Another way to buy a car is to use car finance, it entails borrowing money for your car from a lender and repaying it with interest over a period of time that is convenient for you.

Instead of paying the full price of a car up front, you can finance it and spread the expense over time.

There are several different types of car loans available to meet different needs, with Hire Purchase (HP) and Personal Contract Purchase (PCP) being the most popular.

Most of the lender and banks are willing to be flexible with the types of car loans they offer. For example, we offer choices for people with bad credit and zero-down deposit car finance plans that make the new/ newer car more affordable to purchase.

We conduct a gentle credit search to obtain a quote from you, a soft credit check is a preliminary credit check that is used to determine if you are qualified for certain lenders' products.

This type of credit check has no bearing on your credit score and is not shared with any potential lenders, only with us. Only when you opt to purchase a product will your credit score and history be shared with a lender, and the lender you choose to purchase from will then do a full/hard credit check.

The paperwork you'll require will differ depending on the lender, most UK lenders and banks will ask to see a few pieces of papers.

All lenders will want you to be able to demonstrate that any personal information you've provided is correct. You should expect to be asked for a photo of your driver's licence or passport.

Payslips or other proof of income may be required by the lender to ensure that you can afford the payments. Leodis Financial will propose the best lender from its panel for you, and then tell you exactly what they require!

The overall charge for borrowing, including any fees and charges, is known as the annual percentage rate (APR). After your information has been verified, the lender will quote you an exact APR. As a result, the price you see is the amount you'll pay, with no hidden costs.

You can choose a vehicle from any respectable UK VAT registered dealer; we have worked with a number of dealers in the past who have met our risk requirements. We put a lot of time and effort into our dealer checks to safeguard you from future difficulties.

The ideal car financing choice for you will be determined by your unique circumstances, the vehicle you want to purchase, and how you want to use it.

You'll own the car at the end of your loan term if you choose HP finance, but your monthly payments may be higher than other options, and you won't be able to sell or trade it in during your agreement.

You can do everything you want with your new car if you take out a personal loan, but your monthly payments may be more.

 PCP car finance has the lowest monthly payments, but you may be required to agree to mileage restrictions and you will not automatically own the vehicle at the end of the loan term.

You have to be over the age of 18 and have lived in the UK for at least 3x years.

Hire Purchase is a type of finance that allows you to buy a car outright without having to pay the whole amount upfront and with no large final payment; you’d be splitting the cost across a deposit and a series of fixed monthly installments. When all the payments are made, the Hire Purchase agreement ends and you own the car.

“Want to own your vehicle outright but with affordable monthly installments and no large final payment?”

You shall own the vehicle as soon as you’ve made the final installment. While PCP finance involves lower monthly payments for the same car, drivers looking to own the car at the end of the contract will pay less overall with Hire Purchase.

Drivers also don’t have to find a substantial amount of money to pay a very large final payment, known as the optional final payment which is needed to own the car with Hire Purchase as they would with PCP.

Advantages of HP Finance

• It's simple to understand and organised.
• Drive a vehicle that you would normally not be able to purchase outright.
• You own the vehicle once all payments are made.
• You don’t need to estimate your mileage at the beginning of the purchase, you’ll be avoiding the excess mileage charges.
• It allows you to stretch the expense of the vehicle over time, allowing you to have a better vehicle than you could with an upfront purchase.
• It's a flexible agreement with maturities ranging from one to five years.
• The vehicle manufacturer may give a deposit contribution.
• Because the vehicle is considered collateral, HP may be easier to obtain than a traditional loan if you have a bad credit history.

Disadvantages of HP Finance

• The vehicle needs to be insured and highly maintained in the owner’s care until the HP finance agreement has been fully paid.
• Monthly payments are higher than other finance options available such as PCP but you shall be paying off the full value of the vehicle.
• You can’t sell and own the vehicle without settling the finance.
• You do not own the vehicle until the final payment is made.
• Monthly payments are higher as compared to leasing and personal contract plans (PCPs).
• Rates are typically higher than those on normal car loans.
• You can't modify or sell the vehicle without the financing company's authorization during the period of your contract.
• Failure to make payments may result in the vehicle being repossessed by the credit company.
• They can do this without a court order until a third of the entire amount is paid.

There are two options of ending the HP finance deal early, a “voluntary termination” and the 2nd being the “paying off early”.

Voluntary termination – Like with PCP finance, you can return the vehicle back to the finance company without paying anything more if you have covered half or more of the total finance agreement.

Paying off early – If you have a lump sum to invest, you can pay off your vehicles finance and become the owner of the car. Your settlement figure will be the outstanding amount of the loan plus a fee, which can’t be charged if you’re only repaying early £8,000 or less. If you’re repaying more, the fee is capped to the lower between:

• 1% of the amount paid early (or 0.5% if you’ve entered the last 12 months of the loan).
  • The remaining interest.

If the lower of the two is the remaining interest, you won’t have saved any money by paying off the loan early. Like with PCP, once your debt is settled and you’ve effectively bought the car, you can either keep it or resell it, depending on its value and your needs.

Hire Purchase is finance that allows you to buy a car outright without having to pay the whole amount upfront and with no large final payment, you’d be splitting the cost across a deposit and a series of fixed monthly installments.

There are no mileage restrictions or final balloon payments to pay, once all repayments have been made, the vehicle is yours.

Use the HP calculator; enter the amounts to give yourself an idea on what the monthly payments will be but please remember these are only estimates and to be used as a guide only.

We also show the estimate value of the tax saving on the loan amount, for businesses HP finance is the most tax-efficient option when it comes to purchasing of equipment, including cars, vans, trucks, etc.

You can get tax relief on all hire purchases, if you are VAT registered, you can reclaim the VAT at the purchase date, please speak with your accountant or financial adviser for further details.

If you're thinking about buying a used or new car and need to borrow money to do so, and you want to own the vehicle at the end of the contract, you have three available options.

The first is a traditional personal loan, which comes in a variety of forms. Personal Contract Purchase (PCP) is the second choice, although it isn't the cheapest if you're certain you want ownership of the vehicle at the end of the contract. The third and final option is to finance a car through a hire purchase agreement.

Although it is not as prevalent as it once was, HP is still used to purchase about a fifth of all new vehicles. Although the payment schedule is quite similar to that of a personal loan, there are two major variances.

As the name implies, you rent the car from the financial company for the duration of your contract, with the option to purchase the vehicle at the end. Unlike a loan, the finance firm owns the vehicle while you make payments to them.

Ownership of the vehicle is only transferred to you after you have completed all of your payments, including the administration charge for the option to purchase.

The second distinction is that the car serves as security for your loan. If you don't pay, the lenders can seize your vehicle to help you pay off your obligation.

Although this isn't a circumstance you want to be in, there is a benefit to using the car as a security system. Some candidates who would not be selected for personal loans would be offered HP because the lender's risk of supplying money is lower than on an unsecured regular loan.

Whether you choose a traditional loan or a hire purchase agreement, always compare the annual percentage rate (APR) because it will show you the total cost of owning your vehicle. The contract with the lowest APR is generally your best option if all of the deals you're evaluating cover the same amount of time.

If you're thinking about buying a used or new car and need to borrow money to do so, and you want to own the vehicle at the end of the contract, you have three available options.

The first is a traditional personal loan, which comes in a variety of forms. Personal Contract Purchase (PCP) is the second choice, although it isn't the cheapest if you're certain you want ownership of the vehicle at the end of the contract. The third and final option is to finance a car through a hire purchase agreement.

Although it is not as prevalent as it once was, HP is still used to purchase about a fifth of all new vehicles. Although the payment schedule is quite similar to that of a personal loan, there are two major variances.

As the name implies, you rent the car from the financial company for the duration of your contract, with the option to purchase the vehicle at the end. Unlike a loan, the finance firm owns the vehicle while you make payments to them.

Ownership of the vehicle is only transferred to you after you have completed all of your payments, including the administration charge for the option to purchase.

The second distinction is that the car serves as security for your loan. If you don't pay, the lenders can seize your vehicle to help you pay off your obligation.

Although this isn't a circumstance you want to be in, there is a benefit to using the car as a security system. Some candidates who would not be selected for personal loans would be offered HP because the lender's risk of supplying money is lower than on an unsecured regular loan.

Whether you choose a traditional loan or a hire purchase agreement, always compare the annual percentage rate (APR) because it will show you the total cost of owning your vehicle. The contract with the lowest APR is generally your best option if all of the deals you're evaluating cover the same amount of time.

After you've made all of your payments, you'll need to pay an option to purchase charge to transfer vehicle ownership to you. Your HP agreement will include this information, as well as the stated cost, which is normally between £100 and £200 – please check the terms and conditions of the contract before agreeing with the advisor, they will be able to inform you of the exact fee that will be paid for the release.

Remember that the finance company still owns the vehicle until you make both your final payment and your option to purchase fee. It is prohibited to sell the car before you have made these two payments.

It's likely that the finance company with whom you have an HP agreement may allow you to sell their vehicle if the entire amount owed has been paid in full first.

You can return the car to the finance company once you've paid off half of the total debt. This is referred to as a "voluntary termination." You can get out of an HP arrangement sooner thanks to a section in the Consumer Credit Act. To be eligible for this, you must have paid at least half of the total amount owed. You can then terminate your contract and return the vehicle to the credit company.

In a Hire Purchase agreement, this clause can be useful to you if:

• You don't need a car any longer.
• You must cut your expenses.
• You are unable to make your payments.
• You find a car that costs less than the total number of payments left on your contract plus your option to purchase fee.

If the vehicle is not in good working order when you return it, you will be responsible for any necessary repairs. If you haven't made half of your payments, you will be obliged to make up the difference before your agreement is terminated.

If you decide to end your contract early, make sure you acquire formal confirmation from the lenders, and save copies as documentation in case you are accused of defaulting.

All lending is subject to status checks and an affordability assessment.

Personal Contract Purchase finance packages is spreading the cost of the vehicle across a deposit, paying a series of monthly payments and with an optional final payment.

“The most common method of financing a car is through a personal contract purchase (PCP). It’s a way to pay for a car over three or five years, and then most people don't go on to buy the vehicle.”

If you prefer to split your vehicle’s cost into monthly payments, then have the option to buy or not in the future, then PCP vehicle finance is the best option, it is the most common type of finance for new vehicles, with our clients loving the simplicity and options it provides yourself.

With a PCP finance package, the monthly installments are used to pay off the depreciation of the vehicle and not its value over the course of the term, basically the difference between the initial price and what the vehicle is expected to be worth when you hand it back. At the end of the PCP agreement, there is a final balloon payment that needs to be made if you want to keep the vehicle.

Having a PCP finance agreement gives you the options of affording a newer vehicle with more manageable monthly payments and the options of handing the vehicle back and having nothing else to pay at the end of the contract, the vehicle has to be in good condition, with below the agreed mileage limit and the servicing has to be kept up to date with the vehicles manufacturing guidelines.

“PCP splits price of vehicle into affordable manageable chunks, deposit, monthly payments and final payment, return the vehicle, buy it outright or trade it in.”

If you rather pick the option of buying the vehicle outright, you simply make the optional final payment.

Or, you can trade the vehicle in for a new one, taking advantage of any equity you may have built, should the car be worth more than the optional final payment needed to buy it, can be used as part of the deposit on a newer vehicle.

“PCP finance makes it easier to drive around in the vehicle of your dreams with none of the annoying hassles and large monthly payments of a loan.”

PCP does not mean you are tied you into the car dealers, you don’t have to keep purchasing future vehicles from them, if you were to find a better deal on a vehicle at another car dealer, they can pay the optional final payment to buy your car from the finance company, treating it like a part exchange and you still benefit from any equity available.

At the beginning of the PCP contract, a Guaranteed Future Value of the vehicle is set, which is the car’s expected value when your PCP contract ends.

This means that the money you’re repaying is the difference between what the car is worth now and what it will be worth at the end of your PCP agreement, that is the depreciation plus interest, which is calculated on the full value of the vehicle, you’ll be paying the difference off in monthly installments.

Remember: you are still liable for the full amount of the vehicle if anything happens to the vehicle or if you settle early.

This means lower monthly payments for you, but you will need to pay a final payment at the end (the Guaranteed Future Value) if you want to keep the car.

Once your agreement is finished, you’ll have three options:

1.Buy the car by paying the final balloon payment.
2.Hand the vehicle back, the finance company has predicted the Guaranteed Future Value of the car, so handing the car back will settle the deal.
3.Part exchange for a new car.

“PCP splits price of vehicle into affordable manageable chunks, deposit, monthly payments and final payment, return the vehicle, buy it outright or trade it in.”

If you rather pick the option of buying the vehicle outright, you simply make the optional final payment.

Or, you can trade the vehicle in for a new one, taking advantage of any equity you may have built, should the car be worth more than the optional final payment needed to buy it, can be used as part of the deposit on a newer vehicle.

“PCP finance makes it easier to drive around in the vehicle of your dreams with none of the annoying hassles and large monthly payments of a loan.”

PCP does not mean you are tied you into the car dealers, you don’t have to keep purchasing future vehicles from them, if you were to find a better deal on a vehicle at another car dealer, they can pay the optional final payment to buy your car from the finance company, treating it like a part exchange and you still benefit from any equity available.

• PCP finance enables you to drive the latest and most prestigious car models in the market because only a small upfront fee is required accompanied by fixed monthly payments.
• There is less financial risk with a PCP, you are not paying for the entire cost of the vehicle. As previously mentioned, a PCP only entails a fixed monthly payment on the life of the PCP agreement. At the end of the contract, the final purchase is optional and the car buyer is given the chance to actually own the car by paying a specified sum of money or use it as a deposit for your next car.
• Unlike a loan that requires you to make a down payment, a PCP car lease only requires a small deposit amount.
• You don’t need to worry about selling or disposing your old PCP car when deciding to get a newer vehicle at the end of the contract.

• Car enthusiasts who take pride in vehicle ownership will think twice about a PCP finance deal, as the vehicle is legally owned by the finance company. The car will be yours if you opt to pay the final payment at the end of the PCP agreement. But by this time, new car models are already introduced in the market and a new PCP could be taken advantage of.
  
  • You are entitled to stay within the annual mileage chosen upfront. You will be charged mileage fees for any excess mileage occurred when you decide not to purchase the car at the end of the PCP agreement.
  
  • You are not allowed to perform modifications to the car unless authorized by the finance company. If you modified the vehicle without permission, you will pay penalty charges if you decide not to buy the car at the end of the PCP agreement.
  
  • There will also be a penalty fee imposed on the PCP agreement if you decide to cancel the contract and return the car.

You can settle your PCP finance deal early; however the finance company will require you to pay off the difference between what your car is worth now, and what you still owe in negative equity.

Although, you may find that at the end of your term your car is worth more than the Guaranteed Future Value, which means you’ll have some positive equity to contribute towards your next car.

Simply put, the answer is “yes” you can cancel any PCP or HP finance agreement early, you can hand the vehicle back to the car dealers and walk away from the agreement under your legal rights.

You must have paid at least 50% of the total amount you owe that includes any interest and fees acceptable in the terms and the vehicle must be kept in good condition, if you have not taken reasonable care of the vehicle you will not be able to return the car back to the dealers.

If these conditions are met, you can sign the car back over to the dealer through a voluntary termination clause with no more payments to make.

There are three options to choose from when your PCP term ends:

RETURN THE VEHICLE

• Return the car to the finance company within the terms of your agreement

PAY THE BALLOON

• Pay the balance owing on the finance agreement and keep the vehicle

PART-EXCHANGE

• Swap your current vehicle for a new one and new agreement

With a PCP finance agreement, you can pick whether or not you wish to keep the car at the end of the contract. You can choose from three different options:

First option is, you can own the vehicle by paying off the balloon payment. You can claim outright possession once the payment has been made, please note that lenders may charge an extra fee of up to £500 for the transfer, either check the terms and conditions or speak with the advisor.

Second, you have the option of returning the vehicle and leaving. There will be nothing left to pay unless the vehicle is in poor condition or you've over the mileage restriction.

You won't be able to collect the remaining equity in cash until you first make a balloon payment on the vehicle and then sell it.

A great financial advantage of a PCP finance agreement is when the car's value has dropped more than expected by the end of your PCP arrangement, you can simply return it and let the loan company deal with the decrease in value.

The most popular way our clients are purchasing their new car is through a PCP finance deal, the PCP calculator below will give you an idea how the finance works.

Enter the amounts to give yourself an idea on what the monthly payments will be but please remember these are only estimates and to be used as a guide, you shall have to check what the balloon/ final payment will be at the end, which is normally between 45% and 55% of the original value of the vehicle.

An example, if you were to borrow £30,000.00 over 3 x years with a balloon/ final payment of £17,000.00, your PCP loan amount shall be £13,000.00 and monthly payments will be approximately £400.00 taking in account interest rates and fees.

Please note that the more mileage you use, the higher the final balloon payment shall be at the end.

There are fees that can accumulate and become due at the end of the transaction you must be aware of, they are both avoidable - these expenses are divided into two categories.

Over stepping mileage

When your PCP loan agreement starts, you'll be asked how far you plan to drive the vehicle each year in mileage.

The dealer will use this information to calculate as accurately as possible what the car's value will be at the end of the contract, allowing them to set your monthly payments and the balloon payment. A car that has been driven sparingly is worth significantly more than one that has logged a lot of miles.

Damage beyond wear and tear

It's critical to be precise. If you exceed the agreed-upon mileage restriction, the credit firm will charge you between 7p and 10p for each mile you go over. Keep an eye out for this because an additional 2,000 miles will cost you roughly £200 at the end of your PCP term.

The lenders, like any other car rental service, will inspect your returned vehicle for signs of damage. Despite the fact that you are allowed a certain amount of wear and tear from use, the vehicle must be in resalable condition.

This means you'll have to cover the expense of any visible damage or dents in the car that may reduce its worth.

All lending is subject to status checks and an affordability assessment.

PCH stands for the personal contract hire, PCH is leasing a vehicle that allows you to drive a new vehicle every few years with low monthly payments and not having to worry about the vehicle’s resale value.

“You will not have an option to purchase the car at the end of your agreement.” 

Basically, PCH lease allows you finance a new car without having to buy it outright, same as long-term rental. You pay an initial payment that is normally three months upfront then followed by monthly payments until the lease agreement ends, then you return the vehicle back to the leasing company.

• You don’t have to worry about losing money on the vehicles value.
• When the lease agreement ends, hand back the vehicle.
• It’s a very cost-effective way to keep you in a brand-new car.
• Short-term agreement makes it easy to swap into a new car.
• No need for big deposit.
• There’s no MOT for vehicle less than 3 years.
• Flexible contract lengths.
• You’ll have fixed monthly repayments.
• Monthly payments tend to be lower than financing.
• There’s no balloon payment at the end of the lease.
• No large fees at the end of an agreement.

• Excess mileage fees can be expensive if you go far beyond your agreed limit.
• High costs are involved for terminating a lease agreement early.
• You will be charged for any damage to the vehicle that’s not classed as fair wear and tear.
• Ending a PCH lease early will occur extra charges.
• You don’t have the option to own the car
• Leasing agreements tend to have strict mileage limits with further costs for going over those
• You’ll need to pay to give the car back before the end of your contract

If you wish to end the PCH lease agreement term early on a “early termination”, you will have to pay a minimum of 50% of the remaining rentals.

“You are tied into the contract for a fixed term just like a mobile contract.” 

Although, please note with some finance companies you will have to pay all of the remaining rentals in order to early terminate the vehicle. As finance companies have different forms of contract you do need to check the contract with the credit broker, in order to get the correct calculation.

Leasing and buying a vehicle are two very different approaches in getting yourself behind your desired vehicle.

With PCH Leasing, you pay a small deposit at the beginning then pay a monthly rental fee for an agreed amount of time that is normally between 3 and 5 years but can vary.

At the need of the contract, you hand the vehicle back and you don’t have the option to buy.

“Short-term agreement makes it easy to swap into a new car that you wouldn’t normally be able to afford.”

With buying a vehicle, you take ownership or have the option to do so if you have a PCP finance deal.

Options available when buying a vehicle are:

• Personal Contract Purchase
• Hire Purchase
• Bank Loan
• Cash

Should you lease or purchase your next vehicle? When it comes to obtaining a new set of wheels, this is a subject you may be considering, and deciding which route is ideal for you.

According to the British Vehicle Renting and Leasing Association, more than 1.3 million vehicles are presently leased on UK roads, indicating that leasing is a popular choice for many.

Advantages of Leasing

• Monthly payments are lower than finance packages.
• You have short term contracts make it easier to switch into a newer vehicle more regular.
• They are no big cost at the end of the contract.

Advantages of Buying

• You either have the option of owning the vehicle or you’ll own it.
• You shall have no or less mileage restrictions.
• You have the option of returning the vehicle earlier.

Disadvantages of Leasing

• You can’t buy the vehicle at the end of the contract.
• You have mile limits, which can be expensive when going over the limit.
• You have to pay additional cost if returning the vehicle back before end of the contract.

Disadvantages of Leasing

• Your monthly payments will be higher
• Contracts are longer, newer car less often.
• You will have to occur the depreciation cost.

Leasing a vehicle is cheaper than buying a car but the main disadvantages is like when buying a house, you won’t be paying towards ownership and you will have to keep within strict terms, like not being able to customise to your preference, like new wheels, upgraded sound system, etc.

When buying a vehicle, you need a larger deposit and have larger monthly payments to pay, like a mortgage but you will either own the vehicle or have the option to own the vehicle at the end of the contract.

Whether you should lease or buy a car boils down to your preference. Here are some examples of each scenario:

When it’s best to lease a vehicle:

• You prefer lower monthly payments and a newer vehicle
• You like a newer car more often
• You use the vehicle for business, taking advantages of business rates

When it’s best of buy a vehicle:

• You want to own the vehicle and make modifications.
• You are happy to drive a vehicle for longer
• You have no mileage limit.

If you have any questions about our car leasing offers, then please feel free to call us on 01274 028 019 and one of our team will be pleased to assist you.