• HP is simply a loan secured against the car
• No mileage contract
• Ideal if you want to own the car
Hire Purchase (HP) is the traditional way to finance a car purchase. You pay off the entire price of the vehicle through a series of monthly payments. At the end of the contract period the vehicle becomes your property. The monthly payment is determined by the amount of deposit paid, the period of the contract and the sale price of the vehicle.
HP is very similar to borrowing a sum of money from a bank and paying it back over a fixed period of time, with interest. Hire purchase is a type of secured loan which are often preferred over alternative (unsecured) loans because they allow a greater borrowing limit. The term "secured loan" means exactly that, a loan that the lender can secure against an asset (in this case, a car).
P.C.P. Personal contract purchase - A very popular choice for motor finance
• Low monthly payments
• Optional final payment for ownership of car
• Ideal if you change your car regularly
A popular choice for motor finance, due to its flexibility and low monthly repayments. You will make an initial payment, followed by a series of monthly payments. At the end of the term you will have a choice of making a final lump sum payment in order to own the car, or to simply return the car without any further obligation. This type of finance is ideal if you plan to change your car at the end of the contract period.
A Personal Contract Purchase (PCP) plan will enable you to purchase a new vehicle with lower monthly repayments. The way this is achieved is by deferring an amount of the total cost of the vehicle to the end of the contract. This amount is known as the Guaranteed Future Value (GFV) which is often referred to as the optional final balloon payment.
The Guaranteed Future Value plus your deposit is subtracted from the cash price of the vehicle and your monthly payments are based on the balance (plus interest on the balance and the GFV).
By only repaying the difference between the cash price and the optional balloon payment you are only financing the depreciation of the car.
At the end of the contract you have four options:
• You can return the vehicle to the finance company. As long as you have not exceeded the agreed mileage, you will have nothing more to pay.
• If you want to keep the vehicle, you can simply pay off or refinance the outstanding balloon payment.
• You can come back to Seward and part exchange your vehicle for the next new vehicle. If the trade-in value is greater than the GFV, the difference can be used towards a deposit on the next agreement.
• You can sell the vehicle privately and keep any profit over and above the GFV.
Want to lower your monthly payment?
Within a PCP quote there are some things with which you can lower your monthly payment.
• Consider financing the car over a longer contract period – perhaps a 48 month contract will make your car of choice more affordable.
• The amount of deposit you are able to put down will dramatically effect your monthly payments.
• It is worth calculating your annual mileage accurately rather than guessing. If you only do 6000 miles per year but have left your annual mileage figure at 10000 miles, your balloon payment will be lower and you will be paying more unnecessarily.
Contract hire - Simply hire the vehicle for a contract period
• No eventual ownership
• Fixed term rental over a period to suit you
• Ideal for business
Contract Hire is simply an agreement where a rental is paid in return for the vehicle over one, two, three or four years. Contract Hire is ideal if your business prefers to reduce the financial risk by hiring rather than owning and it relieves you of the administration in selling the car or worrying about its value in the future.
If you are a VAT registered business, a proportion of the rentals may be tax deductible. Contract Hire is also classified as an operating lease for taxation purposes, and is therefore regarded differently to "purchase" contracts so that your business may benefit from certain other tax advantages.
Contract Hire payments are specific to the vehicle you choose and are calculated on your annual mileage. A deposit payment is compulsory. The deposit payment is an amount equal to 3 monthly payments.
Seward offer both non-maintenance and full maintenance Contract Hire. A full maintenance contract means the finance provider is responsible for maintaining and servicing the vehicle and includes all costs due to fair wear and tear. We would recommend a full maintenance contract if you cover more than 20,000 miles per annum. So if your business requires totally hassle free motoring, please ask our sales staff for a quote including full maintenance.
Lease purchase - Ideal for the more expensive car
• Low monthly payments and APR
• No mileage contract
• Refinance the Residual Value
Lease/Credit Purchase is structured in the same way as a Personal Contract Purchase (PCP) in that a capital lump sum amount, known in this instance as the Residual Value (RV), is deferred to the end of the agreement. The RV reduces the regular monthly payments and makes more expensive vehicles far more affordable.
Unlike PCP, Lease/Credit Purchase offers no option to return the vehicle to the finance company at the end of the contract. It is the customer's responsibility to settle the final balloon payment either though additional finance, cash or settlement by part-exchange.
Lease Purchase repayment periods are typically taken over 2, 3 or 4 years and settlement can be made at any stage of the agreement. Customers will normally benefit from a slightly lower interest rate and has no tie to a mileage contract.
Credit Purchase repayment periods are restricted to 60 months (5 years) and so is only suitable for customers looking to take out finance over a long period of time although settlement can be made at any stage of the agreement. Customers will normally benefit from lower monthly payments due to the long contract period and has no tie to a mileage contract.
You need to be careful to avoid negative equity with a lease purchase agreement but can insure against this with GAP insurance.
Want to lower your monthly payment?
Within a Lease/Credit Purchase quote there are 3 things with which you can lower your monthly payment.
• Consider financing the car over a longer contract period – perhaps a 48 month contract will make your car of choice more affordable.
• The amount of deposit you are able to put down will dramatically effect your monthly payments.
• You can adjust the RV by setting a higher or lower annual mileage and, because you are not contracted to a certain annual mileage, this can be set at any level depending on how large you want the RV to be. Any adjustment in the RV will effect your monthly payments.
For further information please email us with your specific requirements.