HP finance vs. leasing (PCP)
There are many ways to get car credit, two of them are HP financing and the other is Leasing or Personal Contract Purchase.
When taking out a hire purchase (HP) agreement there is a large deposit to put down. This can be between twenty and fifty percent and the balance of the car’s cost is divided over the term of the HP agreement. When the agreement comes to an end the car belong to the driver. The car will of course be worth less than the original price because of depreciation.
The other method of getting car credit is though leasing by way of a PCP agreement. This means you can walk away from your car at the end of the agreement and are not tied in to buy it. It is quite a new way of financing your car purchase. A driver puts down a low initial deposit and then pays a lower amount back each month. At the end of the agreement the driver can either give the car back with nothing to pay (although this depends on the condition of the car and the mileage), they can own the car by paying the final amount or take out another PCP agreement on a different car. This method means you can have the car you wish, even if it would ordinarily be out of your price range, but it wouldn’t be yours unless you could afford to pay it off at the end of the agreed term.
The lease period on both types of lease is between two and four years typically. With an HP agreement you can repay the balance at any time. There are ways you can lower your monthly payments on both types of agreement. The higher the deposit, the lower the monthly costs. Also, the longer the lease period the lower the monthly payments will be too.
These types of car credit can suit a great many people. Do your research and work out which might be the best offer for you. IF you know you may have some money at the end of the lease agreement then you can buy the car with the PCP type lease, if you don’t this option can still work as you can simply get a new PCP agreement and get a new car. If this agreement is over a long period then it really can work out well, as you get a new car every four years but have lower payment to make than you would if you took out a HP lease. An HP lease though is good for those people who actually want to own their car at the end of the agreement and aren’t that bothered about buying a new car after the agreement has ended.