Used Car Finance Guide
Car finance has revolutionised the way people purchase a vehicle. The process of buying used cars on finance means that even the most prestige makes and models are now more accessible – with the option to take out a loan, your dream car doesn’t have to stay just a dream for much longer.
With a huge range of options available, car finance can sometimes be confusing. We offer a number of options, so to help you on your way we have cartime Tim’s handy guide, which explains all there is to getting finance on a used car. We’ll start with the two most common financing options; the two we offer here at cartime.
Hire Purchase
Hire purchase (HP) allows you to pay for your car in installments – you pay an initial deposit, usually around 10% of the car’s marked price, and then make payments on a monthly plan, which can be spread across anything from 12-60 months. The good news is that you are able to reduce these monthly payments by putting down a larger deposit or extending the duration of your contract.
With HP, your APR (annual percentage rate) will determine how much you pay overall, so it’s an important figure to pay attention to. This is where great deals like cartime’s 0% finance come in, but more about that later.
The best thing about hire purchase is that it’s quick and easy, and as the agreement is arranged through cartime, it takes all the legwork out of your normal loan application. Monthly payments are usually lower than a standard personal loan, and there’s no lump sum payment at the end.
Personal Contract Purchase
Personal Contract Purchase (PCP) is very similar to a HP agreement. It’s also arranged through us, so it’s hassle-free and speedy – you’ll be driving away in your dream car on the day of purchase.
After paying your deposit, you still have monthly payments over an agreed term but these are generally fairly low, as you have the option of a final payment. This is commonly known as a Guaranteed Minimum Future Value or GMFV. At the end of the contract, you either have the option to pay it off to take ownership of the car or you can hand it back without paying the final fee. You also have the option to use any value left on the car to trade in for a new model!
Again, payments are spread over a fixed term, but this is normally shorter than your typical HP loan. Prices of resale are also based on a forecast of annual mileage over the term of the agreement, so this is worth bearing in mind if you do have a high mileage. Because of the number of options at the end of the term, PCP is a popular option for buying used cars on finance.
cartime Tim’s Finance Glossary
APR (Annual Percentage Rate): Your APR gives you an accurate idea of the total cost of your loan. The lower the percentage, the cheaper your overall outgoings on the finance plan – with 0% interest you only pay back what you borrowed. cartime offer a number of deals that include 0% finance, with packages tailored to your individual needs.
Gap Insurance: In the event of damage or theft, this is an extra finance product that will cover the shortfall between what an insurance company value the car at and what you originally paid. This type of insurance is available on all plans, including agreements for BMW and Audi finance , and other prestige makes.
Guaranteed Minimum Future Value (GMFV): When buying a car on a PCP agreement, we will give you a guaranteed minimum future value which indicates how much the car will be worth at the end of the term. The GMFV is beneficial as it protects you from any sudden or unexpected drops in value – and if your cars ends up being worth more than your estimated GMFV (yes, it does happen!) you can use the equity as part of a deposit for your next vehicle.
Mileage Allowance: PCP agreements allow the finance provider to take back the car at the end of an agreement, and this is a factor that determines the car’s value. When taking out these agreements, you nominate your average estimated annual mileage – it’s important to calculate this honestly and accurately as you can be charged a fee for every mile you exceed it.
Total Amount Payable: Does what it says on the tin! This is the entire cost of your vehicle, including the deposit, the amount of credit and interest to be payed, and all other scheduled fees. This figure will show you how much your finance has cost.
Term: The term is simply the duration of your agreement. It can vary from anything from 12-60 months, but is usually shorter for those who opt for PCP – where loans longer than 36 months are rare.
If you’re looking for a new way to buy a used car, you can begin the process now by filling in your details on our finance page. With a huge range of makes and models, plus packages including BMW and Audi finance plus many more, you could soon be on your way to owning that dream car. Alternatively, if you have any questions about used cars on finance or would like to speak to a member of the team, contact us today.