Vehicle financing can be very simple if you know the right way to about it in the UK. You can either loan or lease your car in the country which provides you with distinct ways of financing a vehicle that you can use when financing. There are different aspects and elements that are required in these vehicle finance methods. Here, we will perform a thorough discussion of these methods and allow you to understand how they work in the UK.
Leasing a Car
Leasing a car is similar to renting a vehicle. A lease can simply be described as a long term renting activity. A person leasing a car makes monthly payments and uses the car for a fixed period of the contract. There are two sub methods of leasing a car in the UK.
Personal Contract Hire
This is a method which can be simply termed as a personal leasing method. It is simply the method in which you hire a car for an extended period usually two to three years. There is also an agreed maximum limit on the use of the car. You need to return the car once the contract period is over.
The monthly payments are usually quite small as they are simply charged to cover the depreciation of the vehicle. You have to keep the car running by yourself, although you can also opt for a services package for an additional cost. Usually cars that do not lose their value easily are an excellent option to use with a personal lease.
Personal Contract Purchase
A contract purchase is a very popular car finance option in the UK. It is different from the first type because you have more options when your hire contract expires, usually at the end of three years of use. You can either treat this agreement like a hiring contract or you can buy the car due to the purchase clause. You will pay for the car according to its value set up at the start of the contract.
You can also trade the car against a replacement vehicle which once again starts a similar cycle. The payment that you make now as well as your previous payment now works as a deposit for the new vehicle in this option.
The most used method for vehicle finance in the UK is to take a personal loan. Term loans are often employed for financing vehicles. The car itself is often put as a security to get these loans. These loans usually are the most economical way of financing a car if you do not have enough money to outright buy the vehicle. Some people may also use a credit card to finance the vehicle.
Credit card loans are often taken at a higher interest rate but they are unsecured loans and leave you completely in charge of your vehicle as the sole owner.
Pay with Cash
There are some people who simply do not like financing through the bank or the dealer. These are people who intend to finance their vehicles with their own cash that they have saved by working over a number of years.