Dealers are able to offer some very competitive car on finance products and this can be a hassle-free way to purchase your next car. The dealer will be able to sort out a credit agreement with you on the spot. This will allow you to find out quickly if the car you want is available to you on finance. This will mean that if you can pay the deposit you could drive away a car on the same day.
Dealers are motivated by securing car sales so will help you find a credit product you can afford. Unlike banks and building societies, their profits will be made on selling both the car and the credit product. This means they are in a win-win situation, so they will be much more likely to offer you the very best deal they can to help you finance the car you want. In the current unsettled financial climate banks and building societies are much less willing to offer personal loans at competitive prices. This means that dealers can often provide much more cost effective borrowing options for those people who want to use a financial product to fund the purchase of their next car.
There are several different options when it comes to dealer finance and these include:
– Hire Purchase (HP) – this simple agreement involves paying back the cost of the car on a monthly basis. Once you have signed the agreement and paid the deposit you will be able to start using the car straight away. The car will not legally be yours until you have finished paying off the agreement (the price of the car plus the interest and admin charges). It is very important you meet the monthly repayments on this type of agreement. If you do fail to meet the repayments, then the lender will recover the car and you will have lost both your car and the money you have paid back so far.
– Personal Contract Plan (PCP) – this is similar to a HP agreement in that you sign a contract to pay back the costs of the car in monthly repayments. However, this contract is different as you will pay one final ‘balloon’ payment at the end of the agreement. This will make the monthly repayments much lower throughout the contract and is suitable for those people who want to buy a slightly more expensive car. Also at the end of the agreement if you no longer want to keep the car you can give it back to the dealer without paying the final balloon payment (as long as the car is in good condition and has not gone over the agreed mileage allowance). As with HP agreements, if you fail to meet the monthly repayments the lender will recover the car and you will have lost any money you have paid so far.
