If you’re looking to buy a new car, you’ve probably already decided on many things: What make and model you’d prefer; what you’ll be using the car for; what colour you want; how many seats and doors you’d like; as well as all the optional extras.


However, the thing you may not have decided is how you would like to pay for your car. My Car Credit are here to help you make the final stage of your car-buying journey by highlighting the three most popular car finance options available to you.


HP (Hire Purchase)


Hire Purchase is the most common and popular type of car finance. Put simply, this is a finance option where you make monthly repayments to ‘hire’ the car until the end of the agreement, when it then becomes yours. At this point, there is normally a small additional admin or purchase fee.


With Hire Purchase, your loan is secured against the car, which is owned by the lender. So, whilst you are paying, you effectively hire the car from the lender. The time period for repayments is usually between 12 months and 60 months.


A HP agreement is perfect for those people:


– Who don’t want to or can’t pay for their car upfront
– Whose budget and circumstances suit fixed monthly repayments
– Who have had problems getting credit
– Who want to own the car at the end
– Whose disposable income might change (e.g. starting a family)


PCP (Personal Contract Purchase)


PCP works on a monthly repayment basis and gives you the option to buy the vehicle at the end of the loan. Your repayments are based on the vehicle’s Guaranteed Future Value (GFV), which is the predicted price of the car at the end of your loan – taking into consideration how much you will use the car, and the fact that every car will naturally decrease in value.


Over the course of your agreement, you will make monthly repayments based on the difference between the price of the car and the GFV, e.g. if a car was worth £4,500 at the start of your agreement and £2,700 at the end, you would pay £1,800 in total. By fixing this price at the start, you get the advantage of smaller monthly payments which you are able to accurately budget for.


When your PCP contract is finished, there is a balloon payment to settle. There are three options to do this:


– You can pay the GFV and own the car outright
– You can give the car back, which settles the remaining finances
– You can part exchange for a new car


A PCP is perfect for people:


– Who are interested in a new or nearly-new car
– Who want lower monthly repayments
– Who want flexibility and options at the end of the agreement
– Who like to change their car regularly
– Who are confident that they can predict their annual mileage


Conditional Sale


Conditional Sale also works on a monthly repayment basis, but differs from other car finance options because you don’t have to pay a fee at the end of the agreement. This means that your monthly payments will be slightly higher but means that you avoid paying a lump sum at the end of your agreement. Usually, Conditional Sale also allows for a longer payment term because your monthly repayments are higher.


Whilst you’re repaying the agreed amount of the car loan, you have possession and use of the vehicle but it continues to belong to the lender until you have made the final repayment, when the vehicle becomes yours.


A Conditional Sale is perfect for those people:


– Who would rather pay a bit more, spread the fixed repayments and avoid a large payment at the end
– Who want a choice of length of payment terms


Ready to apply for car finance?


You can access our handy car finance calculator here to work out your monthly repayments and see how much you can afford. Alternatively, go straight to our application form, which takes less than three minutes to complete.


We access our extensive panel of lenders to issue instant online decisions and best available outcome for your credit profile. Importantly, applying for car finance with My Car Credit won’t affect your credit score as we only perform a soft search.


Hopefully this has given you an insight into the car finance options available to you from My Car Credit.