Pershore Motor Group Answer Some Common Questions About Finance!

Understanding car finance basics can help you make informed decisions in a potentially overwhelming process. Our guide will answer common questions about car finance to help you confidently buy a car.

PCP or HP? Car finance explained

PCP and HP are popular ways to finance a car, each with its own advantages and things to think about. PCP allows buying car at end, HP involves straightforward monthly payments and eventual ownership of the vehicle. Evaluate your priorities and financial situation to determine the most suitable option for you.

PCP or HP: which car finance option makes most sense?

Choosing between PCP and HP depends on your preferences and financial circumstances. PCP lets you pay less each month and easily upgrade to newer models, perfect for those who upgrade often. HP, on the other hand, provides a clear path to ownership with less restrictions or excess wear and tear charges. Consider factors such as your budget, driving habits, and long-term goals when making your decision.

How does part-exchange work with car finance?

Part-exchange allows you to trade in your current vehicle as a deposit towards a new one. If you have outstanding finance on your trade-in, the dealer can settle the remaining balance as part of the transaction. Knowing the value of your trade-in and negotiating a fair deal is important to get the best offer possible.

How long should I finance my car for?

The ideal loan term depends on your financial situation and preferences. Shorter loan terms typically result in higher monthly payments but lower overall interest costs. Conversely, longer loan terms offer lower monthly payments but may result in higher overall costs because of accruing interest. Consider your budget, future financial goals, and the vehicle's decrease in value rate when selecting a loan term.

Can I pay for a car on a credit card?

Buying a car with a credit card is possible but not advised because of high interest rates and credit limits. Additionally, many dealerships impose limits on credit card transactions or may charge additional fees. Explore alternative financing options, such as car loans or personal loans, to finance your vehicle purchase more affordably.

Best way to finance buying a car

The best way to finance buying a car depends on your individual circumstances and financial goals. Consider factors such as your credit score, budget, and preferences when evaluating financing options. Compare interest rates, loan terms, and incentives from multiple lenders to secure the most favourable financing arrangement. Additionally, consult with a financial advisor or car finance specialist for guidance tailored to your needs.

What credit score do I need for car finance?

The credit score required for car finance varies depending on the lender and the type of financing you're seeking. Generally, lenders prefer borrowers with higher credit scores, as they pose lower credit risk. However, some lenders offer financing options for individuals with lower credit scores or limited credit history.

A higher credit score can help you get better loan terms and lower interest rates when buying a car. No specific score requirement exists for this benefit.

How will buying a new car affect your credit score?

Purchasing a new car can impact your credit score in several ways. When you apply for a car loan, it can lower your credit score temporarily because it results in a hard inquiry. Paying your car loan on time shows good money habits and could work to boost your credit score in the long run.

On the other hand, missing payments or defaulting on your loan can have a negative impact on your credit score. Managing your car loan responsibly is essential to maintain or improve your score.

Can you get car finance with bad credit?

While obtaining car finance with bad credit may be challenging, it's not impossible. Some lenders specialise in financing options for individuals with less-than-perfect credit histories. Consider alternative financing arrangements, such as subprime auto loans or guarantor loans, to secure financing. Improving your credit score can help you qualify for better loan terms in the future.

What is a balloon payment due at the end of an auto lease?

A balloon payment, common in lease agreements, is a lump sum payment due at the end of the lease term. It shows how much the cars value is at the end of the lease term. Lessees can then decide whether to purchase the car, refinance the payment, or give back the car. Understanding the terms of your lease agreement, including the balloon payment, is crucial before signing.

What are your options at the end of a PCP?

At the end of a PCP, you have three options. You can return the car, purchase it by making the final payment, or trade it in for a new one. Evaluate your financial situation and driving needs to determine the best course of action.

What is a settlement figure? Paying off PCP car finance early

A settlement figure is the amount needed to pay off the rest of your PCP agreement and own the vehicle completely. If you're considering paying off your PCP early, request a settlement figure from your lender. Remember, settling early might cost extra money, so think carefully about the advantages and disadvantages before making a decision.

Can I cancel a car finance agreement?

While cancelling a car finance agreement isn't straightforward, you may have options depending on your circumstances. If you change your mind within 14 days of signing, you can cancel without extra charges. This is called a cooling-off period. Outside this period, cancelling may involve paying off the remaining balance or negotiating with the lender.

What happens if I can't afford my car payment?

If you find yourself struggling to make your car payments, it's essential to take proactive steps. Contact your lender quickly to discuss options like refinancing, delaying payments, or changing your loan terms. Ignoring the issue can lead to repossession and further financial repercussions.

Car finance can be confusing, but with the right info, you can make choices that fit your financial goals. If you learn about financing, loan terms, and credit scores, buying a car will be easier. Take the time to educate yourself for a better car-buying experience.

Ensure to to consider all your options. If you need assistance, our expert teams are here to help. Choose the financing plan that suits your situation the most.