Finance Options

There are 3 ways of car financing that are most common in the UK. Below you will find the detailed breakdown, benefits and what to keep in mind when taking one option over the other.

How does PCP car finance work?

With PCP finance, you choose your initial deposit. You'll then make a monthly payment usually for 36 or 48 months and after the end of the agreement you have three options:

• Return the car to the dealer.
• Trade it in for another car and continue the PCP contract.
• Own it outright by paying the oustanding amount, usually called the 'balloon payment' or 'optional final payment'.

Benefits:

• Lower monthly repayments due to lower borrowing costs, so you end up paying less interest.
• Flexibility to keep, choose a new one or say goodbye to your existing car at the end of the contract.
• PCP agreements are subject to consumer protection regulations, so FCA (Financial Conduct Authority) will make sure that the terms are fair and transparent to you as a customer (unlike if you go down the personal loan route)

Keep in mind that:

• You don't own the car until the final payment is settled.
• There's usually a mileage limit, however don't worry - if you will go over it there's a small fee to pay.
• You are expected to maintain vehicle in a good condition.

Why not to take out our industry-leading warranty which will keep your mind worry-free for the duration of your contract. You can also add servicing costs to your PCP contract with Oakwood Motor Company.

How does HP car finance work?

With Hire Purchase agreement you will notice that your monthly payments will be higher as you are borrowing the full amount of the car's worth.

Benefits:

• You own your car outright, however, legal ownership is transferred to you only after the final payment is made.
• No mileage restrictions
• You can usually repay the outstanding balance early
• HP agreements are regulated by the Financial Conduct Authority (FCA) in the UK to ensure consumer protection and fair lending practices (unlike if you go down the personal loan route).

Keep in mind that:

• If you fail to make payments, the finance company has the right to repossess the vehicle
• The interest rates can be fixed or variable, depending on the agreement.

Car Lease Purchase

A Lease Purchase (LP) is another type of car financing arrangement, but usually is taken when purchasing a brand new car. This type of car finance shares similarities with both Hire Purchase (HP) and Personal Contract Purchase (PCP).

You would also be required to put down a deposit. Usually it is around 9 months of your average monthly payments plus additional fees.

Benefits:

• You are financing a brand new car.
• If it's not a stock vehicle then you might be able to add additional options or colour of your choice.
• Lease Purchase agreements are also regulated by the Financial Conduct Authority (FCA) in the UK to ensure consumer protection and fair lending practices.

Downside:

• Your are the first owner who gets hit with vehicle's largest depreciation

Keep in mind:

Usually you will have to hand the car back, so in other words it's more like a long-term car rent. It's essential to carefully review the terms and conditions, including the balloon payment amount and any associated fees, before entering into a Lease Purchase agreement.

Your vehicle may be repossessed if you do not keep up to date with payments.