Types of Vehicle Finance Available
Understanding the different finance options available is crucial for making the right choice. Each type of car finance has distinct advantages and limitations, affecting everything from your monthly payments to vehicle ownership rights.
Hire Purchase (HP)
Hire purchase represents one of the most straightforward car finance options available to UK consumers. With an HP plan, you’ll own the car automatically after making all payments, typically with a small Option to Purchase fee at the end of the agreement.
This finance agreement typically results in higher monthly payments compared to personal contract purchase options, as you’re financing the vehicle’s full value minus your deposit. However, there are no mileage restrictions or excess wear charges to worry about, making it ideal for high-mileage drivers.
During the hire purchase hp agreement period, you cannot sell or modify the vehicle without the lender’s permission, as they technically own it until the final payment is made. Once you’ve completed all payments and paid any purchase fee, you’ll receive the vehicle’s title and own it outright.
Most suitable for drivers who want guaranteed ownership and plan to keep the car long-term, hire purchase offers peace of mind that you’ll eventually own an asset. The fixed monthly payments make budgeting straightforward, and there’s no optional final payment to worry about.
Personal Contract Purchase (PCP)
Personal contract purchase pcp has become increasingly popular due to its lower monthly repayments compared to traditional hire purchase. With PCP, you only finance the vehicle’s depreciation during your agreement term, not its full value.
At the end of your personal contract purchase agreement, you’ll face a balloon payment (typically 25-50% of the original price) if you want to own the car. This optional final payment is calculated based on the vehicle’s predicted residual value.
PCP agreements usually include annual mileage limits, with excess charges of 5-25p per mile if you exceed these limits. You’ll also need to return the vehicle in good condition, avoiding any significant damage beyond normal wear and tear.
At agreement end, you have three choices: return the car and walk away, pay the balloon payment to own it, or use any equity as a deposit on your next car. This flexibility makes PCP attractive for drivers who prefer changing vehicles every 2-4 years.
Personal Loans
Personal loans from banks or online lenders offer an alternative approach to vehicle financing. These are typically unsecured loans with fixed interest rates, depending on your credit score and the lender’s assessment.
With a personal loan, you own the car immediately and can sell it anytime without restrictions from a finance company. This option works particularly well when buying from private sellers, as many don’t accept HP or PCP agreements. You’ll need to apply online or visit a bank branch, and approval depends entirely on your creditworthiness rather than the vehicle’s value.
How Vehicle Finance Works
The vehicle finance process follows a straightforward process. Understanding each step helps ensure a smooth experience and better outcomes.
With The Business Finance Group start by choosing your vehicle and obtaining a quote. This quote becomes the basis for your finance application, determining how much you need to borrow after accounting for your deposit amount.
Submit your finance application with personal details, proof of monthly income, and vehicle information. Our applications can be completed online, requiring details like your driving licence number, employment status, and financial details including any existing credit commitments.
Upon approval, you’ll sign the finance agreement and arrange vehicle collection or delivery. This agreement outlines your monthly repayment amount, the total amount payable, and all terms and conditions. You’ll then make monthly payments via direct debit on agreed dates, with terms typically lasting 24-60 months.
Vehicle Finance Costs and APR
Understanding the true cost of vehicle finance requires looking beyond just monthly payments. The annual percentage rate combines interest, arrangement fees, and admin charges into one figure, making it easier to compare different finance options. Here at The Business Finance Group we make this process easy, simply fill out our vehicle finance form and we'll get our experts to find the right deal for you!
Deposits and Down Payments
Your deposit amount significantly impacts both your monthly payments and the likelihood of finance approval. Higher deposits reduce your monthly payments and improve approval chances, especially if you have a poor credit rating. They also reduce the total interest you’ll pay over the agreement term, as you’re borrowing less money.
Part-exchange vehicles can contribute toward your deposit, with most dealers providing professional valuations. This approach is particularly convenient when upgrading your current car, as the equity transfers directly to your new finance agreement.
Early Settlement and Payment Options
Many finance agreements allow you to pay off your loan early, potentially saving money on interest charges. Check these costs before proceeding, as they might offset some of the interest savings from early repayment.
Some agreements allow partial early payments to either reduce your loan term or lower your monthly payments. While most modern agreements are flexible, some older contracts or specialist finance products may have limitations that affect your ability to pay off the loan early.
Choosing the Right Vehicle Finance Option
Selecting the most suitable finance option requires careful consideration of your personal circumstances, driving habits, and financial goals.
Choose hire purchase if you want guaranteed ownership and plan to keep the car beyond five years. This option suits drivers who cover high annual mileage or prefer the security of owning an asset, despite higher monthly payments compared to PCP.
Select personal contract purchase for lower payments if you typically change cars every 2-4 years or prefer driving the latest models. PCP works well if you’re comfortable with mileage restrictions and maintain vehicles in good condition.
Personal loans suit buyers wanting immediate ownership or those purchasing from private sellers who don’t offer finance options. This route provides maximum flexibility but typically costs more in interest compared to secured lending options.
Factor in all associated costs alongside your finance payments, including insurance premiums, road tax, fuel consumption, and expected maintenance costs. Some vehicles depreciate faster than others, affecting their suitability for different finance types.
Consider your future plans when making this decision. If you’re likely to need a larger car for a growing family, or if your income might change, choose a finance option that provides appropriate flexibility for your evolving needs.
The best approach involves getting quotes for different finance types and comparing the total cost over your intended ownership period. Don’t focus solely on monthly payments, consider the total amount you’ll pay and what you’ll own at the end of the agreement.
Whether you’re financing a new or used car, taking time to understand your options and shop around for the best deal will save you money and ensure you choose the right finance plan for your specific situation. Get in touch with our experts to find the best vehicle finance deal for your needs!
What We Do
Tailored commercial finance, supporting the growth of your business.
01
Purchase new or used equipment on finance.
02
Increase your working capital position.
03
Spread the repayments on your vehicle purchase.
04
Debt Consolidation
Lower your monthly outgoings and improve your interest rate.
05
No more waiting for your invoices to get paid, get paid upon invoice.
about us
Tailored
Funding, to Support Business Growth
Our team have a passion for helping business owners thrive, grow and achieve their dreams. At The Business Finance Group we make the experience of obtaining finance stress-free, taking care of the whole application process so that you can do what you do best, run your business. Our finance solutions are designed to assist in the growth of your company, for both the short term and long term.
Our Impact
in Numbers
Facts & Figures
+3k
SME's Helped
Over 3,000 SME's Supported
£300m
Total Funded
For businesses throughout the UK
3.2%
Rates Starting at 3.2%
We have access to the whole lending market.
92%
Acceptance Rate
Almost all of our customers get their application accepted.
Finance On The Go
Getting Finance has never been easier.
What Our Clients Say
"The Business Finance Group have helped us for years, we would recommend them to anyone"
James Morgan
"They took our turnover from £4m to £8m just by offering our customers finance options"
CNC Machinery Supplier
"The Business Finance Group were 3% cheaper than other brokers, achieving us huge savings"
Vanessa Plough
We work with a handpicked panel of the best funders in the UK.
Let’s enhance your financial future together
Office 9,
Eckland Lodge Business Park,
Desborough Road,
Leicestershire,
LE16 8HB
01604 201510
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What is Vehicle Finance?
Vehicle finance allows you to spread the cost of a car over monthly payments instead of paying the full amount upfront. Rather than needing thousands of pounds in savings, you can drive away in your chosen vehicle and repay the loan amount over a period typically ranging from 12 to 60 months, plus interest.
Lenders provide funds to purchase your vehicle, which you repay over the agreed loan term with interest. The monthly repayments are calculated based on the vehicle price, your deposit amount, the annual percentage rate, and your chosen repayment period.
Typical loan amounts range depending on your financial circumstances, credit rating, and the vehicle you want to purchase.