WHAT TYPES OF CAR FINANCE ARETHERE?
(PCPs) Most motor dealers offer PCPs, but they will have their own brand name – such as Options for Ford. These plans allow you to pay a deposit for the car, and the car dealer will give you a guaranteed future value for the car at a given date – usually two or three years after purchase, according to the miles you expect to drive. The amount you pay interest on is the ‘bit in the middle’ that you are borrowing – if the car costs £10,000, and you pay a £2,000 deposit, if the GFV is £3,000, then you pay interest on £5,000. You can buy the car by paying the GFV at the end, hand the keys back, or use any money the garage offers you above the GFV to carry on with another car on the scheme. These often have incentives such as free breakdown cover or insurance. You would not have to get an MOT for the car as you could swap it before this was necessary. This scheme allows you to take a finance deal with the garage, with or without a deposit paid for the car depending on the deal on offer, and you pay off the loan over a set period. At the end of the term, you will own the car outright without the need to pay a balloon payment. Unsecured loan from banks and building societies can be significantly cheaper than the motor finance on offer, and you can choose the term of repayment depending on your needs. If you have a mortgage already, the cheapest way to borrow more would be to add the loan amount to your mortgage. This will often give you access to finance at a lower cost than an unsecured loan, but defaulting could put your house at risk. Also, if you make payments for the whole of the mortgage term on the extra borrowing, it could prove to be very expensive in the long run.