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Which finance option is best for me?

If you have an unreliable income or have been refused finance before, or you have a poor credit score, you might think that getting a new car on finance is out of your reach. Fleet UK has presented some options below to show you that this may not be the case. See what situation you might be in and see which options would be a good fit.

If you have any questions, call Fleet UK on 02392 245572 and we will provide you with a dedicated account manager who will listen to your specific requirements and will provide you with advice on the best way to secure a new car.

First car buyer

You have probably got a very limited budget for your first car unless you’re very lucky! Hire Purchase is a good option for first-time drivers who want to be able to afford a better vehicle than they could buy with just their cash alone.

This type of finance allows you to spread the cost and make car ownership affordable for almost anyone. Also, if you haven’t had other forms of credit before you’re more likely to be accepted for Hire Purchase.

Please read our 'Hire Purchase Guide' for more information on this finance option.

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However, another option worth considering, if you’re 18 years or older, is Personal Contract Hire. With low and affordable fixed monthly payments, you can get to drive a new or nearly-new vehicle fitted with the latest infotainment technology as well as safety features that help keep inexperienced drivers safer on the road.

You pay an up-front initial payment which is typically 3 to 6 months’ worth of rental payments, but it’s flexible enough to allow you to pay as little as one months’ rental or as many as 12 months – whichever amount you choose will either increase or decrease the remaining monthly rental amounts.

The length of the PCH agreement is normally between 2 to 4 years and at the end of the contract, the vehicle is simply returned to the financial provider, allowing you to lease a newer vehicle.

For more information on Personal Contract Purchase (PCP), please read this detailed guide.

Poor credit

Having a poor credit score can impact you when it comes to obtaining finance and if you need a car to commute to work or carry out other daily activities, this can be a difficult situation to be in. The good news is that you could qualify for Hire Purchase car finance.

Hire Purchase simply means that you’re hiring the vehicle you’ve chosen to purchase. The finance provider own the car until you’ve made the final payment. Please note that if you don’t keep up with the repayments then the finance provider can repossess the vehicle without a court order.

HP is generally the easiest form of finance to get approved on, so if you know your credit score isn’t great, this could be the most suitable option for you.

Family / stretched income

If your budget is limited or you simply don’t want to devote too much money to buying a new car because you have lots of other important outgoings, then either taking out a Personal Contract Payment or Personal Contract Hire agreement will suit your needs.

Traditionally, Personal Contract Purchase (PCP) has been one of the key methods of buyers financing their new car – around 80% in fact. This is because a lot of buyers like the flexibility that PCP offers. Basically, you pay a deposit, make your monthly payments and then, at the end of the PCP agreement you select one of the three following options:

  • Hand the car back with no further payments
  • Use any ‘equity’ generated during the PCP contract as a deposit for a new car
  • Purchase the vehicle outright by making a final payment

However, while PCP deals have long been the “king of the forecourt”, there is a new challenger in town – Purchase Contract Hire (PCH).

An increasing number of consumers are opting for Purchase Contract Hire instead. Personal Contract Hire is also known as “personal leasing”. There are important differences between PCP and PCH – where PCP gives buyers the option to purchase the vehicle at the end of the agreement, or use any equity towards a new car, with Personal Contract buyers hand the car back at the end of the agreement with no other options available.

Also, while PCP buyers can step away from their PCP agreement early once they have paid off 50% of their car’s value, PCH customers are locked into their contract, with no legal right to end it early.

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PCP tends to have higher initial payments, interest and a final substantial “balloon payment” to secure the ownership of the car. So, why did the quantity of PCH buyers double between 2015 and 2018? Where Personal Contract Hire leasing comes into its own is that you get to drive a new or nearly-new car, fitted with the latest safety and in-car technology that you otherwise might not be able to afford any other way.

The initial outlay is minimal as you can pay anything from 1 months’ worth of rental up to 12 months’ worth. Although you don’t have the option to buy the car at the end of the contract you do have the flexibility to lease a newer model every 2 to 4 years.

For more information on PCH, please read our detailed guide.

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Fleet UK are a credit broker and not a lender, we are authorised and regulated by the Financial Conduct Authority. Registered No : 682714

Registered in England & Wales with company number : 4018111 | Data Protection No : Z6393738 | VAT No : 755080825

Registered Office : 7 Stratfield Park, Elettra Avenue, Waterlooville, Hampshire PO7 7XN

Disclaimer: All vehicle images and descriptions are for illustration and reference purposes only, all vehicle leases are subject to credit approval and subject to change at any time. E&OE.

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