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Funding Options & Your Emissions Claim

We explain how options for funding vehicle purchases can affect your Emissions claim.

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Vehicle Funding Options

Cash

Paying out right for a car using cash is generally always the cheapest way to pay for a car. If you are buying a car outright this means that you own the car straight away. By owning your car straight away if there any financial difficulties in the future you do not need to worry about being able to pay for your car. You end up paying lower interest rates overall as well so you end up saving money.

As long as you have the money to be able to afford to pay with cash and do not plan on making any big payments in the near future, such as putting a deposit down on a house, then paying by cash could be the best option for those wishing to outright own a car.

Loan

By getting a personal loan to pay for a car it allows you to spread the cost of paying for the car over a number of years. Providing that you have a good credit rating, this can be the cheapest way to borrow money over a long period of time.

Getting a personal loan can allow you to pick when and how much you pay back, and you can get fixed interest rates so you always know how much you are paying. A personal loan also allows you to own the car while you are paying it back, unlike with other methods of finance where you do not own the car until you have paid it off completely.

Dealer Finance

Dealer finance is where car dealers offer car finance options. It is essentially a finance option that is usually still offered through a third party financial lender.

Dealerships may put the interest rates up of what the third party financial institution offer in order to keep the difference as a way to make a profit. It is important that a lot of research is done when contemplating using dealer finance in order to get the best deal.

Manufacturer Finance

Manufacturer finance is similar to dealer finance in that the manufacturer offers a range of car purchasing finance options. Manufacturers can offer a range of ways to finance a car, such as hire purchasing.

Usually these are still underwritten by a bank or lender, and most manufacturers have their finance wings as separate companies to the actual manufacturer.

Finance Through Independent Companies

Finance through independent companies is where an independent company will loan you money specifically for a car and you pay them back, instead of just getting a loan from a bank, or doing it through the dealer or manufacturer. You decide on how much you want to pay a month and for how long, then the company can work out how much you can borrow and at what price.

Most companies ask you to have a good credit score in order to be able to gain finance from them. However there are finance companies that will give your finance if your credit score is not very good.

PCP

PCP stands for Personal Contract Purchase. PCP is a form of car finance where you lease a car and have the option to own it or walk away at the end. These deals are growing in popularity as they are flexible and you may only have to pay small amounts each month.

At the beginning you normally pay a deposit and monthly instalments on a car. At the end of the monthly repayments you may have a large sum to repay, called a ‘balloon payment’. This is where you can decide to buy or leave the car.

The benefit of having a PCP deal is that it offers you three options at the end of your monthly payments. The first is that, if you wish to own the car, you pay the final payment (the balloon payment) and then you legally own the car. The second is that you do not pay the final amount and you give the car back, which allows you to purchase a different car. Or the third option being that you hand the car back and start a new deal with a different car.

PCH

PCH stands for Personal Contract Hire. PCH is usually a long term rental agreement where you pay to rent a vehicle each month for a contracted amount of time. In this agreement you will normally never own the vehicle and you have to return it on completion of the contract. With a PCH, instead of paying a deposit like you do with a PCP plan, you can instead pay 3 months rental payment in advance.

The benefit of having a vehicle on PCH is that it is normally a fixed monthly cost that includes running fees, such as maintenance and servicing. This does not include your fuel costs, but this way you know exactly how much your expenditure on the vehicle is each month.

You may also benefit from not having to worry about the warranty on the car running out, or having to sell the car on as you just hand it back to the leaser at the end. On returning the vehicle it normally needs to be returned in a condition that falls within the Fair wear and tear BVRLA guidelines. If there is any damage to the vehicle that is not down to natural wear and tear, extra costs can be incurred when handing the car back.

Hire Purchase

Hire Purchase is where you buy a car on finance that you normally pay for over a period of 1-5 years. You usually pay a small deposit, about 10% of the vehicle price, at the beginning, and then over the 1-5 year period you pay for the car in instalments. At the end of the payment period, you legally own the car.

This offers people flexibility as they have 1-5 years to pay the car off and you know exactly what you are paying as the interest rates are commonly fixed. However, you do not legally own the car until all the payments have been made, which also includes an option to purchase fee of £100-£200. This means that if you are unable to make your monthly payments the finance company can take the car away.

Credit Card

If you have a credit card that has a 0% interest rate, providing that you pay the car off before the 0% period expires, you could pay no interest on the credit you used to pay for a car. Paying with a credit card also gives your purchases full protection providing that it was over £100 if anything goes wrong, although this can apply for other finance as well.

However, most dealerships will not accept credit cards. Some will allow you to pay a limited amount on the card while ones that do let you pay the full amount on card, but may charge you a fee to do so. As most credit cards have a limit of £5,000 you could be limited in what you could purchase. If you fail to pay the credit card off before the 0% runs out then you will have to pay interest, which would end up costing you more money

Combination Of Methods

Instead of just paying for a car through one method, there is the option to use multiple methods as a way to purchase a car. As previously mentioned, with credit cards, you only get a certain limit on them. This could mean that only a deposit or only part of the car can be paid through the use of a credit card. In order to pay for the rest of the car someone could use cash as a way to cover the rest of the payment. Or if someone did not have enough cash to cover the car, they could take out a loan to cover the rest.

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