Car Finance Explained
Terms and Conditions:
This example is for a Hire Purchase Agreement.
I confirm that I have read and understand the following, and that in doing so provide permission for ZAP Loans to undertake a credit search and provide my information to their panel of lenders. I understand that this may register as a credit search against my name.
- I have read the Initial disclosure document (IDD) available online
- I consent to a credit search being conducted
- I understand the following
- The credit search relates to a hire purchase product which does not have any mileage restrictions; however, a balloon product is also available – please call to discuss
- Subject to balance financed, the agreement would be protected by the Consumer Credit Act (CCA)
- I tend to be the registered keeper of the vehicle and would hold fully comprehensive motor insurance during the length of the agreement
- I understand that the vehicle is at risk of repossession if the contractual repayments are not maintained
By proceeding to obtain a quote, you confirm that you have independently chosen the appropriate term of agreement , are comfortable with the suggested repayments and agree to the above statements. Copies of the relevant documentation, to include the IDD, Product Explanations and Overview have been provided to your email address in a durable medium
How Does Car Finance Work?
Understanding how car finance works is essential for choosing the right option for your needs. Here’s a simple overview of the process:
- 1.
Choose Your Car Select the car you want to buy. It can be new or used, depending on your preferences and budget. Example: You find a used hatchback for £8,000 that you’d like to finance.
- 2.
Apply for Car Finance Submit an application to a lender or finance provider. You’ll need to provide personal and financial details, such as your income, employment status, and credit history. Example: You apply for a car loan through ZAP, providing information about your financial situation.
- 3.
Get Approved The lender reviews your application and decides whether to approve you for car finance. If approved, you’ll receive a finance offer detailing the loan amount, APR, term length, and monthly payments. Example: You receive an offer for a £8,000 loan with a 5% APR for 4 years.
- 4.
Finalise Your Finance Agreement Once you accept the offer, you sign the finance agreement. This document outlines the terms of your loan, including the repayment schedule and any additional fees. Example: You sign the agreement for your £8,000 loan with the agreed-upon terms.
- 5.
Purchase Your Car With your finance in place, you can purchase the car from the dealership or private seller. Example: You buy the £8,000 hatchback with your finance agreement.
- 6.
Make Monthly Payments Repay the loan over the agreed term with regular monthly payments. Your payments will include both principal and interest. Example: You make monthly payments of £150 for 4 years. Explore Your Car Finance Options with our team and find a deal that fits your budget!
What are the Different Types of Car Finance?
There are several types of car finance available, each with its own features and benefits. Here’s a guide to help you understand what the different types of car finance are:
Hire Purchase (HP)
Hire Purchase is a straightforward way to buy a car. You make an initial deposit followed by monthly payments. Once all payments are made, the car is yours to keep.
Pros: Fixed monthly payments, you own the car at the end of the term.
Cons: Higher monthly payments compared to some other options.
Example: £1,000 deposit, £200 per month for 4 years.
Personal Contract Purchase (PCP)
Personal Loan
Leasing
Conditional Sale
Choosing the Right Car Finance Type
Deciding which car finance type is right for you depends on your individual needs and financial situation. Here are some factors to consider when choosing the right car finance type:
- 1.
Budget and Monthly Payments Consider your budget for monthly payments. If you prefer lower payments, PCP or Leasing might be better, while HP requires higher payments but you own the car at the end.
- 2.
Length of Finance Term Think about how long you want to be tied to a finance agreement. Shorter terms mean higher payments, while longer terms can spread out the cost.
- 3.
Ownership Goals Decide if you want to own the car eventually. HP and Personal Loans lead to ownership, while PCP and Leasing offer flexibility without ownership.
- 4.
Initial Deposit Amount The amount you can afford to put down as a deposit will affect your finance options. A larger deposit can lower your monthly payments.
- 5.
Future Plans Consider if you might want to change cars frequently. PCP and Leasing offer flexibility for this. Get Expert Advice on Car Finance and let us help you choose the best option for your needs!
Car Finance Explained – FAQs
What is the difference between a car loan and car leasing?
A car loan allows you to purchase a car and own it once all payments are complete, while car leasing is a rental agreement where you return the car at the end of the term. Loans lead to ownership, whereas leasing offers a new car every few years.
