Finding the money for a car, whether used or new, can be a challenge, which is why many people consider car financing schemes. Car financing allows people to buy their cars without paying the full amount upfront.
Hire purchase and personal contract purchase are the most common car financing schemes. In both of them, buyers must pay a deposit to get the car. In hire purchase, the car dealer divides the balance in equal installments over a certain period. Once the buyer finishes paying the installment, they fully own the car.
However, in a personal contract purchase, the buyer pays for the value that the dealer predicts the car will lose throughout the contract. Like in hire purchase, the amount is split into equal installments.
Personal contract purchase contracts usually last around three years, and the buyer can only drive the car for that period. This is a good choice for people who do not plan to keep the car for a long time. Sometimes, people don’t have the money to pay for the deposit in any financing options, which makes them opt for the no deposit finance.
What Is No Deposit Car Finance?
As the name suggests, this type of financing allows buyers to drive the car without paying the deposit. Like in PCP and HP, buyers pay for the car in installments, but the payments are usually lower than those in hire purchase.
Buyers can choose to use personal loans or go the PCP way. No deposit finance is usually more common with PCP schemes than HP. After the end of the PCP contract, buyers can choose to pay the balloon payment and keep the car, return it, or get a new car for a new PCP scheme.
Pros And Cons Of No Deposit Car Finance
- No upfront payment- Deposits can be expensive, especially if buyers buy new expensive cars. With this financing, people can put the money they would have used to pay the deposit for other purposes or invest.
- Lower monthly payments- No deposit financing has lower monthly payments than hire purchase, which is a considerable saving in the long run.
- More payment than standard CPC- Buyers must pay a deposit in a regular CPC payment. However, since buyers don’t pay a deposit in this financing option, the dealers might compensate that with higher monthly payments, meaning a higher amount in the long run.
What To Watch Out For
No deposit financing looks like the best option, but there are things buyers should look out for before deciding if it’s the best payment. Experts warn buyers to thoroughly check the small print to determine how much they have to pay in total and determine if it’s the best option.
Buyers should also check if there are annual mileage restrictions or restrictions on the number of days they should drive the car outside the country. There could also be regulations on when to service the car and where the buyer should service it.
Breaking those restrictions could see the buyer paying more than anticipated because of extra charges. For the best prices, buyers should try negotiating for discounts and compare finance deals online on platforms like Lantern by SoFi. If buyers choose a financing option then find another option with better interest rates and terms, they can opt for car refinancing.
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