Sep 282017

Car finance schemes can be a major source of profit for businesses, due to the APR added – so almost every dealer, car broker or car supermarket offers a variety of finance options for consumers.

Thanks to low-interest deals and a growing credit industry, finance deals can be a great way to get a better quality used car in a more affordable manner.

However, there are a few key things to be aware of before committing to any deals…


Hire purchase (HP)

This is perhaps the simplest type of car finance plan. After paying a deposit of around 10 percent of the car’s value, you hire your car with the option to buy it by the end of a 12-60-month contract. Hire purchase is arranged by the car dealer, but brokers also offer this service. The rates are often very competitive for new cars, but less so for used cars due to a higher rate of APR.

This option is often best for those with a good credit rating, as this means you’ll get hire purchase deals at the lowest interest rates.

Drawbacks include potential repossession if you miss a payment and it can sometimes be more expensive than an independent bank loan.

Personal contract purchase (PCP)

Based on a ‘minimum guaranteed future value’ for the car, this involves paying a deposit, then low monthly instalments over a fixed period. At the end, you can either pay a lump sum to purchase the car outright or return the vehicle.

It’s important to stick to agreed mileage limits to avoid costly penalties of up to 30p per mile – so if you are doing a lot of miles, this option may not be for you.

PCP financing on used cars rarely offers the same incentives as new cars as they are not as lucrative for manufacturers. However, it’s worth keeping an eye out for used-car sales events as some may offer the option of a deposit contribution.

Personal loan

You may consider a personal loan if you have a strong credit rating, as this could work out cheaper in the long term than a finance scheme. There may be a higher APR, but this could be offset by lack of deposit and spreading the loan over a period of your choice. You will also own the car from the outset.

Check the APR between the different payment plans you’re offered and compare it to the rate charged on a personal loan to see what would be the best overall value.

Check the small print

Whichever method you choose, you’ll need to be certain you can afford the repayments throughout the agreement, even if your circumstances change. While some deals give the option of ending the contract early, there can be significant fees for doing so.

You could also buy a used car that has outstanding finance on it, without realising. If it does, the finance company that paid for it will have a vested interest and could reclaim the money or the vehicle from you.

For this reason, it’s advisable to get an HPI check on any used vehicle before you buy it. This is a check of the vehicle’s history that will uncover any outstanding finance on it, protecting you against this potential pitfall.

GAP insurance

If you’re buying a used car on finance it’s worth investing in GAP insurance. This covers the ‘gap’ between the current market value of your car and the value of your outstanding loan or the cost of replacing your car, should it get stolen or written off. However, it is worth bearing in mind that some providers, such as Warranty Direct, are unable to accept leased vehicles on GAP insurance.

Mar 222016

New research reveals that almost twice as many motorists are confident about buying a car unseen today, compared with three years ago.

There has also been a rise of almost one third in those who describe themselves as comfortable to buy a car online.

But franchise dealers need not fear being sidelined by online motor retail specialists because the research also highlights a 50% rise in customers travelling outside their local area to buy from a national main dealer.

However, the research also appears to sound the death knell for private car sale classified advertisements, with survey respondents reporting a dramatic fall in purchases from that source

The research, conducted in February 2016 for, reveals changes in consumer attitudes and behaviour following a major survey of motorists in August 2013.

Since August 2013, when almost 5,000 motorists were first polled on their car buying habits and attitudes, the proportion of those who say they would be happy to buy a new car online, without seeing it first, has risen from 17.5% to 31.3% – an increase of 78.8% in positive responses.

At the same time, the number of people describing themselves as ‘wary’ of buying a car unseen from a reputable online source has fallen from 27.7% to 25.5%.

But the most positive change in attitudes to online car buying was found among those who had previously ruled out buying cars online at all.

In August 2013 more than half of all respondents said they wouldn’t buy cars online but that figure has now reduced to 43% – a 21.1% drop in anti-online purchase sentiment.

Growing consumer comfort is not limited to online new car sales. Motorists are now demonstrating a strong preference to buying used cars online.

The 2016 survey included questions which were not previously asked, inviting motorists to evaluate their own changes in attitude over time. This revealed that 39.2% agree with the statement ‘I’m MORE likely to buy a new car online now than I used to be’ and 21.3% agree with the statement ‘I’m MORE likely to buy a used car online now than I used to be’.

The latest survey reveals the strength of the UK motor retail market in general, with good news also for traditional dealers – and franchise groups in particular –throughout the results.

For example, in August 2013, respondents reported where they had bought their current car and the latest survey indicates that consumers have been looking further afield and increasingly buying from national main dealers since then.

The figure for those who had bought from a main dealer more than 50 miles from their home saw almost half as many again travelling further afield to buy their current car, compared with the car they owned at the point of the 2013 survey.

The biggest change in where people had purchased their current car this time was a 50% slump in those who had bought from private sellers – from 11.6% to 5.8%.

Austin Collins, Managing Director of, said: “This was not a survey of customers, so the results are not skewed in favour of our own business or even the online car retail model in general. It’s genuine evidence that consumers are increasingly comfortable with the concept of buying cars online and unseen until they take delivery.”