Personal loan – This is one of the most common ways to finance your new car. You‘ll borrow money from your bank/building society etc. When you buy the car, you’ll get instant ownership.
Personal contract purchase (PCP) – With this method, you’ll pay a deposit, then you’ll have fixed monthly payments. This is ideal if you’re flexible with what happens at the end of the agreement. The car will belong to the finance company during your contract, and you’ll only be paying off the depreciation. This is usually the preferred option for purchasing a new car as the monthly payments tend to be lower. However, once your contract comes to an end you’ll have three choices:
Hire purchase (HP) - Similar to PCP, hire purchase requires a deposit and fixed monthly payments. The car is owned by the HP company. You’ll only be hiring it until you’ve made the final payment, after which you will own the car.
Leasing - This option means you’re renting, and therefore will never have any ownership of the car. Unlike PCP, you won’t have the option to buy the car at the end of the contract. However, every two to three years you’ll be able to change the car you’re driving. This is a good way to drive cars that you usually wouldn’t be able to afford to buy. Effectively the payments you make only cover the car’s depreciation.