There are three different types of motor finance existing in the market nowadays.  Below are few details about them which may help you taking the decision.

1.  PCP (Personal Contract Purchase)

This is the best option available while purchasing a motor vehicle preferably a car on finance.  This scheme is available to every one with very minimum down payment and easy and low EMIs. It is very certain that the monthly EMIs will be very low when compared to other motor finance schemes available in market. Whenever a deal is finalized, some proportion of the total amount is paid as down payment and remaining amount in monthly equal installments which is very low and as per the pocket of the customer and also as per GFV agreement in the deal. The phrase GFV denotes Guaranteed Future Value.  It is mainly fixed by the dealer while making the deal.  This choice also helps in making another motor finance deal through EMIs.

2.  HP  (Hire Purchase)

This is a very customary and conventional choice of motor finance and is very famous.  It is one of the most easy and uncomplicated motor finance deal.  In simple words, just pay the whole amount of the car in monthly equal installments and the car is yours.  Only some amount as preliminary advance is to be paid in start of deal. The amount of monthly installment will be lower if the amount paid initially is big. It is one of most secured motor finance scheme. The only negative aspect attached to it is if you don’t pay the EMI, the car will be lost.  Therefore, it is very essential to go through the scheme thoroughly and go with the Hire Purchase contract.  However, the scheme is very easy and affordable.  It can help a lot in buying the car of your choice.

3.  LP (Lease Purchase)

The types of deals are basically for expensive and luxury cars which are very hard to afford but desire is brave.  It helps in a way of repaying the monthly installments which are very low.   It someway resembles with the Personal Contract Purchase scheme.  The most part of the amount is paid at the later part of the deal.  In this type of contact, the capital payment / initial payment is  termed as Residual Value and this value has to be fully paid by the end of deal in order to attain the possession of the motor.  Similar to Personal Contract Purchase scheme, the deal also has fixed mileage limits the motor vehicles can be returned if you don’t want to pay the residual value or cannot afford to pay.  But the mileage limits should not cross the limits.  However, it is not sure that the vehicle will be accepted in return because of the term in deal to pay the full Residual value irrespective of the vehicle you keep or not.  It also does not ensures that the rate of finance are less compared to PCP deals. However, this option is the best available for motor finance on luxurious and posh cars on lesser monthly installments.

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