There are two main types of used vehicle finance to choose from - personal contract purchase and hire purchase. Both are types of secured loan, which means your vehicle acts as collateral against the loan - we’ve expanded a little bit more on these below!
You may also wish to look into a personal loan, in order to buy a second-hand car outright. You’d then make monthly payments directly into your lender. The main drawback of a personal loan though is that because it’s unsecured, the interest rates can be higher, and you may need to have a good credit rating to be approved.
Personal Contract Purchase (PCP) - When it comes to PCP, you’d typically pay a deposit, and then make monthly payments towards the depreciation of the vehicle. This is the difference in price between the initial cost of the car, and the estimated value at the end of the term. With a second-hand car, this may not be as high a figure as a new car, so PCP can work out to be a relatively cheap option. Once your agreement comes to an end, you can then choose to make a balloon payment, in order to buy the vehicle outright.
Hire Purchase (HP) - As with PCP, with a hire purchase agreement, you’d generally make a deposit at the start of the loan, and then make regular instalments moving forward. But rather than contributing towards the depreciation of the car, you’d be simply paying off the cost of the vehicle. So when your loan finishes, you’ll own the car.