When buying a new car, the options for payment seem to be endless. If you’re in a strong financial position you can pay outright in cash, but realistically not many people can afford to fork out thousands of pounds for a new motor. That’s where finance plans come in…

What Finance Plans are Available?

A car finance plan splits the total cost of a second-hand or new car into affordable monthly payments. There are various options for how to do this and you can choose the one that best suits your budget. Here’s a brief look at the type of plans on offer:




  • Hire Purchase (HP)

With a hire purchase agreement, you pay a deposit of around 10% and then fixed monthly amounts over an agreed time period, which can be very flexible. Once the last payment has been made, you own the car.

This option is usually best if you want to buy a brand-new car. They’re usually arranged by the car dealer, for example, Peter Vardy, so they’re incredibly straight-forward to sort out.

  • Personal Contract Purchase (PCP)

PCP offers lower monthly payments so it’s perfect for those on a tight budget and who aren’t necessarily fussed about owning the car at the end of the deal.

Rather than getting a loan for the full cost of the car, you’re paying for the difference between the cost of it brand new and its value at the end of the agreement.

After your last payment you can either: decide to keep the car by making a balloon payment of the resale value, hand it back to the dealer and pay nothing, or trade it in for another car.

  • Leasing

With a lease agreement, you pay the dealer a fixed monthly amount for the use of the car and servicing/maintenance is included (as long as you don’t exceed the specified mileage limit).

It’s worth noting that you never own the car and you have to hand it back at the end of the lease agreement. However, this is perfect for those who are looking for flexibility and don’t want to think about servicing costs.

Choosing the Right Plan

With so many car finance plans available, you can find one to suit any budget. If the options above don’t appeal to you, there are others available that you can read about in this useful article by the Money Advice Service.

Before you make a decision, set your monthly budget (not forgetting the deposit) and consider whether you’d want to keep the car or choose a new one end of the agreement. Then, you’ll be in a good position to decide which car finance plan is best for you.

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