Types of Car Finance

There are lots of decisions to be made when buying a car including what type of finance to choose. Below are explanations of 2 popular types of car finance.

Hire Purchase (HP) involves hiring your chosen car directly from the lender and agreeing to a fixed number of repayments until you’ve paid for it in full. Hire Purchase agreements are one of the most common forms of car finance used today. If you decide to take out a Hire Purchase contract, you can either pay a deposit upfront and regular monthly payments, similar to PCP car finance. What’s different about a Hire Purchase deal is that you will legally own the car once the final payment is made. You also have the option to pay off your Hire Purchase early at any time by asking for a settlement figure from the lender.

With Hire Purchase finance, you lease the car directly from the car finance company. This means that you will be the registered keeper of the vehicle throughout your payment plan and have complete responsibility for the car.

Personal Contract Purchase agreements (also known as PCP agreements) are similar to hire purchase agreements, giving the option to pay a deposit followed by a series of specific monthly repayments over a fixed term, which will usually be 24-48 months. With PCP finance agreements, you are given the option at the end of the fixed period to either hand your car back, use any equity as a deposit for your next vehicle, or pay the Guaranteed Minimum Future Value (GMFV), which is sometimes referred to as a “balloon payment”, to keep the vehicle and obtain full ownership.

With PCP deals, there will be maximum annual mileage on the car. This will be detailed in your agreement. If you exceed this maximum annual car mileage, or the vehicle is damaged past that considered ‘general wear and tear’, you may have additional charges set by the lender. Details of such possible charges will be specified in your initial PCP car finance agreement.

Why We Suggest Lenders

At Motor Finance Scotland we will collect some basic personal details to conduct a soft credit search. This type of credit search leaves no mark on your credit record visible to lenders. It is however enough information to help show you a panel of lenders ranked by the likelihood of you being accepted for credit.

Lenders we recommend are among the leaders in the market, allowing us to provide you with the best rate no matter what your credit rating is.

Your Credit Rating





Your credit rating is an estimate of your ability for meet your financial commitments, this is calculated based on your credit history. It is good to keep an eye on your Credit Rating, particularly if you are looking to purchase something like a mortgage for a house or a new car. Your rating affects how trustworthy companies feel you are and the better your credit rating the better the rates you will get.

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