What Happens When Your Financial Agreement is Coming to an End?

 

When your current agreement is coming to an end, there are different options around what you can do with your car. However, this will depend on what type of finance you have.

There are several types of car finance that Perrys offer including Personal Contract Purchase (PCP), Lease Purchase (LP), Hire Purchase (HP), Contract Hire and Personal Loan. 

It’s good to thoroughly research every finance option and have a look at the processes from beginning to end in order to make sure you fully understand how much you owe and what the requirements are. 

 

 
 

 

Personal Contract Purchase (PCP)

This is a finance plan where you make equal monthly payments over an agreed period of time and at the end, if you decide to keep the car, a final repayment, known as “balloon payment” will be required. This will be worked out at the beginning of your agreement, so you know exactly the position you will be in at the end of the term. 

PCP is a good option if you’re thinking of changing your car in the next few years, or if you are uncertain about keeping the car at the end of the agreement. 

At the end of your PCP agreement, you have four options:

  1. Pay back the final payment (balloon payment) and keep the car. You don’t own the car until all payments are made. 

  2. Refinance the final payment over a further period.

  3. Sell the car and use any money left over for a deposit on a newer car.

  4. Don’t pay the final payment and hand back the keys.

For more information about PCP follow the link here.

 

Lease Purchase (LP)

Lease purchase and PCP are structured in a similar way, apart from when it comes to ending your agreement. At the end of your agreement, you must take ownership of the vehicle once all payments have been made. 

You have 2 options at the end of the agreement:

  1. Pay back the final payment (Balloon payment) and keep the car.

  2. Sell the car and use any surplus as a deposit on a newer car. 

The final payment of your lease purchase is not guaranteed which means your car could be worth less than the final payment. If this occurs, you will have to make up the difference even if you sell or part exchange the car for a new one. 

For more information about Lease Purchase follow the link here

 

Hire Purchase (HP)

Hire purchase is a finance plan that involves you paying a deposit then continuing to pay off the value of the car in monthly instalments for a fixed term. The loan will be secured against the car. 

The car doesn’t belong to you until you pay off all the finance. Once you have made the last payment the car is yours to keep. 

Taking out a hire purchase finance is great if you want a fixed monthly payment and want to own the car at the end of the agreement. Your monthly payments will be slightly higher than a PCP or Lease agreement however, you won’t have the balloon payment to pay off at the end. 

Follow the link here to find more information about Hire Purchase.

 

Personal Contract Hire (PCH)

When taking out personal contract hire finance you will need to place a deposit upfront, this ranges from three to six months’ worth of payments. You will then continue to pay fixed monthly payments for an agreed term. 

At the end of your agreement there is no need to sell the car or pay the balloon payment. You simply just hand the car back.

For more information about Personal Contract Hire follow the link here.

 

Personal Loan

Taking out a personal loan is one of the easiest ways to purchase a car. You can secure a personal loan through our finance team at Perrys or from your bank or building society. As soon as the money is put into your bank account you can choose a car that fits your budget. 

Using a personal loan means the car is yours from the moment you pay for it. There are no further payments that you need to make for the car other than the loan repayments to your lender. 

If you find yourself not being about to afford the loan repayments, then you cannot hand the car back. You must sell the car privately to settle the loan. 

Follow the link here to find more information about Personal Loans. 

 

We hope this article has helped you understand what the different options are when it comes to ending your finance agreement. However, should you have any further questions, please contact your closest Perrys dealership and we’ll be happy to help. 

Written by Lois | 6 min read
29 Apr 2022

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