New Car Finance

Motor car finance is available in two main variants:

• Hire Purchase (HP)
• Lease Purchase (LP)

Each type of new car finance has its pro's and con's in different situations and you need to know which is the right one for you. So we've put together a brief summary of when to use one type of finance over the other.

There are a couple of other finance arrangements we can do, these include Personal Contract Purchase (PCP) and Contract Hire. Both deals are available on some models from UK Car Discount. Please contact us if you are interested in these.

All are types of hire purchase agreements and are protected by the Consumer Credit Act 1974. The main differences are:

• Hire Purchase Agreements (HP) – Payments are made evenly over the period of the agreement. HP is very similar to borrowing a sum of money from a bank and paying it back over a fixed period of time, with interest. The HP we offer is a 'No Fee' versin where there are absolutely no hidden admin costs or document fees.
• Lease Purchase (LP) – Equal Payments are made over the period of the agreement together with an agreed final payment. The effect is a low monthly finance payment without mileage restrictions. Lease Purchase is ideal for the more expensive car and for customers wanting even lower monthly payments

Lease Purchase is structured so that a capital lump sum amount, known as the Residual Value (RV), is deferred to the end of the agreement and this must be settled to gain outright ownership.

The RV is based on the type of vehicle and the suggested annual mileage covered by the vehicle. By deferring a lump sum to the end of the agreement, the RV reduces the regular monthly payments and makes more expensive vehicles far more affordable.

As a customer you will benefit from a slightly lower finance rate with a Lease Purchase product as there is no guarantee offered at the end of the agreement in terms of handing the vehicle back to the finance company. In other words, unlike PCP, Lease Purchase offers no option to walk away from the vehicle at the end of the contract.

It is your responsibility then to settle the final RV (or balloon payment) either though additional finance, cash or settlement by part-exchange.

"Put simply, Lease Purchase has a lower monthly payment than PCP, but you have to purchase the car at the end of the lease term".

Lease Purchase repayment periods are typically taken over 2, 3 or 4 years and settlement can be made at any stage of the agreement. Deposits for Lease Purchase are normally a minimum of around 10% and a maximum of 50% of the total vehicle price. Becuase the funder is exposed to less risk, customers will normally benefit from a slightly lower interest rate and there will be no fixed mileage contract.

Within a Lease Purchase quote there are 3 things with which you can lower your monthly payment:

• Consider financing the car over a longer contract period - perhaps a 48 month contract will make your car of choice more affordable
• The amount of deposit you are able to put down will dramatically effect your monthly payments. Higher deposit means lower payments
• You can adjust the RV (the amount you pay at the end) by setting a higher or lower annual mileage and, because you are not contracted to a certain annual mileage, this can be set at any level depending on how large you want the RV to be. Any adjustment in the RV will effect you monthly payments. You need to be careful to avoid negative equity with a lease purchase agreement since a car's RV will considerably more if it has covered 10k miles a year rather than 30k.

Another way of putting this is that if you state your monthly mileage as being far lower than you actually travel, you'll end up paying more at the end of the contract - i.e the finance company will expect you to pay the balance on a car that has, as far as they are concerned done fewer miles than it's actually done. The risk is that you can end up paying more for the car at the end of the contract than it's actually worth.

Yes and we can do better than that. Part of our finance product is specifically designed for those in receipt of a car and business mileage allowance from their employer. Employees in receipt of a car allowance from their employer can pay no deposit and make the first payment after one month. Members not in receipt of cash/mileage allowance can also benefit from our product by opting to pay the initial payment (equivalent to one monthly payment plus the documentation fee) on delivery of the car and monthly thereafter.

Not at all. Our prices are shown as guides to how much finance could cost. Our finance partner (Santander) is just an option - you can supply your own finance, or some manufacturers have their own providers that can offer even more competitive rates.

If you have the option of taking over your existing company car from your employer, we should be able to provide the finance on similar terms.

The UK Car Discount finance team searches across a number of the major finance providers - so the finance terms and conditions are different for each finance supplier - however these will be provided when you have applied for finance online so they can be read before you decide to go ahead with your new car.

Yes. Finance payments include VAT in each payment - the payments are all Gross figures.

Your first monthly payment will be due one month after your car has been delivered to your door and you are completely happy.

It is possible to pay off a loan early, though there's a specific mathematical formula (called Rule of 78) for working out how much a customer will pay for settlement at any point during the agreement.

Basically it takes into account that you will pay more interest over the first part of the loan when the capital amount is higher and less towards the end.

It's a bit complicated, but here's a link to read more - Click here to read the Wikipedia version of Rule 78 (will open in a new window).

Once your vehicle has arrived into dealer stock and ready for delivery, the finance provider will require good copies of the following 3 additional documents that must match the name and address on your finance agreement:

• A copy of your UK driving licence (if this is a new style licence it must include the counterpart) or an alternative proof of address
• Second proof of signature: Passport or debit card (copy of both sides please)
• Proof of address: A utility bill or bank statement showing your current address dated within the last 90 days (not a mobile phone bill or credit card statement)

Unfortunately not. As part of the finance agreement you are obliged to service and look after the car, as you would normally expect. You can, however, remove the risks associated with the day today running costs of the car by taking out a maintenance contract that covers all servicing and repairs subject to normal wear and tear. This is a particular advantage if you drive a high annual mileage (e.g. 15,000 miles per annum plus).

This Act covers the finance agreement and lays down certain requirements for your protection that must be satisfied when the agreement is made. If they are not, the funder cannot enforce the agreement against you without a court order. The Act also gives you a number of rights including the right to settle the agreement at any time by giving notice in writing and paying off all amounts payable under the agreement, reduced by a rebate.

We have a range of insurances available to protect you covering areas such as Life, Accident, Sickness & Unemployment and also insurance write off (GAP) protection – visit the Employee Protection section of this site for further details.

Simply complete the Finance Proposal form on our website and email it together with your Vehicle requirements. If you have any other questions about finance please click the contact us button or feel free to give us a call, as we will be happy to discuss your requirements.

Because our new cars are already heavily discounted, most of the cars we sell aren't eligible for a further £2,000 discount under the Government Scrappage Scheme. There are however a few exceptions where the scheme can be applied to some of the new cars we sell, further reducing the cost of your new car (if you are eligible to take part in the scrappage scheme).

Keep checking the site for details or sign up for our newsletter to make sure you don't miss out on any great deals.

Some of the main points of the Scrappage Scheme are:

• Consumers will be offered £2,000 towards a new car or van if they trade in a 10 year old plus vehicle which they have owned for 12 months or more
• £300m will be made available to fund the scrappage scheme allowing up to 300,000 sales; It will finish on the 28th February 2010 or until the funding is used up
• Your old vehicle must be a Car or Light Commercial Vehicle not exceeding 3.5 tonnes (N1 class) and must be first registered in the UK before 31 August 1999 (”T” reg and earlier)
• The Claimant keeper must have been the registered keeper for at least 12 months before the new vehicle order date, have a UK address and the car to be traded in must have a current MOT certificate and be clear of finance
• The new vehicle nust be a new Car or Light Commercial Vehicle not exceeding 3.5 tonnes that is a UK specification vehicle and first registered in the UK on or after the date of the launch of the scrappage scheme and declared new at first registration in the UK with no former keepers. It must be registered to the same keeper as the registered keeper of the vehicle to be scrapped.

For more information from the Government's site, click here. (This will open a new window.)