If you have not bought a car on a finance plan in the past, then you may be a little confused as to what terms and conditions are involved, which could theoretically prevent you from agreeing to a deal. In particular, it is often wondered whether a deposit payment is necessary when proceeding with a finance plan. The simple answer to this is that it would ultimately depend on the nature of the finance plan that you opt for, because some plans require it, and some don’t.
We have often written in previous articles about how there are four main types of car finance plan, and each of them sports their own positives and negatives, along with characteristics specifically tailored to the nature of their deals. These are Personal Contract Purchase (PCP), Personal Contract Hire (PCP), Personal Loan (PL) and Hire Purchase (HP). They all have good points and bad points, but in this article, we are focusing on one key element in particular, that being the deposit payment.
In short, a deposit is required if you prefer to go for either a Personal Contract Purchase or a Hire Purchase (note that these two share the term “Purchase” in their titles, hence the necessity for the deposit). If you happen to select either a Personal Contract Hire or a Personal Loan, however, then a deposit is not needed, mainly because in each case, you do not own the vehicle at any point, and if you do not plan to own the vehicle after the deal has ended, then in theory the vehicle is actually never your property.
Note that a deposit payment tends to be around 10% of the overall value. In other words, it is not an additional fee applied to whatever the car costs. We emphasise this because it’s easy to make the mistake of assuming that a deposit means you’re paying out more money, when in actual fact, you’re simply paying a percentage of the car’s value in advance of the deal beginning. And some people actually prefer this, because it means that they’ve already made headway in paying off their motor. Others do not, as they may not have the deposit amount to hand, and are happy to pay a little extra per month to cover the cost of the vehicle.
Either way, though, we have identified which car finance plans require a deposit and which do not. As we noted, the value of the car doesn’t change, but the payment terms do. Hopefully, this will prove helpful as you look to decide not only what you would prefer your next car to be, but also how you would prefer to pay for the vehicle. You can learn more about Accept Car Finance, and why we’re the best car finance company, by heading to our about us page.
As part of our services we deliver the car to your premises of choice within the UK. Lately we have delivered cars in most major towns including the Southern cities & midlands: (London, Birmingham, Leicester), Northern cities (Newcastle, Leeds, Sheffield, Manchester, Liverpool), and Scottish cities (Edinburgh, Glasgow).