MANUFACTURERS SCHEMES
Normally arranged by car dealers, Manufacturers Schemes or Hire Purchase (HP) is the traditional method of financing a car. The downside is that you do not own the vehicle until the end of the agreement term, meaning, if you fail to maintain the finance payments, you could lose the vehicle.
You will generally be required to put down a 10 -15% deposit from your own resources and the balance will be financed over 1 - 5 years depending on your requirements, the age of the vehicle and the finance company's terms.
Advantages
- Monthly repayments are lower because you are have put down a deposit.
- Terms are usually fairly flexible, meaning you can select the period over which to repay the loan subject to affordability.
- You can shop around amongst the independent finance companies to find the best terms.
- If you arrange the finance independently it can put you in the position of a 'cash buyer' enabling you to negotiate a better price.
- The interest rate will usually remain fixed throughout the term, meaning you know exactly how much your repayments will be.
- You can usually take out payment protection so that the payments are still made if you are unable to work.
Disadvantages
- The car is not yours until the last payment has been made.
- If you fail to maintain the finance payments then the car may be repossessed.
- You will normally need to find your own deposit (around 10-15%).
- You cannot sell the car without repaying the finance agreement in full.
- If you take the agreement out in a period of high interest rates then the initial rate will usually be fixed for the period of the agreement, even if interest rates drop.
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