Who is eligible to claim - purchase typesOctober 2016 | Articles
Here are a selection of purchase types
Outright Cash Purchase - Buying the car(s) directly with cash.
Personal Loan - This is a normal loan agreement which is usually repaid in instalments. A buyer will immediately own the car.
Personal Contract Plan (‘PCP’) - PCPs are known as ‘Solutions’ plans with Volkswagen, Audi, Skoda and Seat. The typical features of a PCP are as follows:
- a buyer is able to leave a flexible deposit;
- the length of the plan is fixed at the outset;
- the rate of the plan repayments are fixed for the length of the plan (including interest);
- there will be mileage limits which include penalties if exceeded;
- there may also be penalties for unreasonable damage to the vehicle; and
- payment of an agreed proportion of the car's value can be deferred until the end of the agreement. The PCP allows for lower monthly repayments as a buyer is not paying off the entirety of the cars value.
When the PCP ends a buyer will not own the car but has the choice to buy it at the Guaranteed Minimum Future Value which will have been agreed at the beginning of the plan, otherwise known as the balloon payment. Alternatively, the car may simply be handed back as the part exchange allowance is guaranteed to be at least equal to the final repayment.
Lease Purchase - This operates in the same way as a PCP however the deferred sum must be paid at the end of the agreement period. In addition, there is no guarantee that if a buyer trades in the vehicle, the part exchange allowance will be equal to the final payment due under the Lease Purchase agreement and the buyer would have to meet any shortfall.
Hire Purchase - Hire Purchase agreements are, in many ways, similar to PCPs however the buyer will own the car outright at the end of the Hire Purchase agreement period, there is no deferred or ‘balloon’ payment. The typical features of a Hire Purchase agreement are as follows:
- a buyer to leave a flexible deposit;
- the length of the agreement is fixed at the outset;
- the rate of the agreement repayments are fixed for the length of the agreement period (including interest);
- there is no deferred payment and the buyer will own the car outright at the end of the agreement period.
Finance Lease - Finance Leases are also known as ‘usage agreements’, and allow an individual or business to drive a car without owning it. These payments will not include running expenses such as insurance, maintenance and taxes.
Contract Hire Contract Hire agreements are also known as ‘usage agreements’ and allow an individual or business to drive a car without owning it. The typical features of a Contract Hire agreement are as follows:
- a customer (business or personal) is able to fix the length of the Contract Hire agreement;
- the rate of the agreement repayments are fixed for the length of the agreement;
- some of the running expenses may be included in the repayments, such as tyres and/or servicing; and
- the customer will never own the vehicle and the car will be handed back at the end of the Contract Hire agreement period. There is no additional final payment at the end of the agreement period.