Image representing - Car Finance Explained

Car Finance Explained

If you’ve found the perfect car, but you’re not ready to pay the full price in one lump sum, car finance might be an option for you. Our parent company Santander Consumer Finance UK offers a range of options which can be tailored to suit you and your finances. Your dealer is available to answer any questions you might have and to help guide you to the right choice of finance. Once you have come to a decision, your dealer will apply to the finance provider you have chosen, and they will endeavour to make a quick decision. All the following information is based on the Santander Consumer Finance website, for any specific information about other finance providers, please approach your dealer.

Purchase Plan

A simple way of financing your car that provides certainty of a fixed rate and fixed monthly payments over the course of your agreement. To tailor the monthly payments to your needs the length of term (how many months the agreement lasts for) and the initial deposit can be reduced or increased. You can even trade your existing car and put this towards your initial deposit.

How does it work?

-        Your dealer will work with you to put together the agreement to meet your individual needs based on your car, initial deposit, the term, and your monthly budget

-         Once you’ve paid your initial deposit to the dealer, you make regular monthly payments to the finance provider to cover the amount borrowed plus any interest and fees

-         The fixed interest rate means you’ll know exactly how much you are going to repay over the agreement. This will be clearly indicated to you on the paperwork that you sign and take home.

-         Once you have paid all the monthly payments, the car is yours!

Personal Contract Purchase

This is similar to a Purchase Plan but with more flexibility as part of the cost is deferred until the end of the agreement which may reduce your monthly payments. The deferred amount is known as the Guaranteed Future Value (GFV) which may also be known as the Optional Final Payment. At the end of your agreement there are three options;

1.     Pay the GFV and keep the car

2.     Swap the car for a different car

3.     Return the car, if the car is in good condition you won’t have to pay a thing

How does it work?

-         Your dealer will agree an estimated mileage with you and this will help determine the GFV at the end of your agreement

-         To determine the amount of your monthly payments, you and the dealer will agree on the amount of initial deposit and then combine this with the agreement duration and GFV

-         The fixed interest rate means that you’ll know exactly how much you will repay throughout the agreement

-         Towards the end of the agreement the finance company will write to you to remind you of the three options available

-         It’s up to you to decide which option is best for you. Your dealer may be able to help if you decide to part exchange the car.

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