Guide to Used Car Finance

THE INSIDER ON… A GUIDE TO USED CAR FINANCE IN NORTHERN IRELAND PART ONE

Sometimes The Insider has to get serious: and it’s clear the economic situation in Northern Ireland, despite some recent improvement, is a matter of deep concern. Purse-strings are tighter than ever and running a used car – with insurance,fuel, road tax and more to pay on top of the initial sticker price – has become increasingly expensive meaning that finding a good deal on used car finance in Northern Ireland is vital.

Here we’re offering a two-part guide to help ensure you’re choosing the right used car finance for your needs.

Be responsible…

Whichever car finance option you choose, the first step should be to ensure that you are dealing with a reputable lender. The leading industry body in the UK is the Financing & Leasing Association (FLA): its members must comply with its code to ensure customers are treated fairly.

Hire purchase and conditional sale

One of the most common forms of used car finance in Northern Ireland, this sees you agree with a dealer on an amount you need to borrow, minus a cash deposit or any car you’re offering in part exchange. You will then repay the car finance on a monthly basis throughout the agreement, with interest included. Bear in mind that the car will not be yours to own until the final payment is made.

With some lease purchase agreements the last payment may be significantly higher so your monthly payments are reduced.

Personal contract purchase (PCP)

Personal contract purchase is effectively car leasing but with the option to buy at the end of the term. This means you agree with a dealer on the amount needed to pay for the vehicle minus the deposit and any part exchanges. Assuming you pass credit checks, a car finance company then pays for the vehicle on your behalf while you make reduced monthly payments. While the agreement continues you only pay the difference between the full loan and the amount deferred, plus interest; and at the end of the agreement you can pay-off the amount to own the car outright, return the car and walk away, or trade the car with the lease company for a newer model.

Personal leasing (personal contract hire)

Personal leasing is basically the same as personal contract purchase, but without the option to buy at the end of the term. Remember that with personal contract hire and personal contract purchase you should pay close attention to the mileage restrictions and wear and tear guidelines that are used to determine the vehicle’s residual value: exceeding them could mean you are penalised.

Service and maintenance will usually be included as part of a personal leasing agreement. Meanwhile, bear in mind that you will need comprehensive car insurance with all of these agreements because the car is not actually yours to own until the final payments have been made.

In the next part of the guide we’ll look at personal loans, credit card purchases and mortgage top-ups.

This is the second part of a two part guide looking at used car finance options in Northern Ireland. For information on personal leasing, hire purchase and personal contract purchase, read used car finance Northern Ireland part one.

Personal loans

This is perhaps the most well-known form of car finance that sees you get the money you need to purchase a car outright from a bank or another loan lender.

Before taking out a personal loan you will have already established which car you want with a private seller or dealer and you make a payment with the money you have borrowed. You then have to pay back the lender you have borrowed money from, usually with a series of monthly repayments on which interest will be charged.

As the car is yours to own you are responsible for maintenance, repairs and insurance. You can sell the car whenever you want but you will still need to pay off the loan under the terms of the agreement.

Mortgage top-up

One option that many people consider is borrowing from their mortgage provider to fund a used car purchase: this could mean getting a second mortgage for the amount needed or withdrawing equity from the house.

Of course this will mean that the car is yours and that you will pay for the vehicle via your mortgage repayments. However, it is also the riskiest car finance option as your house is at risk if you do not make repayments.

Credit card

Another option is to purchase a car using a credit card: but this can be extremely expensive as most credit cards are designed for short-term borrowing only.

Typically interest rates on credit cards will be higher than other forms of car finance. However, there are some credit cards available to those with good credit ratings that may offer zero per cent interest on purchases for a limited period.

Cash

It’s not an option that too many of us have: but if you do have the money, then you can pay with cash for the vehicle upfront which removes the interest charges associated with car finance. Just ensure you drive very carefully after spending all that money in one go!

Don’t forget car checks

Whichever used car finance option you choose, don’t overlook the importance of carrying out a car check.

Car checks will disclose the history of a vehicle and take away part of the gamble of the purchase. This can be invaluable information to gather before you part with your money: particularly as it can highlight whether or not the vehicle has been in a serious accident; and whether it has ever been stolen. Both Experian and HPI are able to offer independent car checks on your behalf.