Financial Motoring Lingo Explained
Our annual website traffic reports show a significant visitor increase to the motoring section this time of the year as many of you prepare to change vehicle. To some, this can be a daunting experience with so many financial options for purchasing a car now at your disposal. With this in mind, we decided to look at the financial offerings outside of a cash purchase and discuss the lingo and added extras a buyer might expect.
Personal Contract Purchase
PCP is a flexible car financing option where buyers make an initial deposit followed by monthly payments over a set term, typically 3 years. Unlike traditional loans, these payments cover only the car's depreciation, not the full value. At the end of the term, buyers have three options: return the car, make a final "balloon" payment to own it, or trade it in for a new vehicle using any equity as a deposit. PCP often results in lower monthly payments compared to standard financing and has become very popular with Irish buyers.
Hire Purchase
HP is a car financing option where buyers pay an initial deposit, followed by fixed monthly payments over an agreed term. Unlike leasing, these payments go towards owning the car. Once all payments, including interest, are made, ownership of the vehicle transfers to the buyer. During the payment period, the car is legally owned by the finance company, but the buyer can use it as their own. HP typically results in higher monthly payments compared to PCP but guarantees ownership at the end of the term.
Lease
Car leasing involves renting a vehicle for a fixed period, typically 2-4 years, with agreed monthly payments. At the start, you will pay an initial deposit, followed by regular payments covering the car's depreciation during the lease term. The lessee doesn't own the car and must return it at the end of the lease or may have the option to purchase it for a predetermined price. Leasing often includes mileage limits and may offer lower monthly payments than buying.
On The Road Price
OTRP refers to the total cost of purchasing a car, including all necessary expenses to get it legally on the road. This comprehensive price typically includes the vehicle's basic cost, VAT, registration fees, road tax, and the cost of delivery to the dealership. It may also cover other essentials like number plates and sometimes a warranty. Essentially, the OTRP is the full amount a buyer needs to pay to drive the car away without any additional costs.
Lender Types
Here in Ireland there are several types of lenders offer financing options for car purchases, lets look at the 5 most common:
Banks - Traditional banks provide car loans with fixed or variable interest rates, allowing borrowers to purchase new or used vehicles.
Credit Unions - Credit unions offer competitive car loans, often with personalised service and lower interest rates for members.
Car Dealerships - Many dealerships provide financing options directly or through partnerships with financial institutions, including hire purchase and PCP agreements.
Specialised Car Finance Companies - These lenders focus specifically on vehicle financing, offering various loan products tailored to buyers’ needs.
Online Lenders - Some online financial institutions offer quick, convenient car loans with competitive rates and flexible terms.
These options cater to different financial needs and preferences, providing flexibility for car buyers
Added Extras
Many car companies offer free service plans or vouchers as part of promotional packages when purchasing a new vehicle. These offers can vary by manufacturer and dealership but typically include:
Free Service Plans - Some manufacturers provide complimentary maintenance for a set period or mileage, covering routine services like oil changes, inspections, and filter replacements.
Vouchers - Dealerships may offer vouchers for services they provide internally or generic shopping vouchers with companies they have partnered with.
Extended Warranties - Occasionally, extended warranties that cover additional repairs and services beyond the standard warranty are offered.
Naturally these incentives are designed to enhance the value of the purchase and encourage regular vehicle maintenance. The advice from our DoneDeal experts is to carry out your own du diligence to ascertain what option best suits your needs. Always do a comparison of vehicle prices between dealers on www.donedeal.ie and lending rates from those who, you are interested in borrowing from. The good news is, there are plenty of options!
