The FCA is investigating the use of discretionary commissions arrangements between motor finance providers and brokers. Credit Vibe Finance formerly MotaFinance Limited have never used discretionary commission arrangements, and therefore none of our customers are impacted.
Advantages of Hire Purchase
When paying for a car out of your own pocket, you are usually limited in choice by the amount you can or want to spend. With a hire purchase agreement, it becomes possible to afford a higher specification car and use it right away.
1. You can access newer, higher-specification cars
With a hire purchase agreement, you can spread the cost of the vehicle with monthly repayments. How long the term lasts is dependent on how much you can afford to pay back every month. There’s also flexibility in how much you’ll pay monthly, as you can pay a larger deposit amount for lower payments.
2. You can spread the cost over a fixed term
The interest rate will remain fixed throughout the term. This won’t change, no matter what the Bank of England’s base rate does. So you will know upfront exactly how much the car will cost over the length of your agreement and can budget accordingly.
3. The interest rate is fixed
After paying the last instalment, the ownership of the vehicle will transfer from the finance company to you. At that point, you will legally own the car. You could also alternatively part-exchange it for a newer vehicle if you wish.
4. You’ll own the car at the end of the agreement
Most hire purchase agreements allow you to pay off the balance early, reducing the long-term cost. Some, however, will require a minimum amount of monthly payments to be made first before they allow early repayment.
5. Option to pay off the loan early
Unlike leasing a vehicle, there are no mileage or conditional restrictions that must be met with a hire purchase agreement, as the car becomes yours once the term has ended. However, you must remember that you’re not the legal owner of the car during the agreement, so there could be stipulations on modifying the car until your agreement ends.
6. There are fewer restrictions
Disadvantages of Hire Purchase
With a hire purchase agreement, you are in a fixed contract. As you don’t own the car until the final payment is made, if, for any reason, you can’t afford to make payments, the finance company could take your car away.
1. The loan is secured against the vehicle
The interest charges on hire purchase mean the final cost of your car will be more than if you were to purchase it outright. Monthly payments with hire purchase are also generally higher than for PCP or leasing deals.
2. It will cost more overall
As it’s a secured loan, hire purchase agreements are available to buyers with poor credit ratings. However, if you happen to have a poor credit rating or even no credit (for instance, if you haven’t borrowed in the past), you may not be eligible for the lower interest rate deals.
3. Monthly payments are based on credit rating
If you’re looking for a short-term agreement rather than one spread out over several years, choosing hire purchase can turn out to be an expensive route.
4. It can be expensive for short term agreements
It’s usual for a hire purchase agreement to be registered with credit agencies. So if over the term, you miss a payment or even make a late payment, it will be flagged on your credit report and may affect your credit score or even your ability to borrow in the future.
5. Missing or late payments could affect your credit score
Hire Purchase Advantages And Disadvantages
Is Hire Purchase right for me?
There will always be advantages and disadvantages to any financial decision that you make. Hire purchase is a great finance option to obtain the car you want, but it’s not always right for everyone.
