There are different types of vehicle finance and a brief summary of each option is as follows:
Best Suited For: Customers who want a simple form of car finance and want to own the vehicle at the end of the contract.
Typical cost: Between 7% and 13% APR
How it works: Customer pays an initial deposit and then the balance is paid in monthly instalments including interest. Hire purchase offers a higher level of consumer protection than an unsecured personal loan.
Drawbacks: You don't own the car until the end of the contract and you can't sell or modify it without the lenders permission during the contract.
Best Suited For: Customers who can pay a large deposit buying a new vehicle
Typical cost: None
How it works: Customer pays an initial larger deposit and then the balance is paid in monthly instalments interest free.
Drawbacks: Loan terms are shorter than other forms of finance, so monthly payments may be higher. This type of finance isn't available on all vehicles. It is usually provided by a manufacturer in the form of a consumer offer.
Best Suited For: Customers who don't want to pay a larger deposit, want to keep repayments low and like a new vehicle every 2 to 4 years.
Typical cost: Between 7% and 14% APR
How it works: Customer opts for an annual mileage, pays an initial deposit and then monthly instalments including interest with a lump sum that is left to pay off at the end of the contract based on the mileage you have opted for. The lump sum amount is set by the finance company and is called the minimum guaranteed future value (GFV). The lender guarantees that the car will be worth that amount at the end of the contract. PCP's offer a higher level of consumer protection than an unsecured personal loan.
When the contract ends, you have three options:
1. Pay the lump sum off yourself and keep the car
2. Hand the car back to the finance lender
3. Part exchange your car with your dealer, subject to the car being worth more than the lump sum, and use as a deposit against your next vehicle.
Drawbacks: PCP's generally work out more expensive than hire purchase, especially if you decide to pay the lump sum at the end and buy the vehicle. At the end of the contract you must pay charges relating to any excess mileage and any damage on the vehicle that is not fair wear and tear. If you decide to hand the vehicle back to the lender you must pay any charges relating to any excess mileage and any damage on the vehicle that is not fair wear and tear.
Best Suited For: Customers who want a new car regularly without ever owning it.
Typical cost: Monthly lease payments usually between £100 and £400 per month.
How it works: Customer chooses a vehicle and how long you want to lease it for and states what annual mileage they do. These three factors determine your monthly payment and some schemes have an option to include servicing and maintenance of the vehicle. You rent the vehicle for the stated term and give the vehicle back at the end of the contract.
Drawbacks: You normally have to pay a few months' rental in advance. You cannot modify or cancel the contract and you are liable for all the rentals for how long you are renting the vehicle. At the end of the contract you must pay charges relating to any excess mileage and any damage on the vehicle that is not fair wear and tear.
Just Citroen is authorised by the Financial Conduct Authority to carry out credit broking activities in relation to the sale of motor vehicles. Just Citroen IS NOT a lender and uses a variety of finance lenders namely Citroen Financial Services, Barclays Partner Finance and Black Horse Motor Finance.
The Just Partnership Limited is Authorised and Regulated by the Financial Conduct Authority (FCA) for Consumer Credit activities and is an appointed representative of TRACS, a trading division of FISC Limited, which is authorised and regulated by the Financial Conduct Authority for General Insurance.