Home / News & Press / Purchase rental vs car loan: the difference between the car loan and the hire-purchase contract explained The following example explains the possible difference in your repayments, depending on whether you return the car according to the half rule or sign a voluntary discount. Personal contract purchase loans are a type of car loan that many are not familiar with. Many people are used to using a personal loan for the purchase of their vehicle. You take out the loan for the cost of the vehicle. Although they owe the loan to the bank, they have owned the car since the beginning. Personal contract purchase loans are another way to work the loan. Car rental car loans are another way to find a loan for a car. Both of these types of loans often arise when people are looking for alternative loans. For some, the personal contract purchase loan may be correct.

For others, the hire-purchase car loan may be the best. The first concerns your relationship with the asset: in the case of a personal loan, you get money from the bank, which is often an unsecured loan, which you then use to buy any item – for example, a car! The car is yours as soon as you buy it, but of course you have to repay the loan amount plus interest to the bank. In the case of a hire-purchase agreement, you actually rent the car monthly. The car is not yours until the last payment has been made. At this time, the ownership of the car passes you. The bank can put the car back in possession if you do not keep the payments. Another type of agreement is a personal contract plan (PCP), which in many ways resembles a hire-purchase agreement, but differs in how much the contract is structured and how much money you have to pay at the end of the term, known as a balloon payment or guaranteed minimum future value (GMF) You might also find it useful to see how much a loan will cost you. Use our loan calculator to find out. The half rule is part of the Consumer Credit Act 1995 and gives you the right to terminate an HP contract at any time. The half rule limits your liability (the amount for which you are responsible) to half the HP price of the car.

The agreement of the financial company must tell you the number for half the price of the power of the car. Hire purchase (HP) is a type of loan that is often available from car dealerships. This can give you the convenience of sorting through your finances and choosing your car in one place. Under an HP agreement, you rent the car, pay an agreed amount usually in monthly refunds, and become the rightful owner of the car at the end of the contract. The rightful owner of the car is the financial company that gave you the money to buy the car, and you cannot sell the car without the permission of the financial company. If you have paid more than half of the HP price of the car and have not missed any payments, you can terminate the contract and return the car. You are responsible for the cost of all necessary repairs. If you paid more than half of the HP price, you are not entitled to a refund. Personal contract purchase loans have low monthly payments.

These payments are lower due to the final lump sum. They also give you the advantage of choosing whether or not to buy the vehicle at the end. Lease-to-purchase car loans are a bit easy to get. Their main advantage is the ease of finding the loan. For this reason, they are among the most popular types of loans. The personal contract purchase loan does not allow you to own the vehicle. It also means that if you decide not to buy the car, you will lose the car. Your payments were made to rent the vehicle. Hire-purchase car loans also don`t give you ownership of the vehicle.