Credit Guidance

Financing your vehicle

When considering finance for a vehicle we advise that you research and know of as many different ways to do this as possible. If you’re not paying cash then it’s likely you’ll look to finance it through either Hire Purchase, Personal Contract Purchase or a Personal/Bank Loan.

At First Response we only offer Hire Purchase as a way of getting a vehicle so if you’re looking for PCP or a Personal Loan you will need to look and apply elsewhere.

Work out your monthly budget

Before you’ll be approved for any loan the lender (finance company or bank) will ask you some questions to make sure you can afford to pay the loan back now and in the future. This is responsible lending as no company should be lending money to somebody who cannot afford it in the long run. You can use the following tools so see if (and how much) you can afford to borrow so you’re aware before applying:

Money Health Check

Money Debt Test

Below we’ve given a brief overview of some different options available when financing a vehicle (remember, we only offer Hire Purchase) and we cannot advise on any other finance product. There may be other ways to finance a vehicle we’ve not mentioned so we recommend you do your own research to find your best option.

Hire Purchase

The finance First Response offer
This is where a finance company will buy the vehicle from a dealership and then hire it to you over a certain amount of time. You pay monthly and at the end of your contract you will own the vehicle.

Hire Purchase Pros & Cons

Pros
  • Simple to arrange
  • Fixed monthly payments
  • Fixed interest rates
  • Flexible term lengths 24-60 months
  • Vehicle belongs to you after final payment
  • Deposits not required
  • No annual mileage restrictions
  • You are protected under the Consumer Rights Act 2015
Cons
  • The vehicle is at risk of repossession if you do not keep up repayments
  • You do not own the vehicle until your final payment
  • Hire Purchase is not suitable if you plan on paying off your loan within 6 months
  • Finance is subject to status and not guaranteed

More about Hire Purchase

Personal Contract Purchase

A popular way to finance new vehicles. You tend to put down a deposit, pay monthly repayments and then have one of three choices at the end: give the vehicle back, pay a final sum to own the vehicle or use the vehicle as a deposit for a newer vehicle and start a new contract.

Pros
  • 3 options at the end of the agreement
  • Low monthly repayments (as you've paid a deposit)
  • Fixed monthly repayments
  • Fixed interest rates
  • Flexible lengths
  • Available for newer vehicles
Cons
  • Are not usually available for older vehicles
  • You may never own the vehicle due to the large final payment required
  • The MFV (Minimum Future Value) may be lower than expected
  • Requires a decent sized deposit
  • Vehicle belongs to the finance company until you make all payments
  • Vehicle is at risk of repossession if you don’t pay
  • Not suitable for short term
  • You are only allowed a maximum mileage per year and are charged for anything above

Bank Loan

If you’re able to get a bank loan then it may be your preferred option as the rates will likely be lower than a Hire Purchase. Unfortunately this isn’t always an option for many people as the amount you can borrow may be limited.

Pros
  • You should be able to get a better rate as you’re already their customer
  • You’re vehicle isn’t at risk of repossession
Cons
  • You need a good credit file to be eligible
  • You may not be able to get the amount you need for a vehicle

Credit Cards

Some people may be able to get a credit card with a lend that’s large enough for them to buy a car, if this is the case then it could be a cheaper and better option for you in the long run. Not everybody has this opportunity though as you do tend to need a good credit rating to get a low interest or high amount to borrow.

Pros
  • You’re vehicle isn’t at risk of repossession
  • You may have interest free periods
  • Fixed interest rates
Cons
  • They can be difficult to get if you have a poor credit file
  • You may not be able to get the amount you need for a vehicle
  • Interests rates may increase significantly after interest free periods

Whatever route you decide to go down to finance your next vehicle you need to be sure it’s the right one for you. Although we’ll do our best to make sure you can afford the finance you need to be aware of any changes that are happening in the near future (retirement, redundancy, pregnancy etc.) which may affect your income and therefore your ability to pay back the loan.

We also advise you read as much information about us or any product before applying as it’s likely that any application will show on your credit file.

You can read our blog on improving your credit score if you’re looking for more help on your credit file or you can find independent information on the following website:

Money Advice Service