The best thing about financing a car is that you have so many options. There are agreements to suit every person, from business leasing to hire purchase, there’s an agreement for everyone.
But, what options do you have if you want to own your car at the end of your agreement?
In this article, we look at the different options available to you if you want to own your car at the end, and the pros and cons of each.
What are my options if I want to own my car at the end of my agreement?
There are three options that are available to you if you are a private customer and you want to own at the end and those are;
- Personal contract purchase
- Hire purchase
- Cash purchase
What is personal contract purchase?
Personal contract purchase is the most flexible agreement out of the three we mentioned above. You have your car for a certain amount of of time, paying a certain amount each month. Then, at the end of the contract, you have three options;
- Hand the car back (subject to mileage and condition)
- Part-exchange the car and use the money for the deposit or another one
- Buy the car for a pre-agreed value
And it’s the last option that you are obviously interested in. At the start of your contract, your vehicle will be given a Minimum Guaranteed Future Value (MGFV). This MGFV is based on;
- How many miles you will be doing
- The make and model of the car
- Any optional extras (sat-nav, panoramic sunroof etc.)
- The expected depreciation
The MGFV will not change. It will stay fixed for the duration of your contract. This is important to note because there was a fear that Volkswagen’s would depreciate really quickly due to the emissions scandal. While this turned out not to be the case, it’s good to note that no scandal of any kind will affect your MGFV. You can read more about depreciation here.
How do I own my car at the end of a personal contract purchase?
Towards the end of your contract, you will be contacted by the finance house and they will ask you what you want to do, whether you want to hand your car back, part-exchange it or buy it. In this scenario, you will want to buy it so essentially all you have to do is pay off the Minimum Guaranteed Future Value.
Once that is paid, it’s yours to keep.
What are the advantages of personal contract purchase?
There are quite a few advantages to personal contract purchase.
- It’s flexible
- While this article is about owning your car at the end, a personal contract purchase is good for those who aren’t 100% sure as to whether they do want to own at the end. If you think you might change your mind then personal contract purchase is for you.
- The end payment is pre-agreed
- This means that you know how much it will cost to buy the car at the beginning of the contract. This makes for easy budgeting
- Also, because there is an MGFV it brings down the monthly payments, which means you can afford a better car
What is a hire purchase?
A hire purchase is a finance agreement, not a lease agreement. This is because you go into the agreement with the intention of owning the car at the end.
Essentially, you pay a certain amount each month for a set period of time, and then once that time is up, you own the car.
Hire purchase is perfect for those who are 100% sure they want to own their car at the end but want it on a finance agreement rather than a cash purchase.
What are the advantages of Hire Purchase?
Like personal contract purchase, hire purchase also comes with its benefits. For example;
- It’s a fixed rate loan
- No fluctuating interest rates will affect you
- You can do hire purchase with a balloon payment
- This is where you can lower your monthly payments with a final balloon payment at the end. This is a slightly larger payment.
- Deposit can be optional
- If you don’t want to put a deposit down, you don’t have to. It will make your monthly payments more expensive, however.
- You can settle early
- If you have the cash then you can settle the contract early and walk away with your car sooner than expected
What is a cash purchase?
Not many people realise that we at OSV actually offer cash purchases as well. A cash purchase is pretty self-explanatory, you simply buy the car with cash or a loan from the bank and that’s it. You have nothing more to pay.
A cash purchase is a good idea for those who know they want to own their car at the end but don’t want a finance agreement.
What are the advantages of cash purchase?
And finally, what are the advantages of cash purchase?
- Insurance tends to be cheaper
- Because you own the car outright, you do not have to pay for fully comprehensive insurance. You can get standard third party if you wish.
- You don’t have to keep up with monthly payments
- If you don’t want to have to make the monthly payments for a car, then cash purchase is the best thing for you.
What are the advantages of owning a car at the end of my agreement?
So we’ve gone through your options about owning the car at the end of your agreement, but what are the advantages of actually owning your car at the end of your agreement?
- Once you finish with the monthly payments, the car is yours
- This is an obvious one, but if you only want to have to make monthly payments or a few years or so, then owning at the end just makes sense.
- When you do own the car, you don’t have mileage or condition restrictions
- You are still bound by mileage and condition restrictions with a personal contract purchase sometimes even with hire purchase but once your contract is up you don’t have to worry about that anymore.
- If you buy a car with cash then you aren’t ever bound by mileage and condition restrictions because the car is yours straight away.
- You can end up owning a nicer car than you thought you would
- Because you are spreading the cost over a few years, you could end up owning a nicer car than you thought you would.
Can I own my car at the end of a personal contract hire?
One of the questions we get quite a lot is ‘can I own my car at the end of a personal contract hire?’ and it’s a question that we think does need to be answered.
A personal contract hire is a lease agreement. This means that it is not designed for you to own the car at the end, it is designed for you to simply hand the car back when the contract is up.
And, lease companies will not sell the car to the person who has the finance. However, they will often allow a 3rd party to buy it. Now, if you end up buying it from the 3rd party then that’s your choice.
It should be noted that this doesn’t always happen. It only happens in some circumstances and if you do want to own your car at the end then we recommend a hire purchase. If you are unsure, we would recommend a personal contract purchase, as this gives you both options.
So hopefully that has cleared a few things up about your options when it comes to owning your car at the end of your contract. However, if you do have any other questions then don’t hesitate to contact us.