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• Hire purchase (HP) is one of the most commonly used methods to finance motor vehicles.

• The agreement is structured with fixed monthly payments and a final nominal “option to purchase” fee on payment of which, the customer takes legal ownership of the vehicle from the finance company. Unlike personal contract purchase (PCP), no “balloon” payment is payable at the end if the customer wants to own the vehicle.

• If the customer has a large deposit to put down, HP may be a better option for a customer than PCP.

• Personal Contract Purchase (PCP) is a type of hire purchase agreement (HP) which is often used by customers wanting to change or upgrade their vehicle on a regular basis.

• The agreement is structured with regular monthly payments and a final “balloon” payment, being the estimated value of the vehicle at the end of the agreement, based on the agreed annual mileage and predicted wear and tear over the period. This is called the ‘Optional Final Payment’ (OFP), also sometimes referred to as the ‘Guaranteed Future Value’ or ‘GFV’.

• At the end of the agreement, customers will have four options:

   1 Pay the OFP and nominal option to purchase fee and own the vehicle outright;

   2 Part-exchange the vehicle for a replacement. Any surplus after paying the OFP could then be used as a deposit for a new agreement;

   3 Hand back the vehicle (for example, where the OFP is more than its actual value). If the annual mileage agreed at the start of the agreement is exceeded or if the vehicle is not in reasonable condition on its return, this may incur extra costs.

   4 Re-finance the OFP via a new loan arrangement so that the customer can spread the cost over a period to suit their monthly budget.

• A deposit is commonly made with PCP but, for a larger deposit, HP may be a better option because the customer risks losing that “equity” in the vehicle if it is handed back at the end of a PCP agreement.

• PCP monthly payments will be lower than for HP on equivalent terms. But overall interest charges will be higher on a PCP because a portion of the credit advanced (in the form of the OFP) remains unpaid until the end of the term.

• You can find the options when your agreement is coming to an end here End of PCP Agreement Option Selection Form

• Access is a Mann Island’s own-brand hire purchase (HP) product designed specifically for private customers with a less than perfect credit history who wish to improve their credit profile.
• A higher interest rate than for standard HP may therefore apply but otherwise it operates in exactly the same way as HP.

• We have access to funders who can offer personal loans up to £25,000.
• The payment profile of a personal loan is similar to hire purchase (HP) but the customer takes full ownership of the vehicle as soon as the loan amount has been paid by the finance company to the dealership on the customer’s behalf. The customer then makes monthly loan payments to the finance company to pay off the credit plus interest.
• Because the finance company never owns the vehicle, the customer has no right or option to return it to them at any point.
• Certain rights which protect a customer who may get into financial difficulty during the course of an agreement do not apply to a personal loan as they would to HP.

• This is in effect hire purchase with a “balloon”, designed specifically for businesses which wish to own the vehicle at the end of the agreement.
• The customer hires the vehicle for the length of the agreement and takes ownership of the vehicle once the contract has concluded.
• The payment profile of lease purchase typically involves a deposit, regular monthly payments and a final balloon payment, representing the vehicle’s estimated Residual Value (RV) at the end of the agreement, calculated in the same way as the optional final payment under a personal contract purchase contract (PCP).
• Unlike PCP, the customer cannot hand the vehicle back at the end of the agreement, so must pay the RV (and sometimes a nominal option to purchase fee). If vehicle is worth more than the RV, the surplus could be used as deposit on a replacement vehicle. But if the RV is more than the vehicle’s actual value, the customer must make up the shortfall or refinance it.

• Contract Hire is available to business customers who are VAT registered. It’s a form of long-term rental based on an agreed annual mileage
• Customers lease a vehicle for the period of the agreement and monthly rentals are subject to VAT
• The customer can include the cost of the vehicle maintenance over the period of the agreement
• A typical Contract Hire Agreement will be structured with the customer paying a deposit, normally the equivalent of 3 rentals, followed by monthly rentals over the period of the agreement.
• There is no option to purchase at the end of the agreement

• Balanced Payments Plan is offered to business customers or high-net-worth private individuals.
• It’s a further variation of hire purchase with the same payment profile, but the key difference is that the interest rate can change over the period of the agreement.
• Interest rate movements are tracked during the agreement so, although the monthly payments are fixed, the real monthly cost can go up or down as the rate changes.
• A final reconciliation of interest charges takes place at the end of the agreement which may result in a credit to the customer or a shortfall due from them.

Finance Lease

• Finance Lease is available to business customers who are VAT registered
• At the end of the agreement, the customer must pay a balloon payment
• Unlike some other finance options, the vehicle maintenance cost cannot be included in the monthly payment
• At the end of the agreement the customer has the option to extend the lease for a further set period, or agree for it to be sold to a 3rd party
  o If the sale price exceeds the balloon payment, the leasing company will refund a percentage of that profit to the customer
  o If the sale is less than the balloon payment, the customer must settle the difference between the sale price and balloon payment amount
  

Schedule Agreements

• A scheduled agreement allows business customers to finance more than one vehicle on the same agreement
• Vehicles can be settled and added during the period of the contract