Choosing your smart finance
What are my options?
Choosing a finance package to suit youCar financing is the most popular way in the UK to buy a new or used smart. It provides the flexibility of purchasing a vehicle, without having to pay a large lump sum of cash upfront.
At Inchcape smart we have a great selection of finance options for you to choose from. These include:
- PCP: Personal Contract Purchase
- HP: Hire Purchase
- PCH: Personal Contract Hire
- Finance Leasing
Understanding my finance choices
Personal Contract PurchaseHow does PCP work:
Personal Contract Purchase is a highly attractive and very popular way to own a new, nearly new or used car. It combines fixed monthly payments with exceptional flexibility at the end of the agreement. Your car's Guaranteed Future Value (optional final payment) is calculated (based on a pre-agreed annual mileage and your preferred change cycle) and is deferred as a final payment.
At the end of your PCP agreement:
You have total control in deciding which of these choices suits you best.
Retain - Buy the car by paying the optional final payment
Return - Return the car with nothing more to pay, subject to mileage and condition. (i.e. If car prices fall substantially and you find you have negative equity you hand the car back with nothing to pay)
Renew - Part-exchange your car, and if there is any remaining equity after the final payment is taken care of, this is yours to use as deposit or take as cash-back
Find out more about how PCP works with our useful PCP finance guide.
Hire PurchaseHire Purchase is perhaps the most traditional of funding methods. The monthly payments are determined by the amount of deposit initially paid, the period of the contract and the overall price of the vehicle.
How does HP finance work?
A typical hire purchase option will consist of paying a low deposit amount (maybe 10% of the vehicle price), have no mileage restrictions and entitle you the customer to eventual ownership of the vehicle.
Essentially, the Hire Purchase funding option is best suited to those customers who want simplicity.
At the end of your HP agreement:
Once all the payments due under the agreement have been made the title passes to you and you are free to keep or dispose of the vehicle as you see fit. Should your circumstances change you are able to settle the agreement either partially or in full, and your finance company will be happy to provide a figure for this at any time.
Is HP the right finance option for you?
If you're a high mileage driver or would like to keep your car for a longer period of time, Hire Purchase (HP) can work out more effective than say a PCP deal. For more information about HP, visit our Hire Purchase Funding Explained guide.
Personal Contract HireThis payment plan, normally more suited to Business Users (but becoming more common for personal users via 'PCH') effectively allows you to 'hire' vehicles as opposed to owning them.
How does PCH finance work:
The amount you pay per month effectively covers the drop in your car's residual value. This amount is calculated working on the value of the car at the end of the lease and you pay the difference. It's common to pay three months up front as an initial deposit, which means the initial outlay isn't too big.
If you are a VAT registered business a proportion of the rentals may be tax deductible. Contract hire is classified as an operating lease for current taxation purposes, therefore it is regarded differently to 'purchase' contracts so you may benefit from certain tax advantages. Your financial or tax advisor should be able to advise you if this applies.
At the end of the PCH agreement:
A PCH agreement can run over one, two, three or four years. Once this comes to an end, the customer simply returns the vehicle.
Is PCH the right option for you?
PCH can be a cost-effective way to keep yourself in a new car. You don't need a big deposit and road tax is covered for the duration of your contract. For more information about the key benefits of PCH, visit our Personal Contract Hire Finance guide page.
Find out more about how PCH works with our useful PCH finance guide.
Business Contract HireBusiness Contract Hire (also known as an Operating Lease) is a cost effective way of securing the use of a vehicle for a pre-agreed period of time with a low up front rental. Contract Hire, as the name implies, is an agreement to hire the car for a period of time, typically 2, 3, or 4 years with an agreed mileage limit. Advance rentals can be as little as 1 monthly rental, though are more usually either 3 or 6 months. There are certain tax advantages for VAT registered businesses which we can explain to you in more detail.
Finance LeasingA Finance Lease is a tax efficient and flexible way of purchasing a car. As with PCH/Contract Hire this way of funding is more suited to a business customer. The flexibility comes from the ability to choose between two options:
Option 1: You can spread the total cost of the vehicle, which includes interest charges over a certain period leaving no further money to be paid
Option 2: Offset an amount to the end of the term with the result being that you would benefit from lower monthly repayments. The final deferred rental would be based on the anticipated, projected resale value of the vehicle.
In terms of businesses, while the ownership of the vehicle remains with the leasing company for the period of the contract, the vehicle does actually appear on the company's balance sheet. As with Contract Hire a proportion of the rentals paid can be offset against taxable profits.
At the end of the agreement:
The responsibility for selling the vehicle at the end of its contract term lies with the customer. This means that there could be a profit depending upon the amount of finance still outstanding.