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Car finance refers to the various options available to individuals who wish to purchase a car but do not have the full amount required to pay for it upfront. In Ireland, there are several types of car finance available, including hire purchase (HP), personal contract plan (PCP), lease purchase (LP), and personal loan. Each option has its own unique features, benefits, and downsides, and it is important for individuals to carefully consider which option is the best fit for their needs and circumstances.
In this article, we discuss the different car finance options to help you decide what is best for you.
Hire Purchase
Hire purchase (HP) is the most popular car finance option in Ireland, and it is generally considered to be a good choice for most people. With HP, the individual agrees to make monthly payments to the lender, who retains ownership of the car until the final payment is made. Once all payments have been made, the individual becomes the owner of the car. One of the main benefits of HP is that it allows individuals to spread the cost of the car over an extended period, making it more affordable. Additionally, HP can often be arranged with a low deposit, making it accessible to those with limited savings. Another advantage of hire purchase is that it allows you to build equity in the vehicle, as each payment you make goes towards paying off the loan and increasing the value of the car. However, it is worth noting that if the individual misses a payment or defaults on the loan, the lender may have the right to repossess the car.
Personal Contract Plan
Personal contract plan (PCP) is another popular car finance option in Ireland. With PCP, the individual agrees to make monthly payments to the lender, who retains ownership of the car. At the end of the loan period, the individual has the option to purchase the car for a pre-agreed price (the “balloon payment”), or to return the car to the lender. One of the main benefits of PCP is that it allows individuals to drive a new car without having to pay the full purchase price upfront. Additionally, PCP can often be arranged with a low deposit, making it accessible to those with limited savings. PCP agreements often have lower monthly payments than hire purchase agreements, as you are only paying for the depreciation of the vehicle rather than the entire purchase price. However, you will need to be careful not to exceed the agreed mileage limit or damage the vehicle, as these excesses can be costly. It is worth noting that if the individual misses a payment or defaults on the loan, the lender may have the right to repossess the car.
Lease Purchase
Lease purchase (LP) is a car finance option that is similar to HP, but with some key differences. With LP, the individual agrees to make monthly payments to the lender, who retains ownership of the car. At the end of the loan period, the individual has the option to purchase the car for a pre-agreed price, or to return the car to the lender. One of the main benefits of LP is that it allows individuals to drive a new car without having to pay the full purchase price upfront. Additionally, LP can often be arranged with a low deposit, making it accessible to those with limited savings. It is important to note that you will not own the vehicle and may be restricted in how you use it (e.g., you may not be able to make any modifications). As with other finance products if the individual misses a payment or defaults on the loan, the lender may have the right to repossess the car.
Personal Loan
Personal loan is a type of car finance that is not specifically tied to the purchase of a car. With a personal loan, the individual borrows a sum of money from a lender and agrees to make monthly payments until the loan is repaid. Personal loans can be used to purchase a car, but they can also be used for other purposes, such as home improvements or debt consolidation. One of the main benefits of a personal loan is that it allows individuals to borrow a large sum of money at once, which can be helpful if they need to make a significant purchase. However, it is worth noting that personal loans generally have higher interest rates than other types of car finance, so it is important for individuals to carefully consider the total cost of the loan before committing to it.
Ultimately, the right car finance product for you will depend on your individual circumstances and financial goals. It is important to carefully consider all of your options and weigh the pros and cons of each before making a decision. Don’t be afraid to ask for help or to shop around to find the best deal.
Ready to get behind the wheel of your dream car? If you apply for car finance with LM Operations you’ll receive a decision within 4 hours? Check out our online application form here.
Representative Example
Borrowing €12,500 over 54 Months with a representative of 17.9% APR, an annual interest rate of 17.9% (fixed) and a deposit of €0.00, the amount payable would be 53 repayments of €327.52 per month, with one final repayment of €526.52 (which includes the option to purchase fee of €199.00), with a total cost of credit of €5,385.08 and a total amount payable of €17,885.08.
LM Operations Ltd are a lender, not a broker. This is for illustrative purposes only and is not a quote or an offer of finance.
Our finance rates vary depend on individual circumstances and is subject to status.