Car Finance Explained | Baileys New Cars Direct

Car Finance Explained

Deciding you’re going to get a new car is an exciting time. There’s so much choice, and several ways to pay for it too! We’re here to take the stress away and help you find the solution that works best for you. Apart from paying cash up front, there are typically two ways of paying for your car – these are Personal Contract Purchase (PCP) or Contract Hire (or Vehicle Operating Lease). But what exactly are they?

Personal Contract Purchase

This is ideal if you want the flexibility to renew, return or buy your car after a period of time.

You pay a deposit (usually up to 40% of the value of the car), and decide over what length of time you want to repay the balance. This is normally 2, 3 or 4 years. An optional final payment is worked out based on your predicted mileage each year which could be anything from 6,000 to 30,000.

At the end of your agreed time period, you have three choices:

  • You can part exchange your car, using surplus value on it after you’ve paid the final payment as the deposit for a new one
  • You can give it back with nothing further to pay..
  • You can make the final payment and keep it If you decide to keep it you will need to make the final payment and the car becomes yours.

The small print

Terms and conditions apply. You must be 18 or over. Finance subject to status. The finance provider may require a guarantee or indemnity. You will not own the vehicle until all payments are made. You will be responsible for any loss, damage or deterioration of the goods except through fair wear and tear.


You can hand the car back to the finance company, with nothing further to pay (subject to mileage and condition).


You can pay the optional final payment and the car is yours.


You can part exchange the car, using any equity over and above the optional final payment as deposit on your next car. Equity cannot be guaranteed.

Contract Hire

Although you won’t own the car at the end of the contract, this is a convenient solution for small businesses and limited companies who want a fixed monthly payment. You’re effectively renting the vehicle which is leased to you for an agreed period (typically one to three years). So long as you have kept within the mileage and there is normal wear and tear, there is nothing left to pay when the vehicle is returned at the end of the contract. The fee is paid to the finance company who will take responsibility for depreciation and administration costs. For an extra cost, you could choose a contract that includes maintenance and servicing.

The main benefits are:

  • Fixed monthly payments – no surprises
  • Budget management is easier as the costs are spread evenly
  • Takes the hassle of sourcing cars away
  • Better prices available due to volume discounts
  • With maintenance-inclusive contracts, servicing is included – no haggling with garages

Make sure you check on the customer service and what support you will get if things go wrong with your car. You are paying for a ‘no hassle’ rental so it’s important to be clear what you’re getting.

Feel free to call us for more information or a quotation on 01344 882511

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