Hi, I sell cars for a nationwide franchise.
There are a lot of myths about finance deals, but in reality it helps very many people who would not otherwise be able to invest in a new car onto the ladder.
Firstly, get a good trade in value for yours, even if you don't think it's worth anything it IS. Used car market is very buoyant at the moment and a lot of people are in it for reasonable little runarounds.
Even if it's as little as £100, use this as your deposit. PCP and HP will both accept this.
The PCP is structured into 3 parts. Deposit, payment period and end payment. The monthly repayments are generally less than HP, with the term usually spread over 3-4yrs. Then, once you reach the end the finance company will be in touch with you to see what you wish to do.
You are NOT tied in to a PCP arrangement and may settle or trade your car back in at any point without high penalties.
The end payment isn't plucked out of thin air, it's an approximation of the predicted future value of the vehicle at that point and given anticipated mileage.
Most finance companies will offer you the option of refinancing the end payment should you wish to keep the car.
I'm finding now that 3.5yrs down the line, customers are in a really strong position of positive equity to roll into another vehicle as a healthy deposit if they wish, but the market does fluctuate.
HP is the total cost of the vehicle spread across typically 5yrs with no huge end payment, ideal if you intend keeping the car long term but do attract a higher monthly payment, typically by a third.
In both scenarios, the finance company is the technical owner of the vehicle until paid back although you are the registered keeper with the V5 logbook in your name.
This does not mean you can't trade it back in at any point, as long as the finance is settled. No finance company wants a car back to deal with, their business is finance, not cars. They just wish it to be settled in one way or another.
Also, in both scenarios a monthly interest is also added although be careful of paying too much attention to APR, your interest will be paid as a flat rate and won't fluctuate over the term of the agreement.
There are other ways, a bank or personal loan over a longer period, this will attract a higher long term interest rate but you become full owner of the vehicle immediately as the loan is secured against you, and not the vehicle.