Car finance is an increasingly popular way for Irish motorists to purchase their car, with two main types of finance, PCP (Personal Contract Plan Finance) and HP (Hire Purchase Finance). Although a massive 42 per cent of motorists that we surveyed recently told us that they used their own savings to buy their current car, there's an undeniable shift towards using all types of car finance. Some 21 per cent of motorists that we surveyed used PCP finance, 16 per cent used the Credit Union and another 13 per cent took out a bank loan.
PCP stands for Personal Contract Plan. First up, the buyer pays a deposit (or covers it with a trade-in) and then a monthly fee for a set number of years (usually three). Finally, when that time is up, they decide between paying a lump sum to own the car, giving the car back with no further payments, or using value remaining in the car to cover a deposit on another new car to start the cycle again. There's lots of fine print involved, but that's what most of them boil down to.
The pros include a shiny new car every three years, minimal maintenance costs and seemingly low monthly payments. The cons include the fact you don't own the car, there are usually limitations on mileage and condition and, once in the cycle, it's difficult to get out and start again from scratch.
Good old Hire Purchase is still available. Rates and repayments are higher than PCP, but you own the car at the end. Meanwhile, Credit Union and other bank loans allow the buyer to own the car from the start.