What happens at the end of your car finance deal?

**Collaborative post**

If you’ve got a car on finance and you’re coming to the end of your finance deal, you may be wondering what your options are. Depending on the type of car finance deal you have, you will have different options at the end of your deal. In some agreements, such as PCP or Hire purchase, you have more freedom as to whether you own the car or not. The guide below has been designed to explore what you can do at the end of your car finance deal. 

Hire purchase

Hire purchase is one of the most straightforward forms of car finance. HP finance can be good for those who have previously been declined car finance as its type of secure loan. This means the lender owns the car throughout the agreement until the final payment has been made. If you currently have a car on hire purchase, there are two things you can do at the end of your deal.

Hand the car back 

If you’ve enjoyed the car you’ve been driving but want to get another car, at the end of a HP deal, you can simply hand the car back to the dealer you bought it from. However, the car must go back to the dealer in good condition so they can then sell it on. There can be damage charges applied if the car goes beyond general wear and tear.

Pay the ‘option to purchase fee’

At the end of a HP deal, there is an option to purchase fee which needs to be paid if you want to own the car. The lender owns the car throughout the agreement until the final payment has been made. The option to purchase fee isn’t usually too much can will normally resemble something similar to the monthly payments you have been making.  

Personal Contract Purchase

Personal Contract Purchase (PCP) is a great way to get more flexibility from your car finance deal. A PCP agreement consists of fixed monthly payments followed by a large balloon payment. However, you don’t need to pay this if you don’t want to keep the car. At the end of your PCP agreement, you have 3 options. 

Give the car back

At the start of your finance agreement, you will agree to keep the car in good condition and within an agreed mileage. If you have made all your repayments and don’t want to keep the car, you can hand the car back to the dealership. If you have damaged the car or exceeded the mileage limit, you will need to pay additional charges. 

Buy the car

If you want to keep the car you’ve been driving for the past few years, at the end of your PCP deal, you will need to pay the balloon payment. Monthly payments on PCP deals tend to be lower as you only cover the cost of depreciation. This means the final payment tends to be quite large. If you can’t afford to pay the final payment, you could consider finding a lender who will refinance PCP balloon payment in order to keep the car.

Get another PCP car

If you’re ready for another car after you PCP deal ends, you can choose to trade in your current car and buy a used car or get a new car on PCP. If your current car is worth more than the finance owed, you can use this amount towards a deposit on a new car on PCP. If not, you’ll need to make up the remaining amount or swallow the negative equity into your next deal.

Bank loan

If you bought a car through a bank or personal loan, there’s not much you need to do at the end of your agreement. When you take out a personal loan, a bank or budling society gives you the money to buy a car. You then make monthly payments with interest till the end of the term. You purchase the car outright at the start, so you are the automatic legal owner of the car. Once all personal loan payments have been made on time and in full till the end of the term, there’s nothing else to do.