What's the difference between Car Finance and an unsecured personal loan?
Extra protection
If you use Car Finance instead of an unsecured personal loan to buy your car you’ll benefit from extra consumer protection. The consumer rights act applies which means the finance company has responsibility for the quality of the goods and to resolve any issues with the dealership if they are not of the required standard.
Voluntary termination rights
Under the Consumer Credit Act 1974 you have a right to end any regulated Hire.
Purchase (HP) or Personal Contract Purchase (PCP) agreement at any time before the final repayment under your agreement, becomes due. This is known as voluntary termination and is detailed in the ‘Termination: Your Rights’ section on your credit agreement.
Should you decide to voluntarily terminate your agreement you will need to return the car and have paid half of the total amount payable as detailed on your agreement documentation. If you have already paid at least this amount plus any overdue repayments and have taken reasonable care of the car, you will not have to pay any more.
Finance Product Comparison
The car finance lender buys the car on your behalf and owns the car for the duration of the finance agreement, so if payments aren't kept up, the car can be repossessed.
For unsecured personal loans the lender loans you the money directly and does not own the car.
Car ownership
Car Finance (PCP or HP options)
Don’t own car until the final payment is made.
Unsecured personal loan
Own the car as soon as you purchase
Loan Purpose
Car Finance (PCP or HP options)
Can only use to purchase car
Unsecured personal loan
Could use for other purposes as well as car purchase
Deposit required to take finance out
Car Finance (PCP or HP options)
Typically yes
Unsecured personal loan
No
Extra protection
Car Finance (PCP or HP options)
Yes – protection under the Consumer Rights Act if something goes wrong and the right to terminate your regulated agreement under the Consumer Credit Act 1974
Unsecured personal loan
No
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