Taking out vehicle finance is one of the most popular ways of buying a car these days. But did you know there are several types of finance? Here we have listed all the different types of finance and given you a little bit of information about them. After reading this you will know how best to proceed after seeing the type of finance on your HPI report.
HP (Hire Purchase)
With HP, the lender owns your car until the final payment has been made. In many cases there will be an additional fee for having the option to purchase at the end. If you inadvertently buy a car that has outstanding HP, the lender can reclaim the vehicle – as it is legally theirs. This is the reason that outstanding finance checks are vital.
Conditional Sale
A conditional sale is an agreement whereby the finance company owns the vehicle until certain conditions are met. These conditions can vary and will be stipulated in the agreement. Common conditions are for all payments to be made, and for the payments to be made on time. Sometimes there are additional conditions which cover the insurance and maintenance for the vehicle. If any of these conditions are not met, then the finance company could still legally own the vehicle.
Credit sale
A credit sale is like any other type of credit agreement. The buyer becomes the owner of the vehicle at the start of the agreement. The buyer is then responsible for the money owed to the lender as opposed to the vehicle itself. There are many different types of credit sale, so if this shows up on your report, it is a good idea to consult the seller for more information.
Lease/Contract Hire
Leasing is also often referred to as contract hire. Up until a few years ago, it was mainly businesses that leased vehicles. It is a great way to ensure that a company has a reliable fleet of new cars. Nowadays, leasing is also popular with personal customers. As a result, you can lease virtually any make or model of car. Whether the vehicle was leased by a business or professional customer, they will not own it until the finance has been settled.
PCP (Personal Contract Purchase)
As with a lease, the lender will own the vehicle until all payments have been made and outstanding finance settled. Occasionally there are other conditions that need to be met as well. Usually with a PCP, there is a large payment at the end of the agreement (often referred to as a ‘balloon’ payment). In most cases, this is guaranteed by the lender at the beginning of the agreement.
Personal Loan
A personal loan is a loan from a bank, building society or any other financial institution. When someone takes a personal loan to buy a car, the lender has no claim or interest in the vehicle. It is the borrower’s responsibility to repay the loan regardless of whether they own the car or not. If someone has taken out a personal loan to by a car then it will not necessarily show as outstanding finance on an HPI check.
Miscellaneous
Occasionally you might come across the term ‘miscellaneous’ when looking at the finance on a vehicle. This could mean that the finance is any one of the above types, but perhaps with varying conditions. If this is the case, then it is a good idea to request more details from the seller of the vehicle or the finance company. You need to be 100% satisfied that any balance owed on the car is settled before you purchase the vehicle.
Unit Stocking
Unit Stocking is a common finance agreement that motor dealers use fund the vehicles that they have sitting on the forecourt. Therefore, this type finance may show on your HPI report if you are buying your car from a dealer. The best action to take in this instance is to contact the dealer and discuss it with them. Check their liability for the finance and make sure you get written confirmation that the dealer will clear the finance on the car before you buy it.
Demonstration Stocking
This type of finance agreement allows dealers to fund vehicles that they can use for demonstration purposes on their forecourt. This term may appear on your HPI report if you are looking at a car that has a high specification or options package. As with unit stocking, check the dealer’s liability for the finance. And once again, get written confirmation that the dealer will clear the finance on the car before you purchase it.
Bill of Sale
Probably one of the most complicated finance types for a vehicle. If this term shows up on your HPI report then it is highly recommended that you make further enquiries with the finance company before buying the vehicle. The finance company may still legally own the vehicle and may be able to reclaim the vehicle. If the finance status of the vehicle is still not clear, then it is a good idea to consider contacting the Citizen’s Advice Bureau. Or better still, find another car to buy.
Thanks for the information. My report had “Unit Stocking” recorded under the Finance section, so I spoke to Vauxhalls and they explained and sorted everything out. I now own the car, but would have walked away had I not found this info. Thanks Rob