FinanceAcar

FinanceAcar

December 28, 2010 19:01 ET

Car Leasing was the Most Popular Way to Buy A New Car in 2010

LONDON, UNITED KINGDOM--(Marketwire - Dec. 28, 2010) - During the first six months of 2010, just over 530,000 new cars were purchased by consumers in the UK. According to the Finance and Leasing Association (FLA), 49.4% of these cars were obtained using car leasing. It is estimated that 8 out of 10 of all new cars are bought with car finance but it seems that austerity is changing the way consumers choose their car finance. They are moving away from the more traditional finance options towards the car leasing product called Personal Contract Purchase (PCP).

This is quite a large turnaround from previous years when hire purchase accounted for approximately 60% of all dealer finance. The other major alternative is car loans in the form of personal loan that only account for 13% of new car purchases according to Sainsbury Finance.

Simon Norman from FinanceAcar.co.uk said, "This is an interesting development that has predominantly been driven by consumers wanting to save money. Depending on the vehicle, the monthly payment for car leasing can be as much as 50% cheaper per month than hire purchase or car loan repayments. The reason for this is that with car leasing consumers' monthly payments are calculated on how much the vehicle will depreciate across the car leasing contract. This is a much smaller amount than the figure used to calculate hire purchase repayments where the cost of the whole vehicle is taken into account."

An interesting factor that many people are not aware of is that if they buy a car using hire purchase they will not own the vehicle until they make their final payment. This ownership gap could be as long as 4 to 5 years after they took possession of the vehicle. A perception of lack of ownership has been a major factor of why people have historically avoided car leasing. This no longer seems to be a major issue because with a car lease product called PCP, they can lock in a price to buy the car at the end of the contract. However, buying the car is not compulsory, if they don't want to own it, they can simply hand the car back and get a new one.

Whilst PCP might be an attractive car finance option for obtaining a car, there are some drawbacks such as the fact that you must agree an annual mileage limit upfront and you should not exceed this. If you do, you will be charged an excess mileage fee. Whatever car finance option consumer takes it is essential that he or she shop around before entering in to an agreement. For some vehicles it may be best to use hire purchase because the price difference on PCP is only small. In addition to this, if someone chooses to go with PCP they should always be sure to shop around and compare alternative PCP monthly prices from different sources and compare like with like such as mileage, contract period and upfront payment.

About FinanceAcar.co.uk

FinanceAcar (http://www.financeacar.co.uk) is a UK car finance specialist. It is the world's first car finance marketplace powered by the world's first car finance comparison engine that compares all car finance products for new cars (car leasing, hire purchase and car loans) in one place making it comprehensive in car finance compared to other comparison engines such as Moneysupermarket that only compare car loans. The website compares finance from top UK lenders for 6,000 vehicles and offers more than 1,000,000 different prices. The site allows car shoppers to choose their car by make or budget and within seconds it presents the best finance product and best UK monthly price for that car based on the monthly cost of ownership. Once the user obtains the best monthly price, they can get a full personalised quote, obtain a credit check, apply for finance and have their chosen car delivered to their door.

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