Hybrid cars offer the ideal compromise for UK motorists who wish to cut down on their bills but not necessarily adopt an all-electric car approach. It is important to understand what options you have in order to make the process less expensive for you each month. This guide will explain the various hybrid car finance deals, including PCP, HP, leasing, and how to choose and pay for them.
Car Loan First uses its network of reputable lenders in the UK to find hybrid vehicle finance packages for motorists regardless of their credit history. If you are self-employed, employed, or even trying to improve your credit score, we can help.
What Exactly Are Hybrid Car Finance Deals?
As such, hybrid car finance can be thought of as any kind of finance that helps you buy a petrol-electric car through repayments on a monthly basis. Just like any other car, the affordability of the hybrid is calculated by the lender, but some insurance companies and manufacturers give out lower rates due to the fact that hybrids retain their value and have low maintenance costs.
Generally, customers opt for several kinds of agreements. These vary in terms of whether you actually own the car after the end of the period and the amount of deposit needed.
How Does Hybrid Car Finance Work?
In general, one agrees on how much money will be borrowed from a bank or financial institution, makes a deposit (in some cases, there can be no deposit at all), and pays back the rest with interest over a fixed period, which can vary from two to five years.
The car itself usually serves as collateral in the process of borrowing money, which means that the finance firm has an interest in the car until the last repayment is made. Monthly payments depend on the cost of the car, the size of the deposit, the interest rate, and the term of the contract.
PCP Hybrid Car Finance Compared to HP Hybrid Car Finance
PCP hybrid car finance means splitting the cost of the car into monthly payments and a higher amount at the end called the “balloon.” At the end of the agreement period, one may return the car, pay the balloon, and get its ownership, or use the car for trading in towards another deal. It is a good choice for people who change their vehicles every couple of years.
HP hybrid car finance means that all costs of the vehicle are divided over the period of time, but without any balloon payment, meaning that when the last payment is made, the car belongs to the buyer.
Are Lease Agreements for Hybrids Preferable?
Hybrid car lease deals differ from all other types of car financing arrangements because you will never be able to own your car. You pay a monthly charge for a set term, after which you return the vehicle and enter into a new leasing agreement. Leasing is perfect for those people who prefer to change their hybrids every couple of years but do not want to deal with resale; in this case, your monthly expenses will be even less than those in the case of PCP or HP.
The disadvantages include mileage and condition restrictions, but no equity will be accumulated. This type of hybrid financing is the right choice for businesspeople who use cars in their business.
Can I Finance a Hybrid Car?
Generally yes, in almost all cases. The lender evaluates hybrid loans like other vehicle financing requests, evaluating an individual’s income, other financial obligations, and past credit history, instead of what fuel the car runs on. Self-employed people, first-time buyers, and people with poor credit history can apply for these loans as well, although the interest rate would be determined by their personal situation.
A professional broker can give you plenty of choice because he or she compares multiple lenders’ loan offers rather than the requirements of one bank alone.
Credit Score for Hybrid Car Finance
Many people inquire, “What credit score do I need for hybrid car finance?” and unfortunately, there isn’t a fixed score; different lenders have varying criteria when deciding whether to give you a good rate or not. Having a fair to good credit score would help in getting favourable rates. Even a low credit score can get you approved for a loan, but at an increased rate, or a bigger down payment will be asked for.
Some things that could help you when you decide to apply include checking your credit report, fixing any mistakes that could be on it, and putting yourself on the electoral register.
Getting the Most out of Hybrid Car Finance Deals in the UK
There’s no better way to get the most out of the best hybrid car finance deals in the UK than by doing the comparison right. Among others, these are some tips to consider:
- Compare PCP, HP and leasing deals instead of accepting the first offer you see
- Consider the APR and not only the monthly payment
- Include the cost of insurance and servicing and early repayment penalties
- Get the services of a broker for better comparison among lenders
- Choose your time wisely with the manufacturers’ or dealers’ financing offers
Costs To Consider When Planning Your Budget
Apart from the monthly payment, there are also several other costs that determine the actual cost of owning a hybrid. Interest, measured in terms of APR, is one such cost with the greatest effect on overall cost, hence the importance of searching for low APR car finance deals when thinking of a purchase.
Other costs to consider budgeting for include:
- The deposit cost, usually 10% or more of the cost of the vehicle
- Insurance costs, which may vary according to the type of hybrid you choose
- The servicing costs for both the engine and battery
- Excess mileage costs when leasing a car
Other Financing Choices for Vehicles
Hybrid financing is just one of a number of financing choices that you might consider if your situation changes. Those who want new vehicles with comprehensive guarantees will usually opt for new car finance deals, allowing them to pay for a new car on a regular basis each month.
Those who need vehicles on a business basis to complete their work tasks each day will opt for van finance deals, as this type of deal takes into account the commercial nature of the deal.
Motorbike finance deals work on the same principle as hybrid financing, as individuals can take out a finance plan to cover the costs of a motorcycle.
What Happens When Your Term Ends?
It is very much up to what type of agreement you choose right from the start as to what happens when your term ends. With HP, it will automatically become yours after the final payment, and that is all that needs to be done. With PCP, you have the option to make the optional final payment and take the vehicle, return the car with no further payments owing (provided that certain conditions and mileage tests are met), or trade it in for another hybrid.
The lease agreement is different because you simply return the car to the finance company after the agreed period. It would be wise for you to set an appointment in your diary regarding when the term of the agreement ends, as everything becomes much easier when you are not under pressure.
Confidently Making the Move to Hybrid Motoring
When you know how the deals vary from one another, and what is expected of you when applying for finance, buying a hybrid can become much simpler. When you have compared PCP, HP and leasing deals to your budget and requirements, you will be better equipped to make the right choice.
By contacting Car Loan First and our UK lender panel, we can ensure that you secure the perfect finance package for your needs and circumstances.
Contact us for a free, no-obligation quote today!
Frequently Asked Questions
Are there any finance incentives for hybrids in the UK?
There are some special incentives like lower finance rates or deposit contribution on hybrid models, but those may differ from brand to brand and change all the time, so you need to look into that carefully.
Is there an evaluation of the hybrid battery during finance approval?
The state of the battery is not going to be considered during the approval process, as it is part of warranty/servicing, not of the credit risk, but you should consider the condition of the battery when you choose PCP and think about final payment.
Am I able to change from petrol cars to hybrid in the middle of the agreement?
Terminating the existing agreement in order to switch to a hybrid is going to involve paying off the existing balance with a possible early repayment fee, so it is better to terminate the agreement only at the end of its term.
Is it more difficult to get finance for a used hybrid than a new one?
There is the possibility that some terms may be slightly different for used hybrids depending on battery life and miles covered, which will be taken into consideration when checking the affordability of the finance.
Does hybrid finance impact future vehicle finance?
Being an ongoing hybrid finance agreement means having existing credit, which will be considered by the lender if you apply for a van, motorcycle or another vehicle in the future.
Are there any finance incentives for hybrids in the UK?
There are some special incentives like lower finance rates or deposit contribution on hybrid models, but those may differ from brand to brand and change all the time, so you need to look into that carefully.
Is there an evaluation of the hybrid battery during finance approval?
The state of the battery is not going to be considered during the approval process, as it is part of warranty/servicing, not of the credit risk, but you should consider the condition of the battery when you choose PCP and think about final payment.
Am I able to change from petrol cars to hybrid in the middle of the agreement?
Terminating the existing agreement in order to switch to a hybrid is going to involve paying off the existing balance with a possible early repayment fee, so it is better to terminate the agreement only at the end of its term.
Is it more difficult to get finance for a used hybrid than a new one?
There is the possibility that some terms may be slightly different for used hybrids depending on battery life and miles covered, which will be taken into consideration when checking the affordability of the finance.
Does hybrid finance impact future vehicle finance?
Being an ongoing hybrid finance agreement means having existing credit, which will be considered by the lender if you apply for a van, motorcycle or another vehicle in the future.
