Campervan Finance Explained

Campervan Finance Explained

Taking on Finance to buy a new campervan can be confusing. And you may hear lots of terms like balloon payments, APRs, and monthly instalments. So, if you’re unsure about the difference between PCPs and HP, let us help you understand the jargon.

Understanding Campervan Financing Options

When purchasing a campervan, there are two primary financing options: Personal Contract Purchase (PCP) and Hire Purchase (HP). Each option has its features and benefits, tailored to different preferences and financial situations.

1. Personal Contract Purchase (PCP)

PCP is a popular financing option for those who want flexibility and lower monthly payments. Here’s how it works:
Deposit: You pay an initial deposit, usually around 10-20% of the campervans price.
Monthly Payments: You make fixed monthly payments over a period (typically 2-4 years).
Guaranteed Future Value (GFV): At the end of the agreement, you have three options:
Return: You can hand back the campervan and walk away, provided you haven’t exceeded the agreed mileage and the vehicle is in good condition.
Keep: You can pay the GFV and keep the campervan.
Trade-in: You can use the campervan’s value towards a new PCP agreement.
Advantages: Lower monthly payments, flexibility at the end of the agreement, and the option to drive a new campervan every few years.

2. Hire Purchase (HP)

HP is a straightforward financing option that leads to full ownership at the end of the agreement:
Deposit: Like PCP, you pay an initial deposit.
Monthly Payments: You make fixed monthly payments over the agreed-upon term (usually 2-5 years).
Ownership: Unlike PCP, at the end of the agreement, you become the outright owner of the campervan.
Advantages: Clear path to ownership, no mileage restrictions, and no balloon payment required at the end.

Choosing the Right Option:

The choice between PCP and HP depends on your preferences and financial situation. If you prioritise lower monthly payments and enjoy changing vehicles frequently, PCP might be the better option. HP could be the way to go if you want to eventually own the campervan and prefer a clear path to ownership.

At Leisuredrive, we understand that navigating campervan finance can be overwhelming. Our team is here to help you make an informed decision that aligns with your needs and preferences. Contact us today to explore the financing options we can offer to buy a new campervan.

Understanding Key Terms:

Annual Percentage Rate (APR):
Finance Explained – The Annual Percentage Rate (APR) represents the annual interest cost of the money you’ve borrowed, encompassing all associated fees. 
Therefore, this crucial figure enables you to accurately assess and compare the overall yearly expense of your financial agreement.
Also, It’s important to note that APR should not be mistaken for the ‘Flat Rate,’ which only reflects the interest rate without factoring in fees. When evaluating financial options, ensure you compare apples to apples by avoiding comparisons between APR and flat rates, as they differ significantly.
Balloon Payment:
A balloon payment denotes the substantial final sum required to take full ownership of a motorhome after a Personal Contract Purchase (PCP) agreement. 
Indeed, this payment defers a portion of the loan amount until the agreement’s end, resulting in lower monthly instalments. Subsequently, opting not to pay the balloon sum means forfeiting ownership of the motorhome.
Credit Agreement:
A credit agreement is a comprehensive document outlining the terms and conditions of the financial arrangement established with a lending institution.
Credit History/Rating/Record:
This information is derived from your past borrowing activities and serves as a basis for lenders to assess your creditworthiness. Notably, a favourable credit history indicates reliability when extending loans, while a negative credit history may diminish your borrowing prospects.
Depreciation is the reduction in the motorhome’s value over time due to age, mileage, and wear and tear.
Equity/Negative Equity:
Equity arises when the market value of your motorhome exceeds the outstanding loan balance. You can either retain the surplus or apply it toward a down payment for another motorhome. 
Negative equity occurs when your loan balance surpasses the motorhome’s market value, leaving you responsible for the difference. 
Furthermore, in negative equity cases, you can sometimes settle the outstanding amount independently or transfer it to a new motorhome deal.
Financial Conduct Authority (FCA):
The Financial Conduct Authority (FCA) oversees the United Kingdom’s financial services industry. Its primary mission is safeguarding consumers and monitoring lender conduct to ensure industry stability.
Fixed Rate:
A fixed-rate means that your monthly payments remain constant, unaffected by fluctuations in interest rates, such as changes in the Bank of England Base Rate.
Flat Rate:
The flat rate represents the monthly interest payment, excluding fees. It differs from APR, which includes all associated costs.
Part-exchange involves trading in your current motorhome, using its value as a partial payment toward purchasing a new one.
Residual/Resale Value:
Residual or resale value signifies the worth of your motorhome at the time of sale or trade-in.
The term denotes the repayment period, expressed in months, over which you’ll spread your payments, as specified in your agreement.
Total Amount Payable:
The total amount payable encompasses the sum you will have paid by the conclusion of your finance agreement. It includes the motorhome’s on-the-road price and any applicable interest and charges.
Campervan Hire UK
Buying a Campervan in UK - Some frequently asked questions!

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