‘This is the company to go to. Real people who really care about each individual. No recorded messages. Karen James is second to none, she is more than helpful in every way. The support Karen gave me was superb. She talked me through every step and was quick to respond to my questions and queries. More companies should be like this.’
Classic Car Finance
Traditional car finance institutions and high street lenders rarely offer suitable finance options to suit the needs of a classic car buyer. Either they don’t wish to get involved at all or the options they offer are unsuitable and therefore unduly expensive.
Pegasus Finance is a niche vehicle finance broker and as such has access to funds and finance options designed specifically for the purchase of classic cars among others. We are able to provide secured and unsecured classic car finance options and offer the flexibility of buying from a specialist dealer, private sale or classic car auction.
Our experienced, professional staff are able to swiftly arrange the most suitable finance option available to meet your needs, with advances of up to £1million, long terms up to 10 years and NO DEPOSIT options.
LOAN BENEFITS
- Interest rates from 6.8% APR
- Borrow £5,000 upwards
- No deposit required
- 2 – 10 year loan terms
- Sign agreement online
Hire Purchase Classic Car Finance
Our expert advisors understand the market thoroughly and it’s their objective to find the most cost effective way for your to fund your dream car. Pegasus Finance is able to offer PCP deals but we recommend Hire Purchase to most of our customers as it’s normally the cheapest way to finance a classic or sports car.
Customers can apply without any obligation and we charge no fees. Once we have discussed the vehicle and your needs, we will compare the options available via our panel of lenders and investment companies and present the best.
During this process we will conduct credit searches and we’ll research the seller to ensure they and the vehicle is legitimate. Finance options presented to you will depend upon;
- The car itself – its age, condition, mileage, value, etc.
- Who is selling it – dealer, private sale or auction
- The sale price, deposit and advance
- The term of the loan
What Other Lenders Don’t Tell You About Balloon Payments
The majority of UK specialist car dealers encourage customers to sign up to finance agreements which has an element of a balloon payment. Examples of these may be PCP or Lease Purchase agreements and are very common methods used to fund specialist cars, making them affordable on a monthly basis, but what is the true cost?
What is a PCP Agreement?
A PCP is basically a loan designed to make monthly repayments as low as possible, but unlike a Personal Loan or Hire Purchase agreement, you won’t be paying off the full value of the car and you won’t own it at the end of the agreement, unless you choose to settle the balloon payment.
What is a Lease Purchase Agreement?
A Lease Purchase is similar to a Personal Contract Purchase, with one major difference. Once again, the loan contains a balloon element to the loan, however, on this occasion you are obliged to pay the balloon at the end of the agreement.
How Does a PCP Agreement Work?
You decide over how many months you wish to fund the car, often between 24-48 months is offered. You also need to decide how many miles you’re going put on the vehicle, this is used to calculate it’s future value.
The finance company then calculates the balloon payment, this is their prediction of the car’s value at the end of the term.
You then have to pay a cash deposit, often 20-30% of the purchase price.
Monthly repayments are calculated, which remain fixed for the term of the loan. These monthly payments include capital repayment on the loan amount (purchase price – deposit – balloon), interest charged on the loan amount PLUS interest charges on the balloon value.
There are many people, including some dealers, who do not realise interest is charged on the balloon element of the loan. It is legal for this rate of interest to be higher than that charged on the repayment element of the agreement and doesn’t have to be shown in the APR. As a result this cost can be a significant hidden expense.
PCP Example
Imagine you wish to purchase a car you’ve seen and the price on the windscreen is £90,000, the predicted future valuation (balloon payment) is £40,000 and you have an £18,000 (20%) deposit.
To borrow the car, you pay…
- Deposit – £18,000
- Loan – £32,000 (£50,000-£18,000)
- Interest on £72,000 (£90,000 – £18,000)
- Total = £50,000 plus interest on £72,000
If you wish to buy the car…
- Deposit – £18,000
- Loan – £32,000 (£50,000-£18,000)
- Interest on £72,000 (£90,000 – £18,000)
- Balloon – £40,000
- Total = £90,000 plus interest on £72,000
What happens at the end of the finance deal?
We mentioned that you can buy the car at the end of the deal but you don’t have to – in reality you have three options, but ultimately you are forced into making a decision at a specific time.
- Buy the car by paying the balloon payment. Pay this then you’ll own the car outright. Do note that most finance companies charge an added fee if you buy the .
- Hand the car back and walk away. This means you have nothing more to pay (subject to damage, and over-mileage charges, see below for more info).
- Get a new car. Sometimes at the end of a PCP deal, the car will be worth slightly more than the balloon payment. And if this is the case, you have the opportunity to use that ‘equity’ as a deposit on a new PCP deal on a new car. For example, if the car’s actual value at the end of the deal in the example above was £40,000 and the balloon payment is £35,000, you’d have the difference of £5,000 that you could use as a deposit to roll into another deal.
Often people go for another PCP, but you don’t have to.
In Conclusion
All-in-all a balloon payment makes for lower monthly instalments as you’re only repaying capital on a small portion of the total loan, BUT the overall cost of the loan can be very high. If you decide to give the car back or start a new deal, all you’ve achieved is to rent the car at a very high cost.
BE WARNED.
At Pegasus Finance, the customer comes first and a huge concern of ours is providing the best value finance products. In an effort to make loans more affordable on a monthly basis, we introduced a 10 year classic car finance product. This long term Hire Purchase Agreement has two major benefits. Firstly, our Hire Purchase Agreements offer low APRs and no hidden charges meaning the overall cost of the loan is much lower. Secondly, at no point are you going to be faced with the huge task of either settling a balloon payment or losing your pride and joy.
