Finance Products Explained

At Jigsaw Finance we offer many different ways to finance your next car. This means that you can find a solution to suit your needs.

We also understand that choosing between the various options can sometimes be confusing. That’s why we want to help you to understand all of the finance options available to you so that you can make an informed decision.

This guide explains our different finance products and how they work. The products that we have available are from a limited range offered through our panel of lenders. You may find that some finance options may not be applicable in your particular circumstances. You should also understand that alternative sources of finance may be available to you, such as through banks or internet aggregators.

Additional information can be obtained from organisations such as the Finance and Leasing Association www.FLA.org.uk or the Money Advice Service www.moneyadviceservice.org.uk


Personal Contract Purchase (PCP)

A Personal Contract Purchase (PCP) is a loan secured against the vehicle, where repayments are based on part of the value of the vehicle.

The finance company guarantees the minimum the vehicle will be worth at the end of the agreement known as the Guaranteed Minimum Future Value (GMFV) or Optional Final Payment (OFP). This is offset until the end of the agreement.

PCP's can run from 2 to 4 years and repayments are determined by the size of the deposit, how many miles the customer intends to do and the length of the agreement.

  View More Information About PCP

Hire Purchase (HP)

Hire Purchase (HP) is a hiring agreement between the customer and the finance company.

The loan is secured against the vehicle over a set period between 1 and 5 years, with fixed monthly repayments including interest.

During or at the end of agreement (if the balance has been paid in full), the customer has the option to own the vehicle by paying an additional sum called the Option to Purchase Fee and will then own the title to the car, becoming the legal owner.

The customer is the registered keeper of the car and responsible for insuring and maintaining it, but the finance company remains the legal owner until the amount borrowed has been fully repaid.

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Conditional Sale (CS)

A Conditional Sale (CS) agreement is similar to Hire Purchase (HP).

These are different from ordinary credit agreements because under CS and HP agreements the customer does not own the car until they have paid off the agreement.

The key difference between a CS and HP agreement is that the customer will become the legal owner of the vehicle, once all repayments have been made to the lender, whereas on HP there will be an Option to Purchase Fee at the end of the contract before the customer legally owns the vehicle.

The finance is secured against the vehicle.

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Personal and Business Contract Hire

Personal Contract Hire (PCH) or Business Contract Hire (BCH) allows the customer (the lessee) to choose the vehicle they want, use it for a set period of time and then give it back to the leasing company (the lessor) at the end of the period of hire.

The customer will pay a fixed monthly rental payment for a fixed period of time, this is based on a fixed annual agreed mileage.

Some PCH and BCH agreements include Annual Vehicle Excise Duty (road tax). Service and maintenance plans can also be added.

The customer is not responsible for the disposal or sale price of the vehicle at the end of the contract. The car is owned by the finance company, the customer has no option to buy it, and cannot sell it. All rentals will attract VAT at the current rate.

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Lease Purchase (LP)

On a Lease Purchase (LP) an amount of the total cost of the vehicle will be deferred (estimated future resale value/ residual value) until the end of the agreement. The customer's monthly payments will be based on the total cost less the deferred amount. The deferred payment must be paid at the end of the agreement to own the vehicle.

On a LP agreement the deferred element (residual value/final payment) is estimated based on the vehicle usage, meaning the vehicle could be worth less than the lenders estimation this could result in negative equity.

The difference between a Lease Purchase and a Personal Contract Purchase PCP is that the deferred payment on a Lease Purchase is an estimate of how much the car maybe worth, whereas on a PCP the Guaranteed Minimum Future value (GMFV) is the minimum the car will be worth and there is no option to return the car.

  View More Information About Lease Purchase