What Happens When Your Vehicle Finance Agreement Ends

For business owners who want to buy a vehicle for business purposes, commercial vehicle finance is one of the best ways to arrange all the required funds. This is an option that allows individuals and organisations to purchase a vehicle for commercial use without burning a hole in their pocket. It is very similar to a car loan; the only difference is that car loans can be obtained to purchase a vehicle for personal use. Tata Motors Finance, one of the leading finance companies, offers commercial vehicle loans at the most competitive interest rates.

Like every other financing option, commercial vehicle loans also come with a finance agreement. Usually, these agreements are made for a specific period of time. When someone avails private finance for their commercial vehicle, the most important question is: what happens when the vehicle loan agreement ends? Especially, if the person is new to vehicle financing, this is the question that bothers a lot.

What happens when a commercial car finance agreement comes to an end depends on the type of finance product you have. The three main products associated with commercial vehicle finance are personal contract purchase, lease purchase, hire purchase, and personal contract hire. Let’s dive deeper and discuss how they actually work:

Personal Contract Purchase (PCP)

In this type of vehicle finance plan, the buyer makes equal monthly payments for a specific period of time. When the contract comes to an end, a final repayment needs to be made in order to obtain the vehicle’s ownership. This final payment is known as a balloon payment.

At the end of a PCP agreement, the borrower has the following options:

• Make the final payment in one go and keep the vehicle.
• Refinance the balloon payment over a period of time.
• Sell the vehicle and use the extra money to make the deposit on a new one.
• Don’t pay anything and hand over the vehicle to the finance company.

Lease Purchase (LP)

This option is somewhat similar to a personal contract purchase. The only difference is that in a lease purchase, the borrower can keep the vehicle once all the payments have been made. In this type of finance, the borrower has two options:

• Make the final payment (balloon payment) and keep the vehicle.
• Sell the vehicle and use the extra money to make a deposit on a new one.

Hire Purchase (HP)

In this finance plan, the borrower has to make a deposit at the beginning. After that, he/she can continue to pay off the value of the vehicle in equated monthly instalments. These monthly payments need to be made for a fixed term. The loan will be secured against the car, and after making the final payment, ownership of the vehicle can be obtained.

Personal Contract Hire (PCH)

In this finance plan, the borrower needs to make a deposit upfront. This amount can range anywhere between payments of 3 to 6 months. After that, the rest of the amount can be paid in fixed monthly instalments over an agreed period of time.

Are you looking for a vehicle loan for your personal or commercial vehicle? If yes, you can explore an entire range of vehicle financing options at Tata Motors Finance. We are offering hassle-free vehicle loans at the best interest rates.