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Types of UTE & Truck Finance

Hire Purchase (HP)

Hire purchase means that you’re hiring the car from the lender until you’ve paid for it in full. The loan is secured against the vehicle itself, and you won’t officially own it until the final payment has been made. It is one of the most commonly used forms of car finance. If you take out a hire purchase agreement, you can choose whether to pay a deposit up front – followed by regular monthly payments over an agreed period of time.


Personal Contract Purchase (PCP)

A personal contract purchase (PCP) agreement is similar to a hire purchase agreement, in the sense that you’ll have the option to pay a deposit followed by fixed monthly repayments over a set period of time (typically 24-48 months).

However, at the end of the fixed term, you’ll have the option to either hand the car back, use the equity as a deposit for your next vehicle, or obtain ownership of the vehicle by paying the Guaranteed Minimum Future Value (GMFV) (also known as a “balloon payment”).


Personal Loan

A personal loan (also known as an unsecured loan) enables you to borrow an amount of money over a fixed amount of time.

If you choose to take out a personal loan to buy a car, you will own the car from the time that the dealer receives the money for it. This loan is not secured against the vehicle itself (unlike a PCP or hire purchase agreement), meaning that you can sell the car at any time without needing permission from your finance company beforehand.

Guarantor Loan

A guarantor loan is often suggested if the individual wanting to take out the agreement has a particularly poor credit rating.

This is because it involves a third party (usually a relative or friend) acting as a guarantor. If you fail to keep up with repayments, the guarantor will subsequently pay the monthly payments on your behalf.

What is car finance?

Buying a car in New Zealand is one of the few major purchases you’ll make in your life, so it’s important to do it right.

While the process of car shopping can be a thrilling experience, you also need to be sensible and realistic about what you can afford. That’s where car finance comes into the equation.

If you’re on the lookout for a new car with a budget in mind, but you’re not quite sure how to pay for it – you’ve certainly come to the right place. Use Comparity to find you the best options for your car finance.

Other Considerations

There are a few additional things to think about when it comes to car finance options.

Some you’ll perhaps already be familiar with and some are more relevant to certain types of car finance than others – however it’s useful to be aware of these things if you’re currently in the mind-set of exploring car finance.

Learn More

How does New Zealand vehicle finance work?

The term “car finance” applies to the process of paying for a vehicle over a set period of time, as opposed to buying it outright with a cash payment.

The most common types of car finance agreement are hire purchase (HP), personal contract purchase (PCP), lease purchase or personal loan, though other options are available also.

The payments you make over this period can depend on several factors – including the amount you’re looking to borrow, the length of time you intend on keeping your car, and ultimately, what type of agreement you have.

With many options available, it’s important to understand how they differ and why one option may be better suited to you than another.

What is a conditional sale?

A conditional sale (CS) agreement is the same as a Hire Purchase agreement, except that you will automatically own your car after the finance has been paid. Conditional sales may or may not include a balloon payment at the end of your agreement.


You can part-exchange your current car towards the deposit, or – you could part-exchange a car as part of the transaction itself.

Part-exchanging is also an effective way to offload your old car. It takes the admin and time out of facilitating the sale yourself.

When it comes to deposits, if you don’t have the cash, or a car to part-exchange – then it might be worth exploring no deposit finance as an option.

No deposit car finance options

You don’t necessarily need to put a lump sum down to secure car finance.

Provided you meet the necessary eligibility criteria – you may be able to try no deposit car finance.

No deposit car loans enable you to get a new car without having to make any payments in advance (although you might need to pay a small reservation fee in some cases).

Ending PCP early in New Zealand

Every car finance agreement has a built-in clause that legally gives you the right to terminate the contract (Voluntary Termination) once you’ve paid off half of the total repayable amount.

However, the mechanics of PCP make this very difficult. When you factor in the deposit, lower monthly repayments and the large balloon payment attached to the agreement – the likelihood is that you won’t pay back half of the loan until you’re deep into the contract.

If you hit financial trouble earlier in the contract, things can get complicated – so be sure to factor this into your decision.

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