When it comes to car finance, one name that often comes up is Avis. As one of the leading providers of car rental services, Avis has also ventured into the world of car finance, offering a range of options to help people purchase vehicles. In this article, I will dive deep into Avis car finance, explaining what it is, how it works, and how it compares to other car financing options. Whether you are looking to finance a new car or simply exploring your options, this guide will give you a clear understanding of what Avis car finance is all about.
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What Is Avis Car Finance?
Avis car finance is a service that allows customers to finance the purchase of a car through a leasing or loan agreement with Avis. Unlike traditional car dealerships, Avis offers a range of flexible plans tailored to suit different budgets and needs. With Avis, you have the option to either buy or lease a car, depending on your preferences. The company partners with a range of lenders to provide competitive interest rates, making it an attractive option for those looking to finance a vehicle.
There are two main types of finance options available through Avis: Personal Contract Purchase (PCP) and Hire Purchase (HP). Both options allow you to spread the cost of the car over a fixed period, but they work in slightly different ways.
Personal Contract Purchase (PCP)
PCP is one of the most popular car finance options, and it is ideal for those who want lower monthly payments but still want the option to own the car at the end of the term. When you choose a PCP plan, you essentially agree to pay a deposit, followed by a series of monthly payments. At the end of the agreement, you have three options:
- Pay the final lump sum (also known as the Guaranteed Minimum Future Value, or GMFV) and own the car outright.
- Part-exchange the car for a new one and start a new contract.
- Return the car and walk away.
One of the main advantages of PCP is the flexibility it offers. Since the monthly payments are based on the depreciation of the vehicle rather than its full price, they tend to be lower than other types of finance agreements. However, the final lump sum can be quite large, so it’s essential to factor this into your decision-making process.
Hire Purchase (HP)
Hire Purchase (HP) is another option available through Avis. Unlike PCP, HP doesn’t offer the option to return the car at the end of the agreement. With HP, you make a deposit followed by fixed monthly payments over a set period (usually between 12 to 60 months). At the end of the term, you own the car outright.
The main difference between HP and PCP is that with HP, you are paying off the full cost of the vehicle, including any interest charges, over the course of the agreement. This means your monthly payments are typically higher than with PCP, but you own the car outright as soon as the final payment is made.
How Does Avis Car Finance Compare to Other Car Finance Options?
Now that we have a basic understanding of what Avis car finance is, let’s compare it to other financing options available in the market. I will look at traditional car loans and car leasing as two common alternatives to Avis car finance.
Avis Car Finance vs Traditional Car Loans
Traditional car loans are one of the most straightforward options for financing a vehicle. With a car loan, you borrow a lump sum from a bank or lender and repay it over a set period, typically with fixed monthly payments. Once the loan is repaid, you own the car outright.
Here is a quick comparison of Avis car finance (using PCP) and traditional car loans:
| Feature | Avis Car Finance (PCP) | Traditional Car Loan |
|---|---|---|
| Monthly Payments | Lower (based on depreciation) | Higher (based on the full car price) |
| Ownership at the End | Option to buy (lump sum) or return | Own the car outright after full repayment |
| Flexibility | High (can return or part-exchange) | Low (fixed loan structure) |
| Deposit | Typically low (10-20%) | Typically higher (10-20%) |
| Total Interest Paid | May be higher due to GMFV | Usually lower, as you’re financing the full amount |
| Mileage Restrictions | Yes (depends on contract) | No (unless you’re in a lease) |
From the comparison, it’s clear that Avis car finance is more flexible in terms of options at the end of the agreement, but it may come with higher overall costs in terms of interest and the lump sum at the end. On the other hand, traditional car loans are more straightforward, and once the loan is repaid, the car is yours.
Avis Car Finance vs Car Leasing
Car leasing is another alternative that can be compared to Avis car finance. When you lease a car, you essentially rent it for a set period, typically between two to four years. At the end of the lease, you return the car to the leasing company and have the option to lease another vehicle.
Here’s a comparison of Avis car finance (using PCP) and car leasing:
| Feature | Avis Car Finance (PCP) | Car Leasing |
|---|---|---|
| Monthly Payments | Lower (based on depreciation) | Similar to PCP but can be higher |
| Ownership at the End | Option to buy or return | No option to buy |
| Flexibility | High (part-exchange or return) | Low (must return the car) |
| Deposit | Typically low (10-20%) | Typically low (but can vary) |
| Mileage Restrictions | Yes (depends on contract) | Yes (usually strict) |
| End-of-Term Options | Buy the car or return/part-exchange | Return the car and lease again |
While Avis car finance offers more flexibility and an option to own the car at the end of the term, leasing is ideal for those who prefer to drive a new car every few years and have no interest in ownership. Leasing is generally better suited for those who want lower monthly payments and don’t mind returning the car at the end of the agreement.
Examples with Calculations
Let’s look at a couple of examples to illustrate how Avis car finance works in practice. Suppose you’re looking at a car worth £20,000 and are considering a PCP deal with Avis. Here’s how the numbers might work out:
- Deposit: £2,000 (10% of the car’s value)
- Monthly Payment: £250 per month for 36 months
- Final Lump Sum (GMFV): £8,000 (based on the car’s expected depreciation)
At the end of the 36 months, you can choose to:
- Pay the £8,000 lump sum and own the car outright.
- Part-exchange the car for a new one and start a new contract.
- Return the car and walk away.
Let’s compare this to a traditional car loan for the same vehicle:
- Loan Amount: £20,000
- Deposit: £2,000 (10% of the car’s value)
- Monthly Payment: £400 per month for 48 months
At the end of the 48 months, you will own the car outright, but your monthly payments will be higher.
Conclusion
In conclusion, Avis car finance offers flexible and competitive options for financing a car. Whether you choose PCP or HP, you can spread the cost of your car over a period of time with manageable monthly payments. PCP, in particular, offers flexibility in terms of returning the car, part-exchanging it, or purchasing it outright at the end of the agreement.
When compared to other financing options like traditional car loans and car leasing, Avis car finance stands out for its flexibility and range of options. However, it may not be the right choice for everyone. It’s essential to consider your own needs, preferences, and budget before making a decision.
If you are looking for a financing option that allows you to own the car at the end of the term and offers lower monthly payments, Avis car finance could be a great choice. But if you prefer a straightforward loan with fixed payments or want to lease a car without any intention of ownership, then traditional car loans or car leasing might be better suited for you. Ultimately, the decision comes down to your personal preferences and financial situation.
