Car finance has become big business. A huge number of new and used car buyers in the UK are making their vehicle purchase on finance of some sort. It might be in the form of a bank loan, finance from the dealership, leasing, credit card, the trusty ‘Bank of Mum & Dad’, or myriad other forms of finance, but relatively few people actually buy a car with their own cash anymore.A generation ago, a private car buyer with, say, £8,000 cash to spend would usually have bought a car up to the value of £8,000. Today, that same £8,000 is more likely to be used as a deposit on a car which could be worth many tens of thousands, followed by up to five years of monthly payments.With various manufacturers and dealers claiming that anywhere between 40% and 87% of car purchases are today being made on finance of some sort, it is not surprising that there are lots of people jumping on the car finance bandwagon to profit from buyers’ desires to have the newest, flashiest car available within their monthly cashflow limits.The appeal of financing a car is very straightforward; you can buy a car which costs a lot more than you can afford up-front, but can (hopefully) manage in small monthly chunks of cash over a period of time. The problem with car finance is that many buyers don’t realise that they usually end up paying far more than the face value of the car, and they don’t read the fine print of car finance agreements to understand the implications of what they’re signing up for.For clarification, this author is neither pro- or anti-finance when buying a car. What you must be wary of, however, are the full implications of financing a car – not just when you buy the car, but over the full term of the finance and even afterwards. The industry is heavily regulated in the UK, but a regulator can’t make you read documents carefully or force you to make prudent car finance decisions.Financing through the dealershipFor many people, financing the car through the dealership where you are buying the car is very convenient. There are also often national offers and programs which can make financing the car through the dealer an attractive option.This blog will focus on the two main types of car finance offered by car dealers for private car buyers: the Hire Purchase (HP) and the Personal Contract Purchase (PCP), with a brief mention of a third, the Lease Purchase (LP). Leasing contracts will be discussed in another blog coming soon.What is a Hire Purchase?An HP is quite like a mortgage on your house; you pay a deposit up-front and then pay the rest off over an agreed period (usually 18-60 months). Once you have made your final payment, the car is officially yours. This is the way that car finance has operated for many years, but is now starting to lose favour against the PCP option below.There are several benefits to a Hire Purchase. It is simple to understand (deposit plus a number of fixed monthly payments), and the buyer can choose the deposit and the term (number of payments) to suit their needs. You can choose a term of up to five years (60 months), which is longer than most other finance options. You can usually cancel the agreement at any time if your circumstances change without massive penalties (although the amount owing may be more than your car is worth early on in the agreement term). Usually you will end up paying less in total with an HP than a PCP if you plan to keep the car after the finance is paid off.The main disadvantage of an HP compared to a PCP is higher monthly payments, meaning the value of the car you can usually afford is less.An HP is usually best for buyers who; plan to keep their cars for a long time (ie – longer than the finance term), have a large deposit, or want a simple car finance plan with no sting in the tail at the end of the agreement.What is a Personal Contract Purchase?A PCP is often given other names by manufacturer finance companies (eg – BMW Select, Volkswagen Solutions, Toyota Access, etc.), and is very popular but more complicated than an HP. Most new car finance offers advertised these days are PCPs, and usually a dealer will try and push you towards a PCP over an HP because it is more likely to be better for them.Like the HP above, you pay a deposit and have monthly payments over a term. However, the monthly payments are lower and/or the term is shorter (usually a max. of 48 months), because you are not paying off the whole car. At the end of the term, there is still a large chunk of the finance unpaid. This is usually called a GMFV (Guaranteed Minimum Future Value). The car finance company guarantees that, within certain conditions, the car will be worth at least as much as the remaining finance owed. This gives you three options:1) Give the car back. You won’t get any money back, but you won’t have to pay out the remainder. This means that you have effectively been renting the car for the whole time.2) Pay out the remaining amount owed (the GMFV) and keep the car. Given that this amount could be many thousands of pounds, it is not usually a viable option for most people (which is why they were financing the car in the first place), which usually leads to…3) Part-exchange the car for a new (or newer) one. The dealer will assess your car’s value and take care of the finance payout. If your car is worth more than the GMFV, you can use the difference (equity) as a deposit on your next car.The PCP is best suited for people who want a new or near-new car and fully intend to change it at the end of the agreement (or possibly even sooner). For a private buyer, it usually works out cheaper than a lease or contract hire finance product. You are not tied into going back to the same manufacturer or dealership for your next car, as any dealer can pay out the finance for your car and conclude the agreement on your behalf. It is also good for buyers who want a more expensive car with a lower cashflow than is usually possible with an HP.The disadvantage of a PCP is that it tends to lock you into a cycle of changing your car every few years to avoid a large payout at the end of the agreement (the GMFV). Borrowing money to pay out the GMFV and keep the car usually gives you a monthly payment that is very little cheaper than starting again on a new PCP with a new car, so it nearly always sways the owner into replacing it with another car. For this reason, manufacturers and dealers love PCPs because it keeps you coming back every 3 years rather than keeping your car for 5-10 years!What is a Lease Purchase?An LP is a bit of a hybrid between an HP and a PCP. You have a deposit and low monthly payments like a PCP, with a large final payment at the end of the agreement. However, unlike a PCP, this final payment (often called a balloon) is not guaranteed. This means that if your car is worth less than the amount owing and you want to sell/part-exchange it, you would have to pay out any difference (called negative equity) before even thinking about paying a deposit on your next car.Read the fine printWhat is absolutely essential for anyone buying a car on finance is to read the contract and consider it carefully before signing anything. Plenty of people make the mistake of buying a car on finance and then end up being unable to make their monthly payments. Given that your finance period may last for the next five years, it is critical that you carefully consider what may happen in your life over those next five years. Many heavily-financed sports cars have had to be returned, often with serious financial consequences for the owners, because of unexpected pregnancies!As part of purchasing a car on finance, you should consider and discuss all of the various finance options available and make yourself aware of the pros and cons of different car finance products to ensure you are making informed decisions about your money.
Starting your own online business is one of the smartest moves you can make to invest in your future. Now more than ever, people are putting their ideas into practice and becoming first time entrepreneurs. Starting out as a new business owner has never been easier. Booming online businesses make up a huge percent of products sold. It’s evident that e-commerce is here to stay.People from all walks of life, professions and ages are looking to start their own online business. From real estate agents to single parents, from mortgage brokers to people who have lost their jobs, form government employees to corporate executives and CEO’s, there is no restrictions to being an online entrepreneur.Can I Start My Own Online Business?The great thing about setting up your own online business is that the start up costs are very low as in comparison to a conventional bricks and mortar business. Old or young, people of all ages and experience can build a business they really like from anything that they are enthusiastic about. Regardless of whether it is selling traditional furnishings, golf equipment or selling services, there will be specific niche market just right for your talents. So who are the people who are starting online businesses?The Offline Business Owner.This is someone who already owns a traditional ‘offline’ business and realises that there are many more customers on the internet. The last few years of economic downturn have really hit hard and by putting their years of expertise from both life and business to work for them, many traditional business owners are are now realising how starting their own online business will generate additional income.An Employee Made Redundant.Often in a difficult employment economy, middle-managers and new employees are some of the first people to be made redundant. Businesses often try to keep the younger people in the job because they do not have to pay them as much. It is not very fair, but it does occur. If you are in that group who has lost your job through no fault of your own, it can be the launchpad that catapults you into the entrepreneurial adventure of creating your own business online.The Internet Newbie.A newbie is somebody who is aware the internet is the way to generate income, but they have yet to get started with their own online business. Many first time entrepreneurs are are work from home mums or younger people who work in a job that they find uninteresting and boring.People Who Are Retired.In a number of jobs, there are government requirements that stipulate that people must retire from at a specific age. This is unfortunate as in many cases, the people with the years of experience make better employees than the newly employed ones. Many people who are forced to retire want to continue to keep working to keep their minds productive and to give themselves something to look forward to. Transforming from a life of active work to being home all day can be quite an adjustment. But starting your own online business can help to make that adjustment for both the person retiring and his or her family.
The industry continues to grow as entrepreneurs like you explore innovative ways to help travelers make the most of their business and leisure trips regardless of their destinations. All successful entrepreneurs began the process of determining the ideal approach to starting their companies by first determining which type of made the most sense for them to pursue.The industry includes five types of online travel businesses:Private Sale: This category includes flash sale, member-only, daily deal, and group-buying travel sites.Tour/Trip Operators: “Trip” is the more accurate term as this category specializes in selling packaged trips to vacationers with no tour operations included.Guides and Activity Providers: As the name states, this group does provide guided tours and other activity guidance during a trip.Online Travel Agencies: Also called OTAs, this group sells everything general travelers need from lodging, air travel, and car rentals to full vacation packages.Brokers: OTBs contract with travel suppliers such as airlines and hotels to represent their businesses and help them sell more of their travel products.Each of these types of online travel businesses is discussed in detail in Module 1 of the Travel Business Academy’s Startup and Growth Program. However, the first category-Private Sale -remains the hottest business model in this space.Private Sale – Private sale sites operate on the premise that consumers look for-and enjoy buying-”act now or lose out” deep-discount deals.Private sale sell travel products such as hotel rooms, cruises, and tours, from big-name travel suppliers that are willing to sell excess inventory at a discount but also need to protect their brand image. Rather than offering incredible deals on their own websites, these suppliers opt to offer them through flash sale, daily deal, or group-buying travel sites.Do private sale or member-only travel sites cater only to exclusive memberships? Not really. Most require some sort of sign-up, sometimes via another member, simply to make their site look more upscale.Social media contributes immensely to the success of private sale online travel websites. Private offerings with exclusive daily or weekly deals, strict deadlines, and significant discounts on high-end travel services such as five-star hotels quickly become hot topics on social media networks, where people love to share the deals they’ve discovered in order to improve their standing with others in their personal circles. Such an easy and free distribution and promotional strategy contributes to sales as well as memberships on the private sale websites that initiated and communicated the offer in the first place.To learn how you can start your own private sale -or to read more about the wide variety of other successful -visit the Travel Business Academy website today.