What to Check Before Signing a Car Finance Agreement

Signing a car finance agreement is a significant financial commitment. Once you sign, you are locked in — so it pays to know exactly what you are agreeing to before you put pen to paper. Whether you are in Reading, Berkshire or anywhere across the UK, here are the key things to check before committing. ## 1. The Total Amount Payable Do not just look at the monthly payment. Always check the **total amount payable** — that is the full cost of the deal including interest and all fees. A low monthly payment on a long term can cost far more overall than a slightly higher payment on a shorter one. Compare total costs, not just monthly figures. ## 2. The APR and Interest Rate **APR (Annual Percentage Rate)** tells you the true annual cost of borrowing, including all charges. Make sure you are comparing APR across deals, not just headline rates. Also check whether the rate is **fixed or variable**. Fixed is more predictable. Variable rates can move up or down, which affects your payments. ## 3. What You Actually Own (and When) Different finance products give you different ownership rights: - **HP (Hire Purchase)**: You own the car at the end after the final payment - **PCP**: You do not automatically own it — you need to make an optional final balloon payment - **PCH (Personal Contract Hire)**: You never own the car — it is a long-term rental Make sure you understand which product you are on and what ownership looks like at the end. ## 4. The Settlement Figure Process Check how **early settlement** works. Under the Consumer Credit Act, you have the right to settle your agreement early and receive a rebate on interest. But there may be early settlement fees — check these upfront. Also verify the **voluntary termination** rights. Once you have paid 50% of the total payable, you can usually hand the car back with nothing more to pay. ## 5. Mileage and Condition Restrictions (PCP/PCH) If you are on PCP or PCH, you will have a **contracted annual mileage limit**. Exceeding it means penalty charges at the end — typically 5–15p per extra mile. Check the contracted mileage against your realistic annual driving. If you are regularly covering 15,000 miles but the deal is for 8,000, you will face a big bill. ## 6. What Is Included in the Monthly Payment Confirm whether your monthly payment covers just finance, or whether it includes road tax (VED), servicing or maintenance, insurance, and breakdown cover. Many deals do not include these. ## 7. What Happens If You Miss a Payment Check the **default and arrears clauses** in the agreement. Know how many missed payments trigger default, what the charges are, and what the lender process is. --- **Not sure what you are signing?** **We Finance Your Asset** will walk you through it. Based in **Reading, Berkshire** and working with buyers across the UK — get in touch at **wefinanceyourasset.co.uk**.