What is the difference between car finance and a car loan?

Help & Advice

The types of car finance that Zuto provides are HP, PCP and Conditional Sale. All of these are known as ‘Tri-Partite Transactions’, this is a term used to describe a finance agreement where there are three parties involved in the process of providing a vehicle finance agreement. The Customer (Debtor), Supplier (Dealer) and the Lender (Creditor).

A Personal Loan or Car Loan is not a ‘Tri-Partite Transaction’ as the lender provides the loan facility but not the vehicle. The customer buys the vehicle directly from the dealership using the loan amount borrowed.

While the loan option is less complicated, this borrowing doesn’t offer you the same type consumer protection for the vehicle.

If something goes wrong with your car, with a tri-partite transaction the finance provider is responsible, under the Consumer Rights Act 2015, as the car has been underwritten in the agreement to provide finance to you. It’s effectively the finance company’s asset if things go wrong. The Consumer Rights Act 2015, gives the right to return something for a full refund within a 30 day window of purchase, if there is something faulty with your goods or services. After 30 days, and before 6 months post purchase, if you find a fault with your goods or services, The Consumer Rights Act 2015, dictates that the provider of the goods or services must repair the fault and if they cannot, they have to refund you the money, minus the costs of wear and tear.

With a personal loan, the agreement has been made solely on your affordability for the finance so the provider has not taken the car into consideration as an asset in lending you the money. You are still covered by the same buying rights of the Consumer Rights Act but have to undertake the process without the support of the lender.

For more information, take a look at our blog on consumer protection

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