Personal Contract Purchase (PCP)
A consierge service for everyone.
Personal Contract Purchase Overview
Personal contract purchase (PCP) is a flexible car financing option that can offer lower monthly payments than a personal loan or hire purchase (HP) car finance agreement.
It’s a loan to help you buy the car you want. But it differs from a normal personal loan because you don’t have to pay off the full value of the car which means it could be a good option for you if you like to change your car more regularly.
PCP finance gives you the choice of owning the car at the end of the contract by paying the balloon amount or trading it in. PCP splits the price of the car into affordable chunks; a deposit, monthly payments, and an optional final payment. You also have until the contract ends to decide whether you want to buy the car or not.
With this financial product, you must be aware that the PCP the loan is secured against the car and therefore if you fail to keep up the repayments, you could lose the vehicle.
Car finance tailored to you
How does PCP finance work?
The amount to borrow
With PCP the amount you’ll borrow is determined by the lenders prediction of how much the value of the car will drop over the term of the deal (usually 24 or 48 months), the lender will also subtract the deposit from this amount to give them the total amount you’ll owe. You’ll then make monthly payments including interest.
The balloon payment
Agreed at the start of your deal, this is how much the dealer thinks your car will be worth when your deal ends. It’s also often referred to as the Guaranteed Minimum Future Value (GMFV). You can either choose to pay it and keep the car, trade your car in for a replacement and start a new PCP contract, or give the car back and there won’t be anything to pay, providing you’ve honoured the terms of the agreement and the car isn’t damaged.
What are the benefits?
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Monthly payments on a car financed by PCP are usually lower than if your car is financed by a Hire Purchase agreement.
If you decide not to buy the car, you can simply walk away when you’ve made all the payments.
Similar to PCH, you can drive away a new or used car every few years (dependent on the chosen term) without worrying about selling it on.
If the car is worth more than the Guaranteed Future Value then you can use that equity towards a deposit on a new car.
Finance to suit you
PCP Finance Example
Let’s say you want to buy a car listed for £21,190 through a PCP agreement lasting 4 years (48 months).
You put down a deposit of £2119 and get offered an APR of 10.9%.
Your example breakdown might look a little something like this:
| Car Value | £21,190 |
|---|---|
| Deposit | £2,119 |
| Amount To Finance | £19,071 |
| APR | 10.9% |
| Total Repayable | £27180.52 |
| Term | 48 Months |
| Monthly Repayment | £335.24 |
| Optional Balloon payment | £8970.00 |
*Note: The APR you’re offered will be dependent on your credit rating and the lender you’re borrowing from.
