What is Personal Contract Purchase (PCP) finance?
Personal Contract Purchase works like a loan. At the beginning of the arrangement, you’ll need to pay a deposit on the car – this is usually around 10% of its value.
Agree the remainder of the payments with the lender
These are usually calculated based on the difference between how much the car costs, and how much it's predicted to be worth at the end of your agreement by the finance company.
Options to buy the car at the end of the agreement
At the end of the agreement, you’ll also have to pay what’s called a balloon payment if you want to keep the car. This payment refers to the outstanding principle sum, or “minimum guaranteed future value”. Alternatively, you can choose to give it back, or part exchange it.
Set mileage limits so you don't incur extra costs
You’ll need to have an idea of how much you’ll be using the car as you’ll need to set mileage limits as part of your contract.
How does PCP finance work?
When buying a car, Personal Contract Purchase lets you make the most of lower monthly payments compared to Hire Purchase (HP). However, it could end up being slightly more expensive as you usually pay more interest with this option.
PCP does allow you to change your car easily at the end of the agreement, and if you know how much you’ll need to use it – and can stick to it – setting your contract terms should be simple. The monthly payments tend to be lower than with a Hire Purchase agreement too.
However, with PCP you can encounter further charges, for example if you go over the mileage agreed or if the car’s in a worse condition than expected and you don’t buy it at the end of the term.
You can start your application for a Personal Contract Purchase agreement with us online without affecting your credit score, and receive a decision in as little as 60 seconds!Start your free check
Things to consider
If you’re thinking about a Personal Contract Purchase agreement to finance your car, you might like to consider these facts first:
- With PCP, you don’t own the car unless, at the end of your agreement, you choose to pay the balloon payment to keep it. A balloon payment refers to the single payment of the outstanding balance on your agreement.
- If at the end of the agreement, the actual value of the car is over the predicted value, you can use this equity to put towards a deposit for your next car
- You’ll have to pay charges if you go over your mileage agreement
- You’ll also be charged for any damage that’s not considered fair wear and tear
As well as all these, when it comes to the end of your agreement, you’ll have three options:
- Give the car back and incur no further costs
- Return the car via part exchange and begin another PCP agreement
- Keep the car by paying the final balance
PCP car finance FAQs
Getting your car on finance allows you to spread the cost of your car over a minimum term. It can be quite complex, so we've put the most frequently asked questions below.
Can I swap my car on PCP?Yes. You’ll usually need to wait until the end of your contract term to swap your car. At the end of the term, one of the three options you’ll receive is to swap your car for a new PCP deal – speak to one of our advisors for more information on this option.
Can I settle my PCP early?Most likely yes, but you may need to pay an early termination fee depending on the lender. Get in touch with our team for more information on settling your PCP early.
Can I get PCP on a used car?Yes, but not on every used car. In order to take out PCP finance, the car you choose will need to be under 9 years old and have done less than 100,000 miles.
How does PCP differ from a bank loan?Our finance packages are based on an individual scorecard system, which is based on your individual circumstances. We also go out to some of the biggest lenders when offering car finance, which means we have access to more favourable rates.
What is the maximum age of vehicle you can have a PCP agreement on?The maximum age a car can be if you want to take out a Personal Contract Purchase agreement on it is 9 years old.
What is the maximum mileage of vehicle you can have a PCP agreement on?To take out a PCP agreement on a vehicle, it must have done less than 100,000 miles.
I want to pay my deposit in cash, is there a limit?Due to Covid-19 we have introduced new measures as part of our commitment to our customers and colleagues safety. This unfortunately means we no longer accept cash payments of any value.
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