Personal Contract Purchase
When you’re looking for car finance, there are a few common phrases that you’ll see popping up over and over again – one of these is PCP. If you don’t know what PCP car finance is, don’t worry – we’ve put together this comprehensive guide that will show you everything that you need to know, covering how this form of finance works, who it’ll benefit, and how you can find the best deals on the market! Personal Contract Purchase car finance is one of the most popular options on the market at the moment, offering a fantastic range of benefits that we feel make it the ideal choice for a large portion of customers who are looking for new, reliable vehicles that can be paid for on a monthly basis rather than paying a large one-time sum. Our PCP deals here at ChooseMyCar are designed to help everyone to get on the road, no matter what your personal circumstances are – we even specialise in bad credit car finance! If you find that you are having trouble finding the right car finance package due to your poor credit history, read on to find out more, or get in touch with our team online or by phone for more information.
What is PCP car finance?
Let’s start off by looking into what PCP actually is and how it works – once you’ve got a better understanding of this, you’ll see the benefits of the flexible, manageable form of finance instantly. In basic terms, PCP, or personal contract purchase car finance is a pay-monthly method of purchasing a car, which allows you to choose the level of deposit contribution that you pay along with the length of the agreement. By offering a more flexible way to pay, this becomes an incredibly easy and straightforward way to build your car finance payment into your monthly outgoings without breaking the bank. This reduces the risk of potentially missed payments, helping you to improve your credit score as you go rather than harming it by making late payments of defaulting.
Many people do find that PCP car finance is similar to hire purchase car finance, which is true on a basic level, however, there are some crucial differences between the two that you need to be aware of before you commit to any agreement. You’ll find more information on that in our ‘PCP vs HP’ section further down this page. For now, we’re going to take a deeper, more detailed look at our personal contract purchase plans and the benefits that make them so appealing to customers up and down the country.
What are the benefits?
There are many benefits associated with PCP car finance, along with some things to be wary of, so we’ll take a look at both of these to give you a better idea of what you can expect from one of these deals. Here are the benefits of a PCP agreement:
- Your monthly payments will be lower! In general, you’ll find that your monthly payments in a PCP agreement are much lower than you would find in the alternatives such as a personal loan or a hire purchase deal. This is due to the fact that you won’t technically own your car during the contract – you will only be the owner should you choose to pay the balloon payment at the end of your agreement.
- Your trade in or resale value is guaranteed. This means that you won’t have to worry about your car losing value whilst it’s in your possession – the lender or credit broker will give you a guaranteed minimum sum that the car will be worth at the end of the deal. This sum cannot be changed during the course of the contract without a reason, which could be something like excessive damage outside of the usual wear and tear expected over the course of the agreement. If excess damage is found upon returning the vehicle, you will likely be charged for this.
- You may be able to afford a better can than you would using another form of finance. As you won’t be owning the car until you pay the balloon payment (which is not mandatory), your monthly payments are much lower than they would be if you were to use a hire purchase deal where you would own the car at the end of the agreement. By lowering the monthly cost, you’ll likely be able to afford a better car when you’re buying using a PCP deal.
- Your overall motoring experience may be cheaper. Dealerships will often add in services such as maintenance, warranty, and even insurance in some cases – these are all costs that you would usually have to pay separately. By having these included in your package, you’ll be reducing the running costs, which will in turn lower the overall cost of driving with a PCP agreement. You’ll have to check whether this is available with your dealership, as these add-ons may not always be included.
- There’s loads of flexibility! From choosing the length of the agreement and initial deposit all the way to choosing whether to pay the balloon payment or to trade the car in for an upgrade at the end, there are lots of ways to tailor your experience to meet your needs and desires.
- Voluntary termination is available! As with many other forms of car finance, you’ll probably have a ‘voluntary termination’ clause in your PCP agreement. This clause essentially enables you to leave your credit agreement with no strings attached, provided that you have paid at least half of the total credit amount. This is a great clause to be aware of if you find you aren’t using your car often enough or if you’re looking to cut costs if the payments become too much to keep up with.
There are however, certain cons to be aware of when looking at PCP car finance. These can be found below:
- The car isn’t yours. The biggest downside to a PCP agreement is that the car is not technically yours until after the balloon payment has been made – this means you need to be extra careful with the car until then as you will be charged for damage that is deemed to be outside of general wear and tear.
- The interest may be higher than it is on a personal loan. As you won’t be owning the car, the lender is not able to use the car as collateral to reduce their risk, so they must use a slightly higher interest rate to do this.
- The future value that you are quoted depends on the condition the car is returned in. If your car is not returned in good condition, then you may be charged for the repairs. Wear and tear from general use is perfectly fine, but anything more serious will be your responsibility.
- There will be a mileage limit. As the car is not going to be yours unless you pay the balloon payment, the lender will need to ensure that the car is still going to be in good condition to be sold after it is returned to them – to do this, they will implement a mileage limit for you to follow. Should you exceed this, you will be charged a set fee per mile for each mile you have exceeded your limit. As well as incurring extra costs on top of your monthly payments, this can also be quite limiting if you hit your mileage limit early on in your contract. If you expect to exceed the set limit, talk to your lender about increasing this to better reflect your level of usage.
Who will find this type of car finance to be the right fit?
The benefits and drawbacks are clear to see, so who is PCP going to be a good fit for? Essentially, it’s going to be someone who will feel the benefits and won’t be too bothered by the drawbacks – if you’re looking to be able to upgrade your car constantly and are happy keeping a constant rotation of cars going from agreement to agreement, this will be a perfect option for you. You’ll never be stuck with the same car for too long with a personal contract purchase plan, meaning you’ve always got the latest set of wheels to keep your daily drives comfortable and economical. However, if you do fall in love with a particular car, you’ll always have the option to buy it at the end of your agreement should you wish too; you’ll simply pay the pre-agreed fee and the car is yours! This flexibility is a huge part of what makes these agreements so popular.
On the other hand, these deals will also be an ideal fit for those who tend to stick to a low mileage over the course of a year. With a mileage limit in place to maintain a high standard of condition upon the return of a car, frequent long-distance drivers can often be dealt an excess mileage charge at the end of the contract if they have used extra miles outside of their limit – if you drive less frequently, you won’t have to worry about this!
How does it work?
If you’re interested in entering into a credit agreement on one of our personal contract plans, you’ll probably be wondering how you do that and what it entails. Thankfully, we aim to make this process as easy and personal as we can here at ChooseMyCar – using our flexible system, you’ll be able to find a car finance plan that works perfectly for you in line with your income and outgoings. This will ensure that your payment plan is affordable for the duration of the agreement.
The general process with these types of credit agreements is as follows:
- First of all, you’ll need to pass a creditworthiness assessment – this essentially means a credit check will be used to assess the risk associated with offering a certain amount of credit to you, based on your previous credit history. If you have a strong credit history with evidence that you are a reliable borrower that’s able to maintain a record of consistent on-time payments each month, this will show the lender that you are a safe bet when it comes to credit agreements. Alternatively, those who have a poor credit history may find that they struggle to gain approval for car finance deals, or that the interest rates are higher than they would be for someone with good or excellent credit. In these cases, you may be best looking for a specialist bad credit car finance such as ourselves here at ChooseMyCar!
- Next, you’ll need to make a decision regarding your deposit – this is usually very flexible depending on your credit rating, but as a general rule you should try to put down as much of a deposit as possible, as this will reduce the cost of the monthly payments to the minimum amount. In some cases, the finance company may offer £0 deposit PCP deals, which are great if you don’t have a large lump of money saved to put down as a deposit for your new car.
- After that, it’s simply a case of finalising your credit agreement and sticking to your payment plan! During this time, you’ll want to keep an eye on your mileage, making sure that you stay within your preset limit, as you may incur costs if you exceed that limit. In addition to this, avoiding damage will mean that you may be able to eliminate the need to pay for repairs when you hand back the car at the end of the contract.
What happens at the end of the agreement?
The last step of any PCP car finance agreement is to make a decision regarding the balloon payment – you’ll be able to choose between keeping the car by paying the set fee or returning the car at the end of the contract. This means that you have more options available, including the option to keep hold of the car if you are a fan of the vehicle. If you decide that you do want to keep the car, it’s a good idea to start saving up the money to pay the balloon payment early, as it can be quite an expensive fee to pay all at once. By putting aside a small amount each month to cover the cost of the balloon payment, you’ll be saving yourself from a tough situation in the future.
If you decide to hand the car back, you may find that your eligible for an upgrade or swap with your old vehicle, provided that it is still in good condition – this means you’re able to get a new, affordable car to help you with the daily commute, family trips, or other adventures for the next few years at a price that you’ve found manageable in the past, saving you the financial trouble of looking to purchase a new car once your agreement expires.
Alternatives to PCP
Whilst many see PCP as a great way to get a good, reliable vehicle at a low monthly cost, there are others who are apprehensive about the deals – this is usually due to the fact that you aren’t the owner of the car until you pay the final balloon payment, which can often be a substantial fee that isn’t affordable for everyone. If you aren’t fully convinced by the idea of a personal contract purchase deal, here are some of the most common alternatives:
Hire Purchase: This is the type of deal that is most similar to that of a PCP – you’ll pay a monthly price towards the price of the car, except at the end of the deal you will own the vehicle either automatically or after paying a very small fee . This fee can sometimes be as low as £1, which is far more manageable than the sizable balloon payments associated with PCP deals. If you’re looking to own your car at the end of your payment plan, a hire purchase deal may be the most cost-effective option for you.
Guarantor Loans: If you’re finding that your credit score is keeping you from being able to gain approval for a credit agreement of your own, a guarantor loan may well be your most viable option. By using a guarantor as part of your application, you lower the risk for the lender, as there is an alternative source of payment should you miss any of your monthly installments. There are lots of things that you must consider before entering a guarantor loan agreement, particularly if you are the guarantor – you can learn more about this over on our dedicated guarantor loans page!
PCH (Personal Contract HIre): This is the best alternative option to a PCP plan for those of you who are not interested in owning the car at the end of the contract and would prefer to simply walk away or hand the car back and try something new. Personal contract hire plans work in the same way as a PCP deal, you’ll pay a deposit and then make monthly repayments to cover the amount of credit you have been given plus interest. The only difference is that you will not be offered the chance to pay a set balloon payment, or purchase fee, at the end of the contract; if you want to keep the car, your final payment could end up being higher than it would have been at the end of a PCP agreement.
Applying for car finance
Now that you have all the details relating to the different finance options that are available to you, it’s time to look at the application process and what it will entail. WIth certain lenders and finance providers this can often be a bit of a pain, but here at ChooseMyCar we look to take all of the stress out of the situation. We’ve got a range of in-depth pages that explore each type of car finance, a handy finance calculator to assist you in creating a manageable budget for your payment plan, and our team are always on hand to help you out should you require any assistance. Whatever you need, the team here at ChooseMyCar are sure to be able to help you out, so don’t hesitate to get in touch online or by phone if you have any questions or queries relating to our service.
In the next section, we’re going to look at the information that you’ll be expected to provide as part of your application, as well as an outline of what you can expect to pay and when you will need to pay it – this allows you to have a clearer understanding of the process on the whole.
First, you’ll need to give us some information to help us carry out a credit check this allows us to gauge your creditworthiness so that we can decide whether you’ll be eligible for one of our car finance deals. Here is an overview of the information that you’ll need to offer:
- A valid driving licence
- Proof of income
- Address history
- Bank account details
Once you’ve supplied us with this, we’ll be able to complete the credit check and, should you be successful, we’ll be able to finalise the credit agreement and set up the payment plan so you can get your hands on the keys to your new car as soon as possible. If you’re worried about this credit check having a negative impact on your credit score, you can use our 2 step credit check that’s designed to help those with bad credit – you’ll be subject to a soft credit check initially, which enables us to pre-approve you before a hard check is submitted. Soft searches will not appear on your credit support, so are a great way to gauge your eligibility for finance deals if you struggle with a poor credit score.
Whether you’re looking to apply for one of our PCP finance deals or you’re still unsure as to which type of finance is best for you, get in touch with ChooseMyCar today! Our team will be able to guide you through the process one step at a time, making sure you feel comfortable and informed as you browse our range of vehicles and the different types of finance that you can utilise to purchase them.
Why individuals should choose a used car using these types of finance payments
Used cars, while they are, of course, used and previously owned by other people, still hold a level of quality that make them just as good as a car that has rolled off the production line. By asking the right questions, reading the right reviews, and doing an appropriate amount of research, you can quickly find a car in great, almost new condition that is perfect for your needs. Here at ChooseMyCar, we’re passionate about used cars and the various finance options, such as Personal Contract Purchases, and HP Contracts (Hire Purchase), that are on offer which can help open up a whole new world of driving for you. In this section, we’re going to run through a few important things that you need to know when looking for a new used car. This quick breakdown should give you the knowledge and insight needed to make a great decision, once you have set the monthly allowances of your PCP contract.
Firstly, let’s look at the benefits of purchasing used cars through a PCP agreement. The first and arguably biggest benefit is the price. With new cars becoming more and more expensive the appeal of used cars has become greater with each passing year. More recently, Brexit, and rising inflation, has seen car costs rise by 5.2 per cent, with bigger cars, such as SUVs, seeing even greater increases of 12.3 per cent.
These scary figures have put people off buying new cars outright and, instead, seen them turn to different forms of contracts, finance calculators, and other types of finance on cars that have been previously owned. Another benefit is to do with depreciation, the bulk of which has already occurred with used cars, this means your monthly payments are cheaper because these costs have plateaued and aren’t as big of an issue as they once were. A third benefit is one that is often overlooked but is no less significant, and that is that owning a car for an agreed contract period through a company, such as Choose My Car, means you can rest assured knowing that each car is certified, and has been thoroughly inspected. Used cars are too often thought of as dodgy or being sold by unreputable sources but, in actuality, the opposite is true, if anything, the car you select on this finance contract will feel brand-new.
When it comes to what to look for when you’re buying a used car there are a few key things that you need to be aware of to ensure that the car is of a good standard. The first thing is documentation, can you see the V5C registration document? Is the VIN plate intact, and do the numbers that are etched on the glass or lights match up? Most of the time they will, especially when you work with our team but in other circumstances, it’s always good to check.
Safety is all-important, for obvious reasons. So, when looking at a used car check the tyres – are they in good condition? Are the jack, and other safety tools, present, and are the airbags and seatbelts functioning as they should? Create a checklist and ensure all the things that are important to you are ticked off it.
The amount of miles a used car has done is the third key thing to consider. A good way to calculate how many miles is too many for a particular car is to use this quick formula. On average, a car should do around 10,000 miles a year so, to find out if the used car in question has done too many miles, multiply its age by 10,000. If a car is three-years-old, it should have done around 30,000 miles.
Of course, with a PCP you’ll never technically own the car unless you pay a fee, known as a balloon payment, at the end of the lease contract. If you know that your PCP deal is going to absolutely end with you purchasing that car outright, then calculating the mileage it has done is going to be an important factor for long-term ownership. However, mileage is still important even if you intend to give the car back as it gives you an idea of the kind of condition the car is in, and whether it will be worth the monthly payments.
The wide range of cars that we have on offer here at ChooseMyCar
Here at ChooseMyCar, we have a range of vehicles on offer that will suit everyone and their needs. Whatever sort of car you’re after we’re confident that, with a Personal Contract Purchase, you’ll be able to collect your keys and head off into the sunset with a smile. Let’s examine, in greater detail, the types of cars that we have on offer for you.
Hatchbacks
Hatchbacks, and ‘hot hatches’, are extremely popular in this country thanks to their stylish features, compact size, and decent performance, especially on the high-end models. Here at ChooseMyCar, we have a range of city cars that are sure to be perfect for getting you from A to B. From our used Citroens, such as the C1, which is distinctive looking, and lively, thanks to a 1.0-litre three-cylinder engine, right the way through to British classics, such as the MINI Cooper, that has everything you could ever want, from iconic looks to spacious interiors.
Saloon cars
For people who are serious about cars, be sure to check out our range of saloons on PCP finance. Imposing and elegant, we have saloons from companies such as Jaguar, Volkswagen and Mazda that love eating up the miles in a reliable way, that doesn’t feel boring. Be it the Audi A3, Mercedes-Benz C Class, or Vauxhall Insignia, we’re confident you’ll find the perfect saloon car for you and your family.
Estate cars
Throw everything in and get to where you want to go with our range of used estate cars available on personal contract purchase deals. From the Ford Focus Estate, which brings all the benefits of a regular Focus, but with more space, right the way through to the Seat Leon ST, and Skoda Octavia Estate, which brings all the benefits found in their German counterparts, but at a slightly cheaper price.
Multi-Purpose Vehicle (MPV)
The clue is in the name with this range of cars – be it the rugged countryside or the inner city, the appeal of MPVs is obvious. At ChooseMyCar, we offer a great array of MPVs available on personal contract purchase vehicle finance. For example, the Peugeot 5008 has all the style and French swagger that this manufacturer is known for, but with enough room inside to house Noah’s ark! Or, why not give the VW Touran a go, with 1.9 million models sold since its release, it’s clear that this car is doing something right.
SUVs
Forget the days of rugged, uncomfortable 4x4s. These days, used SUVs are stylish, quick, and are able to handle whatever is thrown at them. On PCP finance, the Dacia Duster’s rugged looks, and distinctive front, make it great at tackling the unreliable British weather. Or, there is always the Kia Sportage, which features a panoramic roof, and rear-view cameras, on the higher end models, making it a great option on these types of finance deals.
Coupes
If you’re after driver enjoyment, performance, and good looks, then our range of coupes, convertibles, and other similar sports cars, are for you. And, with a used car finance option such as this one, where you never own the car, you can enjoy getting behind the wheel of a different, exciting coupe every few years, be it an Audi TT, BMW Z4, or Mazda MX-5.
Why individuals should choose a used car using these types of finance payments
Used cars, while they are, of course, used and previously owned by other people, still hold a level of quality that make them just as good as a car that has rolled off the production line. By asking the right questions, reading the right reviews, and doing an appropriate amount of research, you can quickly find a car in great, almost new condition that is perfect for your needs. Here at ChooseMyCar, we’re passionate about used cars and the various finance options, such as Personal Contract Purchases, and HP Contracts (Hire Purchase), that are on offer which can help open up a whole new world of driving for you. In this section, we’re going to run through a few important things that you need to know when looking for a new used car. This quick breakdown should give you the knowledge and insight needed to make a great decision, once you have set the monthly allowances of your PCP contract.
Firstly, let’s look at the benefits of purchasing used cars through a PCP agreement. The first and arguably biggest benefit is the price. With new cars becoming more and more expensive the appeal of used cars has become greater with each passing year. More recently, Brexit, and rising inflation, has seen car costs rise by 5.2 per cent, with bigger cars, such as SUVs, seeing even greater increases of 12.3 per cent.
These scary figures have put people off buying new cars outright and, instead, seen them turn to different forms of contracts, finance calculators, and other types of finance on cars that have been previously owned. Another benefit is to do with depreciation, the bulk of which has already occurred with used cars, this means your monthly payments are cheaper because these costs have plateaued and aren’t as big of an issue as they once were. A third benefit is one that is often overlooked but is no less significant, and that is that owning a car for an agreed contract period through a company, such as Choose My Car, means you can rest assured knowing that each car is certified, and has been thoroughly inspected. Used cars are too often thought of as dodgy or being sold by unreputable sources but, in actuality, the opposite is true, if anything, the car you select on this finance contract will feel brand-new.
When it comes to what to look for when you’re buying a used car there are a few key things that you need to be aware of to ensure that the car is of a good standard. The first thing is documentation, can you see the V5C registration document? Is the VIN plate intact, and do the numbers that are etched on the glass or lights match up? Most of the time they will, especially when you work with our team but in other circumstances, it’s always good to check.
Safety is all-important, for obvious reasons. So, when looking at a used car check the tyres – are they in good condition? Are the jack, and other safety tools, present, and are the airbags and seatbelts functioning as they should? Create a checklist and ensure all the things that are important to you are ticked off it.
The amount of miles a used car has done is the third key thing to consider. A good way to calculate how many miles is too many for a particular car is to use this quick formula. On average, a car should do around 10,000 miles a year so, to find out if the used car in question has done too many miles, multiply its age by 10,000. If a car is three-years-old, it should have done around 30,000 miles.
Of course, with a PCP you’ll never technically own the car unless you pay a fee, known as a balloon payment, at the end of the lease contract. If you know that your PCP deal is going to absolutely end with you purchasing that car outright, then calculating the mileage it has done is going to be an important factor for long-term ownership. However, mileage is still important even if you intend to give the car back as it gives you an idea of the kind of condition the car is in, and whether it will be worth the monthly payments.
The wide range of cars that we have on offer here at ChooseMyCar
Here at ChooseMyCar, we have a range of vehicles on offer that will suit everyone and their needs. Whatever sort of car you’re after we’re confident that, with a Personal Contract Purchase, you’ll be able to collect your keys and head off into the sunset with a smile. Let’s examine, in greater detail, the types of cars that we have on offer for you.
Hatchbacks
Hatchbacks, and ‘hot hatches’, are extremely popular in this country thanks to their stylish features, compact size, and decent performance, especially on the high-end models. Here at ChooseMyCar, we have a range of city cars that are sure to be perfect for getting you from A to B. From our used Citroens, such as the C1, which is distinctive looking, and lively, thanks to a 1.0-litre three-cylinder engine, right the way through to British classics, such as the MINI Cooper, that has everything you could ever want, from iconic looks to spacious interiors.
Saloon cars
For people who are serious about cars, be sure to check out our range of saloons on PCP finance. Imposing and elegant, we have saloons from companies such as Jaguar, Volkswagen and Mazda that love eating up the miles in a reliable way, that doesn’t feel boring. Be it the Audi A3, Mercedes-Benz C Class, or Vauxhall Insignia, we’re confident you’ll find the perfect saloon car for you and your family.
Estate cars
Throw everything in and get to where you want to go with our range of used estate cars available on personal contract purchase deals. From the Ford Focus Estate, which brings all the benefits of a regular Focus, but with more space, right the way through to the Seat Leon ST, and Skoda Octavia Estate, which brings all the benefits found in their German counterparts, but at a slightly cheaper price.
Multi-Purpose Vehicle (MPV)
The clue is in the name with this range of cars – be it the rugged countryside or the inner city, the appeal of MPVs is obvious. At ChooseMyCar, we offer a great array of MPVs available on personal contract purchase vehicle finance. For example, the Peugeot 5008 has all the style and French swagger that this manufacturer is known for, but with enough room inside to house Noah’s ark! Or, why not give the VW Touran a go, with 1.9 million models sold since its release, it’s clear that this car is doing something right.
SUVs
Forget the days of rugged, uncomfortable 4x4s. These days, used SUVs are stylish, quick, and are able to handle whatever is thrown at them. On PCP finance, the Dacia Duster’s rugged looks, and distinctive front, make it great at tackling the unreliable British weather. Or, there is always the Kia Sportage, which features a panoramic roof, and rear-view cameras, on the higher end models, making it a great option on these types of finance deals.
Coupes
If you’re after driver enjoyment, performance, and good looks, then our range of coupes, convertibles, and other similar sports cars, are for you. And, with a used car finance option such as this one, where you never own the car, you can enjoy getting behind the wheel of a different, exciting coupe every few years, be it an Audi TT, BMW Z4, or Mazda MX-5.