Personal Contract Purchase
Personal Contract Purchase (PCP) allows you to purchase a car with a deposit, and if you wish, own the car at the end of the agreement.
Benefits of Personal contract purchase include:
- Fixed interest rate
- The deposit and term can be adjusted to find the budget that suits you
- You can part-exchange you car for a new one and start another contract
- The agreement can be settled early
- You have the option to own the car outright at the end of the agreement or hand it back to the dealer
What is Personal Contract Purchase?
A personal contract purchase (PCP) is a type of secured car finance. It’s offered by the majority of car dealerships, high street banks and also specialist lenders. What makes it popular is the lower monthly payments when it’s compared to other forms of car finance.
These lower fees mean you don't automatically own the car at the end of the term - so you're not paying off the car's full value. Instead, there are three options at the end of your term:
- Own your car outright: You have the option to purchase the car at the end with a "balloon" payment. This amount is set at the start of a purchase agreement and is known as the Guaranteed Future Value, or GFV.
- Return your car and walk away: Unless you’ve gone over your agreed mileage allowance, or returned it in bad condition, this won’t cost you anything and you’ll be free to walk away.
- Upgrade your car: Lenders may also offer you an "upgrade" near the end of the contract to keep your custom. So it's a great option if you want to drive a new car every couple of years.
PCP Car Deals
At Choose My Car we know how popular a PCP car deal on a used car can be. Giving you the option to own your car outright, return it or upgrade it, means you’ve got a huge amount of flexibility. This means that having access to excellent PCP deals can be incredibly helpful.
Buying a car on a PCP finance deal gives you the opportunity to own your car outright, so getting a car with a used BMW deal, for instance, could see you the proud owner of your very own 5-series come to the end of the term. This makes used Mercedes deals a very attractive prospect too. The ability to upgrade your car at the end of the agreement also means that a used Ford deal allows you to keep getting the latest model.
As experts in PCP car deals, Choose My Car is here to help you find used Vauxhall deals for their full range of models, along with used Kia deals for cars like the Sorento or Rio. We can use our expertise to help you find the best used Peugeot deals or to own your very own VW Golf or Polo, with a range of used VW deals.
Is Personal Contract Purchase (PCP) car finance right for me?
Personal Contract Purchase: Things to Consider
- If you definitely want to own the car outright, a comparable hire purchase deal almost always works out cheaper overall - despite the lower monthly fees on a Personal Contract Purchase.
- With a PCP contract, you're responsible for servicing the car and keeping it in good
condition. The lender will usually impose a limit on the number of miles you can drive
- typically between 8,000 and 12,000 per year.
- Bear in mind, the best PCP deals usually require a good credit score - for car finance options for bad credit, read our guide.
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Frequently Asked Questions
On a PCP finance deal it’s a good idea to be wary of the size of your deposit. Using all of your savings to pay a big deposit, while making monthly repayments lower, can cause issues further down the line.
You must consider whether you can afford the balloon payment if you wish to keep the car at the end and, if you can’t, whether you will have enough to place a deposit on another finance deal.
Contracts for PCH generally last 12, 24, 36 or 48 months. There are other contract lengths however and it’s worth working out what the cost of the car will be at the end of the agreement, and whether a longer agreement is worthwhile.
You have two options for paying off your PCP deal.
- If you have paid half of the value you can return the car, or if you have paid less than half you can pay up to half the value and then return it.
- If you have paid over half you can pay off the rest of the value and either return it, or pay a balloon payment to keep it.
PCP deals are generally between 36-60 months.
A longer term will allow you to keep the repayment costs down. It’s worth considering a few things however, such as when a car may need its MOT or whether the value of a used car will drop considerably over that period.
A mileage allowance is worked out between you and the lender. This is created through an estimation of your annual mileage. For a higher number of miles you may be charged a higher rate. Make sure you add a cushion, as a change in circumstances could cause your overall mileage to increase.
If you go over your agreed limit you will be charged.
The lender is the legal owner of the vehicle at all times, even at the end of the agreement. You can however have the option of paying a balloon payment to acquire ownership of the car at the end of the agreement.