What is PCP Finance?
Personal Contract Purchase, also known as PCP, is a popular way of financing a vehicle and is based upon a Hire Purchase (HP) agreement.
The main difference is that the vehicle’s value at the end of the agreement is calculated at the start and is then deferred. This is referred to as the Guaranteed Minimum Future Value (GMFV) and is based on various factors including the starting mileage, the user’s projected annual mileage and the age of the car.
How does a Personal Contract Purchase work?
You pay an initial deposit and then the balance in fixed monthly instalments over an agreed term (24-60 months).
At the end of the contract, you can choose to hand the car back with nothing more to pay*, part exchange it and use any equity (the difference between the trade-in value and the GMFV) towards the purchase of your next car, or simply pay off the GMFV and keep the car.
What are the benefits of a PCP car deal?
Flexible deposit options at the start
Lower monthly payments than Hire Purchase
Fixed monthly payments throughout the term of the agreement
Three options at the end of your agreement
Easy to budget for your next car purchase
What happens at the end of a PCP agreement?
At the end of a PCP agreement the user has three options:
Pay the GMFV and keep the car
Trade the car in and use any equity towards their next car purchase
Hand the car back with nothing more to pay *
*The car must be in good condition and within the agreed mileage. Under a PCP agreement, monthly instalments are based on the amount borrowed minus the GMFV.
What should I consider before choosing a PCP car deal?
Charges – a PCP agreement could work out to be more expensive overall compared to a hire purchase agreement for an equivalent vehicle.
Condition –If you decide to return the vehicle, make sure it is in good condition as you could be responsible for any repairs if it is not.
Mileage –Make sure you estimate your annual mileage with care as there will be charges for additional miles above the amount agreed.
Commonly asked questions
Why choose a PCP?
PCP's are great if you want to change your car on a regular cycle and enjoy fixed monthly payments that are lower than a traditional Hire Purchase.
NICHE VEHICLE FUNDING
Part of the Niche Automotive Group
T: 0845 2020158
Embsay Mills Business Centre