PCP


Personal Contract Purchase

Personal Contract Purchase (PCP) is a type of car finance that allows you to drive a new or used car for a set period of time (usually 24-48 months) without having to pay the full amount upfront.

Instead you make monthly payments to pay off some of the capital borrowed and interest:

  • Hand the car back to the finance company, as long as you have kept to the contracted mileage and the condition of the car been maintained.
  • Trade the car in for another one. This is a popular option for people who like to change their car regularly. The dealer will assess the value of your car and use any equity to put towards your next deposit.
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Benefits of PCP finance
  • Lower monthly payments than a personal loan or hire purchase agreement.
  • Flexibility to choose whether to buy the car at the end of the contract or trade it in for a new one.
  • No deposit required (although you may be offered a lower interest rate if you make a deposit).
Drawbacks of PCP finance
  • Balloon payment at the end of the contract can be expensive.
  • Termination fee may be payable if you hand the car back early.
  • Limited mileage allowance. If you exceed the mileage allowance, you may have to pay a penalty.
  • PCP agreements can be complex, so it's important to read the terms and conditions carefully before you sign up.
Things to consider before taking out PCP finance
  • Make sure you can afford the monthly payments and the balloon payment at the end of the contract.
  • Read the terms and conditions carefully to understand the mileage allowance and any other fees that may apply.
  • Limited mileage allowance. If you exceed the mileage allowance, you may have to pay a penalty.

Overall, PCP finance can be a good option for people who want to drive a new or used car without having to pay for it upfront. However, it’s important to be aware of the drawbacks, such as the balloon payment and the potential for excess mileage fees or any damage beyond wear and tear. However this is only the case when selecting to return the vehicle.

More finance options

PCP<br>Personal Contract Purchase
PCP
Personal Contract Purchase
HP<br>Hire Purchase
HP
Hire Purchase
LP<br>Lease Purchase
LP
Lease Purchase
BP<br>Balanced Payments
BP
Balanced Payments
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