PCP – Personal Contract Purchase
Spread the cost of your new vehicle for up to 4 years with the flexibility to tailor the term, deposit and payments to suit your budget and anticipated annual mileage.
PCP contains a Guaranteed Minimum Future Value (GMFV) at the end of the finance agreement, which usually makes the monthly instalment amounts lower than a traditional Hire Purchase (HP) agreement. This is great for customers who like to change their vehicle frequently.
When you have paid off the finance agreement and the Guaranteed Minimum Future Value (GMFV), the vehicle becomes yours, or if it doesn’t meet the GMFV set out at the beginning of the agreement, you can return it.
Alternatively, you use it as a part exchange against your next vehicle or refinance the balloon payment into a new HP agreement, subject to finance approval.
Pros & Cons
- Generally lower monthly repayments than a typical Hire Purchase agreement
- Flexible repayment terms to help suit your monthly budget
- No minimum or maximum deposit, giving you more control over your expenditure
- Fixed interest rates, so you have confidence knowing your payments won’t change
- Flexibility at the end of the agreement – 1. you can purchase the vehicle outright 2.return the vehicle to the lender 3. use it as part exchange for your next vehicle 4. refinance the balloon payment into a new HP agreement, subject to finance approval
- You agree your anticipated mileage at the beginning of the agreement so you don’t pay too much, or too little
- You don’t own the vehicle until you’ve made your final payment, including the final balloon payment, which means the vehicle could be repossessed if you do not maintain contractual payments
- You cannot sell or give the vehicle away until you have paid all of the repayments under the finance agreement
- Excess mileage charges apply if you exceed the pre-agreed mileage, as documented in the finance agreement prior to purchase
- If the predicted Guaranteed Minimum Future Value (GMFV) is set very close to the actual value of the vehicle, there will be little equity to roll onto another deal
- The vehicle’s future value is based on its condition, commensurate with age and mileage. Any damage over and above normal/fair wear and tear may need to be rectified.