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Personal Contract Purchase: What Is PCP?


Personal Contract Purchase (PCP) is a popular form of purchase agreement (similar to a Hire Purchase agreement) that is governed by vehicle mileage and term (period of agreement), where a Guaranteed Minimum Future Value (GMFV) is offset until the end of the agreement.

With a PCP agreement, you’ll essentially lease your chosen vehicle and have the option to buy it at the end of your contract. You’ll pay an initial deposit as well as monthly payments. Because of the balloon payment at the end of the contract, you’ll often find that your monthly payments will be less than what they would be if you chose an alternative finance method.

At the start of your PCP contract, the dealer will give you your GMFV, which is the minimum price your car will be worth at the end of your agreement. This protects you against unexpected dips in your car’s worth. Likewise, if your car is worth more at the end of the contract, you can use the equity as a deposit in your next PCP deal.

Once you have paid all contracted monthly instalments, you have three options:

  1. Part exchange the vehicle and start another PCP deal.
  2. Pay the final balloon payment and keep the car.
  3. Return the car and walk away.

It’s important to remember that mileage limits and an excess mileage charge can often apply to PCP finance vehicles. You’ll also be expected to maintain the car appropriately, following the manufacturer’s service schedule.

PCP is the perfect option for those who like to change their car regularly and enjoy low monthly payments. To contact us to learn more about PCP car finance, please complete the enquiry form below.


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