Personal Contract Purchase (PCP)
So, looking into finance on a new 65 plate Van or Car? Wanting to lease the newest motor? We have some vital information to make sure you are understanding the deal you are getting into. If you finance your vehicle through a personal contract purchase (PCP) you will end up benefiting from lower monthly payments and you are able to choose at the end of the deal the most important thing. If you keep the vehicle or not.
Similar to a HP Deal (Hire Purchase). A Personal Contract Purchase (PCP) deal requires an initial deposit and then a certain amount of fixed monthly payments.
In regards to borrowing for the finance, if you have a good credit history, a PCP will you have a bigger more expensive vehicle that you might otherwise of been able to afford. Just a heads up, you won’t own the car at the end of the term you have agreed to unless you pay the optional final fee. This fee can also end up being a lot of money.
The amount you pay each month in fixed repayments can be affected by a number of things. The amount of mileage you do over the period will affect how much the car is worth at the end of the term so you will have to agree an annual limited as part of any PCP deal. This is vitally important because you are then charged for every extra mile you go over and end up paying a lot more than you ever anticipated.
The end of the term (usually between 2 and 4 years) you will have 3 choices. You can simply return the car and move on. Pay the final, prearranged fee and own the car outright; or trade in the car and if it is worth more than it was predicted to be you can put the difference towards a brand new PCP deal. Psssst, this means a new shiny car.
Over the period of the term, as long as you have paid off more than 50% of the amount the car is predicted to lose over the course of the whole PCP term, you can hand it back early without any penalty. If not, you will be liable for the additional charges. Always read the small print.