Personal Contract Purchase (PCP)

Also known as PCP, Personal Contract Purchase is a widely available and popular form of car finance. It can typically be arranged with lower payments to make, helping you to manage your money.

How does PCP work?

The value of your chosen car is decided at the start of the agreement. You make a deposit, and part of the value is deferred until this ends. This is called the 'balloon payment', or the Guaranteed Minimum Future Value (GMFV).

When the PCP agreement begins, you will typically make a lower deposit than you would on other types of finance. This could be around ten percent of the vehicle's value. The GMFV also ensures that payments are reduced.

Personal Contract Purchase often runs for either 24 or 36 months. The monthly repayment amount covers part of the car's cost plus interest. Payments and the interest rate on the agreement are fixed, so you will always know the amount going out.

Benefits of PCP

Personal Contract Purchase agreements are a popular third way of giving you some stake in the vehicle you drive (something not offered by Contract Hire packages) without incurring the generally higher initial costs or monthly repayments of a Hire Purchase arrangement.

A modest minimum deposit, as well as the deferment of part of your costs to the end of an agreement, ensures manageable initial and monthly costs. The three choices available to you – selling the car back to the dealer, using it in part-exchange of a new model, or buying it outright – also allow you to easily adapt to any number of changing personal circumstances over the course of the agreement.

What do I do at the end?

At the end of the finance term, your options are:

  • Pay off the GMFV and own the car.
  • Return the vehicle with no more payments to make.
  • Part exchange for another car on finance using the remaining equity.

Should you decide to give the car back, it must be in good condition. Reasonable wear and tear is covered, with excessive damage potentially subject to fines. You may also be charged if you exceed the mileage limit which was set at the start of the agreement.

Can I settle a PCP agreement early?

This may be possible, depending on your circumstances. Every finance provider will handle this differently. Always speak with a financial advisor if you are considering ending your contract early.

Get in touch

Choose your next vehicle on PCP from Johnsons Cars. We represent a large number of global car manufacturers and can talk you through your finance options. Contact us in Merseyside, the West Midlands or the south of England.

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