What is PCP? (Personal Contract Purchase)

Similar to a Hire Purchase Loan, with PCP you pay a deposit and agree on a monthly payment for the car. However, the deposit and the monthly payments tend to be significantly lower than a Hire Purchase Loan.



The monthly payments are less, due to a sting at the tail end of the agreement – this is called, a ‘balloon payment’. However, the balloon payment is optional, and you have a few options at your disposal.

• Pay the balloon payment – usually around 2/3 of the car’s valuation. This means you will drive away owning the car.




• Give the car back – hand the car back and seek a deal elsewhere




• Finance a different car – you can purchase another model from the value of the car you have been paying for. However, this will depend on the dealership and the lender

Advantages of PCP

• True flexibility with options at your disposal
• Choose the car of your choice at an affordable monthly payment
  
• Less risk involved
  
• Small deposit
  

Disadvantages of PCP

• Charges for excess mileage
• High balloon payment
  
• No ownership of car until final balloon payment made
  
• Liable for any damage that results in diminishing car value

Other Car Finance options

• Hire Purchase Agreement
• Conditional Sales Contract
• Personal Loan

Do you have any other questions regarding vehicle finance? We have put together some of our most common questions. Click on the links below.

• What if I have bad credit?
• Am I guaranteed car finance?
• What If I have been rejected before? – Is there any point trying?