Personal Contract Purchase (PCP) is fast becoming one of the most popular ways of financing the new car of your choice, simply due to its flexibility. You choose the car, the deposit, how long you want the contract to run for, and the mileage you intend to do. In return you get fixed cost motoring for the term of the contract.
At the end of the contract you have a choice to either buy the car outright for an agreed lump sum (the minimum guaranteed future value), part exchange the car and use the equity you have built up as the deposit on another new car, or hand the vehicle back to the lender and walk away without owing anybody anything (subject to the mileage and condition of the vehicle at this time).
- No need to deplete your savings
- Allows you to change your vehicle more often
- You can have a new car for the price of an old one
- Access to fleet related discounts
- Deposits are usually very low, as are monthly payments, compared with hire purchase agreements
- You have a Guaranteed Future Value for the vehicle at the outset of the contract based on your predicted mileage
- You will benefit from any equity built up over and above the balloon payment
- You can hand the vehicle back at the end of the contract (subject to its mileage and condition)
- You have the option to take ownership of the vehicle at the end of the contract
- You can settle the agreement early
- You are responsible for the servicing and maintenance of the vehicle
- The final payment (Guaranteed Future Value) is based on the predicted mileage of the vehicle, therefore, if the vehicle has done more mileage than expected there is a risk of negative equity at the end of the contract
- There is a monthly payment so you need to make sure you can afford it
- If you settle the agreement too early there is a risk of negative equity
This would suit customers who:
Want a more expensive vehicle than their budget would normally allow i.e. A new vehicle instead of a used one.
Want ownership of the vehicle at the end of the agreement.
Want multiple options at the end of the contract.
Are able to pay all of the VAT upfront.
Want to build up equity in the vehicle over the contract.