Personal Contract Purchase (PCP)
With PCP, you pay lower monthly instalments than HP. This is because a large part of the total amount payable is left to the end of the agreement, in the final repayment.
You have three options when the agreement ends:
- You can trade in the car for a new deal
You can swap the car for another one, subject to the terms of your agreement. If the actual market value of the car is higher than the lender’s predicted value, you can put the difference towards your deposit for a new agreement. New finance agreements are subject to status.
- You can return the car
You simply hand the car back to the lender. Most lenders will collect the car but you should check the terms of your finance agreement. The car needs to be in good condition and within the agreed maximum mileage or there may be extra charges.
- You can buy the car
When you enter into your finance agreement, the lender predicts what the car will be worth when the agreement ends. If you pay this lump sum, called the ‘balloon’ or ‘optional’ final repayment, including any purchase fee, you’ll own the car. If you know that you want to own the car and can afford higher monthly instalments, HP could work out cheaper overall than PCP.
What extra charges will I have?
When you apply for PCP finance you’ll need to estimate your annual mileage. It’s important your estimate is as accurate as possible as you’ll be charged per mile over the agreed maximum mileage.
Normal wear and tear based on your agreed maximum mileage is expected, but you may be asked to pay for any additional damage to the car.