Personal Contract Purchase (PCP) car finance

Here’s what you need to know to help you decide if a Personal Contract Purchase (PCP) deal is right for you.

How a PCP deal works

PCP is a finance agreement where you pay a deposit followed by fixed monthly instalments, with an optional final payment. It allows you to spread the cost of the car over a period of time and could be the right option if you like to change your car regularly.

PCP might be right for you if you:

  • Are thinking of changing your car in a few years time.

  • Want to make lower monthly payments with an optional final payment at the end to own the car.

  • Want a more expensive model with lower monthly payments than a HP agreement.

What happens at the end of the PCP agreement?

The typical length of a PCP agreement is usually between 24 and 48 months and you have three options when it ends:

  1. You can hand the car back to the lender
    The car needs to be in good condition and within the agreed maximum mileage or you may need to pay additional charges. Most lenders will pick up the car but it’s worth checking the terms of your finance agreement.

  2. You can change the car for another one 
    If the actual market value of the car is higher than what the lender predicted, you can put the difference towards a new agreement, subject to your financial status.

  3. You can buy the car 
    At the end of the agreement there will be a 'balloon' or 'optional final payment'. This is the predicted value of what the car will be worth and is also the final amount you’ll need to pay if you want to own the car. If you decide to make this payment, including any purchase fees, you’ll then own the car.

Popular questions about Personal Contract Purchase

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