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