Personal Contract Purchase (PCP)
Flexible Driving, Lower Payments!
Personal Contract Purchase (PCP) is a highly flexible car finance option that offers lower monthly payments than traditional hire purchase. It's perfect if you enjoy changing cars regularly or want to keep your options open at the end of your agreement.
What is PCP Car Finance?
With PCP, you essentially finance the depreciation of the car – the amount it's expected to lose in value over your agreement term – rather than its full purchase price. This is why your monthly payments are typically lower.
At the end of the agreement, you have three flexible options: Own the car, Trade it in, or Hand it back.
How PCP Works: 3 Simple Steps
Your Agreed Deposit
You can pay an initial deposit to reduce your monthly payments, though zero deposit options are often available depending on your circumstances
The Amount You Borrow
You only borrow the amount the car is expected to lose in value during your ownership period, not the full cost
The Final Payment (Balloon)
This is a lump sum payment if you choose to keep the car at the end of the term
Your Options at the End
Three flexible choices when your agreement ends
Hand it Back
Simply return the car to the lender (subject to mileage and condition agreements)
Trade it In
Use any equity in the car towards a deposit on a new vehicle
Own the Car
Pay a final 'balloon payment' (Guaranteed Minimum Future Value or GMFV)
Pros and Cons of PCP Finance
PCP Advantages
PCP Considerations
Is PCP Right for You?
PCP is an ideal choice if:
Lower monthly payments are key
You want to drive a newer car without high monthly outgoings
You like to change cars
The flexibility at the end of the term suits those who prefer a new model every few years
You have predictable mileage
You don't anticipate exceeding agreed annual mileage limits
Understanding the "Balloon Payment"
The "Balloon Payment" is simply the final lump sum payment at the end of your PCP term if you decide to buy the car. This amount is based on the car's Guaranteed Minimum Future Value (GMFV) and can range from a few hundred to a few thousand pounds.