Personal Contract Purchase

Personal Contract Purchase, or PCP, is one of the most popular car finance choices for UK drivers. The monthly payments on PCP are typically lower, making the vehicle you need that bit more affordable.

How PCP works

When applying for finance, you can set the deposit and monthly repayment amounts that you can comfortably make. You will also need to provide an estimate of your annual mileage, as this will have an impact on your repayments.

PCP agreements typically run for 18-42 months.

A portion of your total payment is deferred to the end – this is known as a ‘balloon payment’, and is based on the vehicle’s Guaranteed Minimum Future Value (GMFV). This amount is set according to industry averages, and will be adjusted during your PCP term to account for depreciation.

The benefits

The deferred payment reduces the amount you need to repay monthly. This could mean that an otherwise ‘too expensive’ vehicle is affordable on PCP over a longer period of time. It may also be easier for you to switch models on a more frequent basis and enjoy continued savings.

You can pay off the full amount at any time during the agreement without any penalties. You could even receive an interest rebate.

No matter how much the vehicle depreciates in value during the agreement, at the end you are guaranteed positive equity. If depreciation is much quicker than you were expecting, it’s possible to return the car at no cost.

When your PCP agreement comes to an end, you have three choices:

  • Make the final payment and take full legal ownership.
  • Return the car with no further payments to make.
  • Use it in part exchange for a different vehicle on a new PCP agreement.

PCP agreements are only offered by authorised dealerships. They are not listed on car finance comparison websites, so visit a dealer for more options and information.

Contact any Eden Motors team to discuss car finance and start your application.