What is Personal Contract Purchase?

PCP is the most popular finance agreement for consumers wishing to change their car between 2 and 4 years.

Similar to an HP agreement, PCP consists of paying an initial deposit, followed by monthly payments.

PCP differs from HP as the monthly payments only pay for the depreciation of the car, whereas with HP the monthly payment pays towards the ownership of the car.

How Does PCP Work?

Deposit & Payment
1. Tailored to individual requirements
Annual Mileage
1. Tailored to individual requirements
Guaranteed Minimum Future Value (GMFV)
1. Also known as the balloon payment, this is the expected value of the car at the end of the agreement

Options at the End of the Agreement

Own the car outright – by paying the balloon payment
End the agreement – by handing the car back to the finance company
Part Exchange the vehicle for another car

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Benefits

Low initial deposit
Low monthly payments
Flexible options at the end of the agreement
A specified Guaranteed Minimum Future Value (GMFV), therefore protecting you from market fluctuations
Ability to change car more regularly – every 2 years

Considerations

If you exceed the anticipated annual mileage there may be an excess mileage charge at the end of the contract
The loan is secured against the vehicle as such if you miss payments then the vehicle may be repossessed

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Personal Contract Purchase (PCP) example

Example costs for buying a vehicle through Personal Contract Purchase. These examples are based on CarMoney rates as of June 2021.

Representative example:

Monthly Payment: £283
Deposit: £1098
Term (Months): 48
Balance to Finance: £16,000
Annual Mileage: 8000
Final Payment: £6,424
Total Amount Payable: £21,104
APR: 8.9%

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