What is Personal Contract Purchase?

One type of car finance agreement we offer at Wavertree Car Centre is PCP (personal contract purchase) finance.

These plans involve paying a deposit and making a number of monthly payments until the contract term is over. At this point, you can choose to return the car and walk away or pay a lump sum to keep it.

How Does PCP Finance Work?

Once you have chosen an eligible vehicle, the length of the car finance term will need to be determined. The longer the contract period, the lower your regular payments will be. With a PCP plan, you will also need to agree on a mileage cap with the dealer. The reason for this is that mileage will affect a vehicle’s depreciation, and this factor will be used to calculate your monthly costs.

To work out the amount you will pay each month, your dealer will predict how much the vehicle will be worth at the end of the contract term. This is known as the Guaranteed Future Value (GFV). The balance you pay in regular instalments will be the sum of total price of the car, minus the GFV and your deposit, so you will essentially cover the cost of the value lost.

What Happens at the End of a PCP Agreement?

Unlike other types of car finance, like HP agreements, you will not own the car at the end of the term. You will instead be given a choice: you can return the vehicle to the dealer or buy it outright by making an optional payment. This will be a substantial sum known as a balloon payment and will make you the legal owner of the car.

Is PCP Finance Right for Me?

PCP finance is a great option because it is flexible, and it can mean that you will be able to afford vehicles that you wouldn’t have been able to otherwise. Before you sign a contract, you must be confident that you will be able to make the monthly payments and keep the vehicle in good condition.

For more advice about PCP, speak to one of our car finance experts at Wavertree Car Centre in Liverpool or apply online for a free quote!