• 2023-10-16 08:00:11
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Common Myths About PCP Car Finance Debunked


You have lots of options when it comes to car finance. PCP car finance can be a great option for many, giving the flexibility of leasing a car while also giving you the option to own the car outright.

As experts in car finance, we know there are a lot of myths around PCP car finance and how it works. Below, we look into some of the most common myths around PCP and separate fact from fiction.

You won’t own the car

Many people think that if you use PCP to finance a car, you won’t be able to own the vehicle once the payment period is up. However, this isn’t true. With PCP, you have the choice to either return the vehicle to the lender, or you can make a final “balloon” payment.

This final payment means you can purchase the car and own it outright. The balloon payment is usually a lot more than your monthly payments have been and it will typically cover the resale value.

PCP gives you flexibility, as you can decide at the end of the payment period if you want to keep the car or not. If you have fallen in love with the car and want to carry on driving it, you just need to make the balloon payment to own it. If you decide you want a new car, you can simply hand the car back without making the final payment, and either find another car elsewhere or negotiate an upgrade with the same lender.

PCP is only available for brand new cars

Some people believe that PCP car finance is only available on brand new cars. When this type of deal was first introduced in the UK, it was only available for new cars, however, it can now also finance used cars.

This can be a big benefit to drivers, as they can use PCP for any type of car. It means you have the flexibility of deciding whether you want to keep the car at the end of the deal or not, while also accessing the cheap car finance that typically comes with used vehicles.

PCP doesn’t have mileage limitations

Some people think that PCP car finance is similar to some other car finance options where you don’t have to agree a mileage limit. However, PCP does require a mileage limit to be in place at the start of the agreement.

Some people believe that if they set a lower mileage limit at the beginning, they can obtain lower monthly payments. While this is true, if the driver then exceeds this limit, they’ll face a cost when it comes to handing the car back. They’ll have to pay a fee that compensates for them going over the agreed limit.

The only situation where the mileage doesn’t matter is if the driver chooses to pay the balloon payment and own the vehicle at the end of the payment period.

You can return the car in any condition

Similarly, to mileage limits, there will be specifications set around the condition the vehicle will need to be returned in. If the vehicle has been damaged or modified, you will have to pay extra fees to have these put right.

It’s important to remember with PCP car finance that until the final balloon payment is paid, if it is paid, then the driver does not own the vehicle. So, they will not be allowed to modify it in any way, in a similar way to car leasing. If you choose to pay the final balloon payment, it doesn’t matter what condition the vehicle is in at the end of the payment period.

You’ll get the deposit back if you hand the car back

Some people view PCP car finance in the same way as leasing a vehicle, where you might get your deposit back at the end of the leasing period provided the car is handed back in good condition. However, this isn’t the case with PCP.

With PCP car finance, the deposit simply secures the vehicle. You can often pay a higher deposit to benefit from lower monthly payments, although this usually caps out at around 35% maximum. The deposit goes towards your payment of the vehicle and you won’t get it back even if you hand the car back.

You can’t settle PCP early

Some people think that it’s not possible to end PCP early and that you will have to keep making the monthly payments for the entire agreed period. However, this isn’t strictly true. All PCP agreements will include a Voluntary Termination clause, which will allow you to end the agreement early, albeit with certain conditions attached.

You will typically only be able to settle early if you have paid at least 50% of the total amount you owe. This doesn’t mean that you have paid for half the time – for example, if you have paid two years of a four-year agreement, you will have paid less than 50% of the total amount, as the final balloon payment needs to be factored in.

If you want to terminate the agreement before you’ve paid 50% of the total value, you still can, but you will need to pay an extra fee to make up the difference.

GetCarFinanceHere can find you the best car finance deals for your situation, including PCP, Hire Purchase Car Finance, and Car Finance for Bad Credit. You can apply online today or contact us for more information.

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