PCP stands for personal contract purchase. It’s a type of car financing and PCP car finance is one of the most popular options we provide at GetCarFinanceHere. For PCP, an initial deposit is first made, followed by monthly payments over a period of time that has been stipulated in the contract, usually between two to five years. After that period, the car can either be returned to the dealer or manufacturer, or you can make a final ‘balloon’ payment so you can own the car outright. The value of this payment will be decided by the finance company based on how much the car is now worth and how much has already been paid.
So that’s how PCP works. But why is it such a popular car finance option?
Low monthly payments
The monthly payments for PCP car finance tend to be lower than other types of finance. This is because the amount goes towards the depreciation of the vehicle over the contract period (plus interest) and not towards the total value of the vehicle. This means that PCP can be a much more affordable way of driving a new car.
The interest rate will be fixed at the time you start the contract, which means your monthly payments won’t increase at any point. This can be a huge help if you’re on a strict monthly budget.
Flexible loan terms
PCP is one of the most flexible car finance options available. You will often have the choice of what deposit you put down – usually, it will be at least 10%, but you can make a larger deposit if you want to reduce your monthly payments.
You will also have a choice on how long you finance the vehicle. Most PCP contracts will last between two to five years, and you can find the best option to suit your situation. You will also often have the option to settle your PCP early by paying the settlement figure whenever you have the finances to do so. Settling early will usually mean you pay less interest when compared to continuing with the agreement.
Available for both used and new cars
PCP was initially designed to finance new cars, but it can also utilised for used cars too. So, you’ll have more options to find the right car for your budget. There will be pros and cons to financing both used and new cars through PCP. Older cars might have cheaper monthly payments, but they might not get the best interest rates. New cars will also often have added benefits, such as warranty protection.
The choice to own the car or change to another model
PCP is also flexible in that you can choose what you want to do with the car at the end of the contract period. If you decide that you want to own the car, you just have to make the balloon payment to secure the vehicle and own it outright.
However, you may instead decide that you want to swap or upgrade to a different model. In that case, you just need to return the vehicle to the dealer or manufacturer. This gives you the freedom to frequently upgrade your car every few years, so you can enjoy that new car feel. You also won’t have to worry about what to do with the car if the contract period ends and you don’t want it anymore, as it won’t be your responsibility to sell it on.
You might also have the option to part-exchange for your next car. Sometimes, those who choose PCP car finance end up with positive equity at the end of the contract period. This is because the car is worth more than what was predicted when the contract is put in place. In this case, you can use this positive equity towards your next car as a deposit.
GetCarFinanceHere has a range of car finance deals to suit every budget and situation. Contact us to speak to our expert team, who can help find the best deal for your requirements. Alternatively, you can apply online for your car finance today.