Personal Contract Purchase (PCP)

Personal Contract Purchase is a type of Car finance option available to people if they need to buy a brand new car. In Personal contract purchase, you have to pay a deposit amount in order to get the car. The rest amount is paid in monthly instalments over a specific period of time. At the end of your contract, you have the option to return the car or keep it by making a final payment.

How Does Personal Contract Purchase Work?

In order to get PCP, you need to pass the credit checks. The lender will look at your credit score, to know how risky it is for him to get in business with you. If you have a good credit score then there won’t be any problem to get this car finance. After going through the credit score you will need to pay a deposit amount. This amount is normally 10% of the car value. You can get the car after paying the deposit. But remember you don’t get to own the vehicle, you just get to use it. When you are using your vehicle remember to be within the bounds of your mileage, don’t go over your restricted mileage. If you do, you can be charged according to the extra mileage. So its better to get a deal with a good mileage number. You should take care of your vehicle as well, no part should be damaged when you use it, otherwise, you have to pay the damage charges at the end of your contract. When your contract ends you have the option to buy the car or return it. If you choose to buy the car you would need to make a final payment (Balloon payment). This payment is decided on the car’s Guaranteed Minimum Future Value (GMFV), it means it depends on what’s the car’s worth now. If you decide to not buy the vehicle you can return it to the dealer without any further payments.  

Things to Consider Before Going for Personal Contract Purchase

There are few things you need to consider before going for Personal Contract Purchase

• The terms and conditions of the contract. If there are any fees charged
• How much you would need to pay extra if there is any damage to the vehicle
• See the repayment plan, how much you are paying monthly and I full. PCP is expensive than most of the car finance options
• The extra charges you have to pay if you exceed your agreed mileage

 

Things to Remember When You Get in a Personal Contract Purchase Agreement

• You don’t get to own the vehicle for the agreed duration, you can only use it
• There’s a mileage restriction on your driving
• They can take away your vehicle if you miss on your repayments for few months
• If you want to cancel or end the deal, you can do it when you have paid 50% of the amount of your car value. If you want to cancel it before that you have to pay the difference
• You will be paying more than any other type of car finance

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