PCP Finance

The Pros of PCP

With any car financing option, there will be advantages and disadvantages, so here we’ve taken a closer look at the pros and cons of personal contract purchase:

• Lower monthly payments: PCP typically offers lower monthly payments compared to other car finance options such as Hire Purchase, making it more affordable for individuals who want to drive a newer or more expensive car.
• Flexibility: PCP offers flexibility at the end of the contract term with the option to return the car, pay a final lump sum payment to take ownership or use any equity towards a new PCP agreement.
• Potential for owning a new vehicle: PCP makes an appealing option for those who want to eventually own their car.
• Protection against depreciation: Typically, PCP agreements include a guaranteed future value (GFV) or balloon payment, which means that the finance company takes on the risk of the car’s depreciation. This protection can provide peace of mind, as you know the car’s approximate value at the end of the contract.

What to look out for?

• Mileage and condition restrictions: PCP agreements usually have mileage limits and require the car to be in good condition when returned. Exceeding the mileage limit or not meeting the agreed-upon conditions can result in additional charges at the end of the PCP contract term.
• End-of-contract balloon payment: If you decide to purchase, you’ll need to make the final balloon payment, which can be a substantial lump sum, so planning and budgeting for this payment is essential.
• No ownership without Purchase: If you decide not to take the purchase option, you will not own the vehicle at the end of the contract, meaning you have no car to show for the payments you’ve made and no asset to trade in or sell.
• Early termination fees: If your situation changes during the PCP term and you need to terminate the contract early, this can result in penalties and fees, so reading the small print is essential.

Which one is right for me?

Choosing the right car financing option depends on several factors, including financial situation, personal preferences about owning a car, and long-term goals. Ultimately, there is no one-size-fits-all solution, and the right car financing option will depend on your unique circumstances and priorities.

We recommend reading up on all the available car financing options and carefully considering your financial capabilities, preferences, and long-term goals before deciding. Additionally, consulting with a financial advisor or speaking to car finance experts can provide further guidance in selecting the most suitable option.