What is Personal Contract Purchase
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What is Personal Contract Purchase (PCP)?

A personal contract purchase deal, commonly seen as PCP for short, is a vehicle finance package where you're required to make regular monthly instalments for an agreed period of time, usually the length of the agreements are two or three years. Once the agreement period has come to an end, you have a few options as to what to do from there. Typically you can:

  • Simply return the car to which no further finance costs are involved,
  • Use the vehicle to part-exchange for a different vehicle, subject to mileage and condition.
  • You can choose to purchase the vehicle outright by making what is commonly known as a guaranteed future value payment (GFV). This payment is normally the current (depreciated) value of the vehicle.

What are the benefits of PCP?

A personal contract purchase may be the ideal finance option for individuals who enjoy changing their vehicle regularly but who also want the ability to purchase the vehicle should you decide to keep it.

Due to the nature of the plan, being quite a flexible plan means that it's naturally better suited for people who have good credit histories. Personal Contract Purchase (PCP) may not be available to individuals who have a poor credit history.

Having a vehicle on PCP may be a more cost-effective option if you wish to drive a new (or nearly new) but keep the monthly payment costs down. Due to how a PCP plan works, if you do decide on keeping the vehicle, the final GFV payment is large, meaning you save the difference over the initial monthly payments. Differences in monthly instalments between a PCP plan and a HP plan for example can be hundreds of pounds.

As the final GFV payment will typically be equal to the vehicle's value at the end of the agreement term (the value of the vehicle will take into account depreciation), you can expect the GFV payment to be thousands of pounds.

The best way to look at how a PCP agreement works would be to think of it as you simply hiring the vehicle for an agreed amount of time, however once the agreed time comes to an end, you can purchase the vehicle or simply move on to something else.

Examples of how PCP works

As an example of how Personal Contract Purchase (PCP) works, using a top of the range vehicle as an example on a 10,000 mile annual cap, the price breakdown seen below would typically apply:

For a BMW 318d Sport Saloon (OTR price of £28,675.00), the PCP costs are:
- Initial deposit of £373.00 followed by £373.76 monthly for 48 months
- After the 48 month agreement period ends, you can return the vehicle or make a one-off final payment (GFV) of £9,495.00 to own the vehicle outright.

This example should give you a feel for what is involved with a PCP plan, however deposit sizes do vary by vehicle as well as interest rate charges on the finance. If you find that a deposit on a certain vehicle on a PCP plan has a deposit which you can't afford, some providers will take your current vehicle in as a part-exchange, helping towards the initial deposit.

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