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What is Personal Contract Purchase (PCP)?

Watch Our Video What is Personal Contract Purchase (PCP)?

Personal Contract Purchase (PCP) is a type of car finance that can be used to purchase either a new or used vehicle.

Like Hire Purchase (HP), you will usually make an initial deposit followed by fixed monthly payments over an agreed period, typically between 18 and 48 months.

The main difference between PCP and Hire Purchase is how the payments are structured. With PCP, your monthly payments are based on the vehicle’s expected depreciation during the agreement, rather than paying off its full value.

At the end of the agreement, you can choose to keep the vehicle by making a final lump sum payment. This is commonly known as the balloon payment or Guaranteed Future Value (GFV).

How does PCP actually work?

Once you have chosen your vehicle, you will agree on your expected annual mileage and the length of the agreement with one of our Business Managers.

We will then calculate the vehicle’s Guaranteed Minimum Future Value (GMFV) at the end of the agreement. Based on this, we will agree an initial deposit and monthly payments that suit your requirements.

At the end of your PCP agreement, you will have three options:

Return – Hand the vehicle back to us.

Retain – Keep the vehicle by making the optional final payment.

Renew – Part-exchange the vehicle for another car.

For a personalised quote or further advice, please contact us and ask to speak with one of our Business Managers.

What are the advantages of PCP?

Monthly payments with PCP are often lower than with a Hire Purchase agreement, as you are not paying off the full value of the vehicle during the term.
If you choose not to keep the car, you can return it at the end of the agreement, subject to the agreed mileage and vehicle condition.
PCP gives you the flexibility to change your car regularly, making it easier to move into a newer model every few years.
If your vehicle is worth more than its Guaranteed Future Value at the end of the agreement, you may be able to use the difference as a deposit towards your next car.

What should you consider when opting for PCP?

If you decide to keep the vehicle at the end of the agreement, you will need to make the optional final payment, also known as the Guaranteed Future Value (GFV).
You will agree an annual mileage allowance when taking out the agreement, and additional charges may apply if you exceed this limit.
You cannot sell the vehicle without first settling the outstanding finance.
You will not own the vehicle until all required payments, including the optional final payment, have been made.
Throughout the agreement, you are responsible for keeping the vehicle appropriately insured and maintained, and it must remain in your possession until the finance is settled.

Can I settle my PCP agreement early?

You can usually settle your PCP agreement early by contacting your finance provider and requesting a settlement figure. This will confirm the amount you need to pay to end the agreement.

If the vehicle is worth less than the outstanding finance, you may need to pay the difference. This is known as negative equity.

Alternatively, if your car is worth more than the amount outstanding on the finance, you may have positive equity, which could potentially be used towards your next vehicle.

Find and finance your next vehicle through PCP

What is Hire Purchase (HP)?

Watch Our Video What is Hire Purchase (HP)?

Hire Purchase (HP) is a type of car finance that can be used to purchase either a new or used vehicle. You will usually pay an initial deposit, followed by regular monthly payments over an agreed period. Unlike PCP, these payments are designed to cover the full value of the vehicle.

Once you have made all the required payments and the agreement comes to an end, you will own the vehicle outright.

What are the advantages of HP?

Hire Purchase can make it easier to get the car you want without having to pay the full purchase price upfront.
Unlike PCP or PCH, there is no need to agree an annual mileage allowance at the start of the agreement, so you will not face excess mileage charges.
Once you have made all the required payments, including any applicable option to purchase fee, you will own the vehicle outright.

What should you consider when opting for HP?

Monthly payments can be higher than with other finance options, such as PCP, because you are paying towards the full cost of the vehicle.
You cannot sell the vehicle while there is outstanding finance without settling the agreement first.
You will not become the legal owner of the vehicle until all required payments have been made.
During the agreement, you are responsible for keeping the vehicle properly insured and maintained, and it must remain in your possession until the finance has been fully settled.

Can I settle my HP agreement early?

Yes, you can usually settle a Hire Purchase agreement before the end of the agreed term. To do this, you can contact your finance provider and request an early settlement figure. This will confirm how much you need to pay to clear the outstanding finance, including any applicable interest or charges.

Once the settlement amount has been paid and any other requirements of the agreement have been met, the finance agreement will end and you will take ownership of the vehicle.

Depending on your circumstances and the terms of your agreement, you may also have other options for ending the finance early. Your finance provider can explain the options available to you.

Find and finance your next vehicle through HP

Finance Below we outline the finance products available to you to fund your new car purchase. Our team are available to assist with any questions, whether up front or throughout the journey should you wish to purchase online. Tailor Your Finance

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What is Personal Contract Purchase (PCP)?

Personal Contract Purchase (PCP) is a finance product that allows you the opportunity to buy a new or a used car. It is similar to a Hire Purchase agreement as you will usually pay an initial deposit, followed by monthly instalments over a term typically between 18 to 48 months.What makes PCP different to Hire Purchase (HP) is that your monthly instalments are paying off the depreciation of the car, and not its entire value, over the course of the term.