Personal Contract Purchase (PCP)
What is Purchase Contract Purchase finance?
The most popular method of car finance, Personal Contract Purchase (PCP), a flexible and straightforward way to craft a personalised finance package that suits your unique needs and preferences.
You’ll enjoy ownership of the vehicle for a set period, based on an annual mileage agreement that you choose at the start of the contract. During this time, you’ll pay a fixed monthly fee for the vehicle.
As you drive and accumulate mileage, the value of the vehicle decreases - your monthly payments essentially cover that depreciation while the car is in your possession. PCP calculates the difference between your vehicle's value at the start of your agreement and its predicted value at the end of the contract, assuming you stick to the agreed mileage allowance.
One of the great perks of PCP is that the predicted value of your vehicle at the end of the agreement (the GFV) is set in stone. This means that your car's value won’t be affected by market fluctuations while you’re in the agreement.
What does a PCP finance deal look like?
While PCP finance agreements might seem a bit overwhelming at first, they're one of the simplest and straightforward ways to finance your new car, giving you plenty of options to consider at the end of the deal. Below is a typical example of a PCP finance deal.
Total Cash Price/On the Road Price | This is the price of the vehicle to buy outright without finance or interest charges. |
APR Representative | Annual Percentage Rate (APR). This is the rate of interest the lender charges for this particular deal. |
Total Amount Payable | This is the total amount paid by the customer after completing a PCP contract. Including the deposit, monthly payments, GFV and interest payments. |
Monthly Payments | The monthly payments are agreed at the start of the contract between the lender and customer. |
Optional Final Payment (or GFV) | This is the predicted future value of the vehicle once you reach the end of the PCP contract. When the term is up, you will have the option to purchase the vehicle at this price - regardless whether the vehicle’s market value has increased. It’s often referred to as a ‘balloon payment’. |
Amount Financed/Cost of Credit | The amount of borrowed finance you will receive to cover the cost of the vehicle at the start of the agreement. |
Customer Deposit | The upfront deposit paid at the start of the agreement. |
Finance Deposit Contribution | Deposit contributions (or FDA’s) are often found with new car finance deals from manufacturers or dealers as a campaign incentive for customers. |
Annual Mileage | The number of miles you can use the vehicle for per year. The annual mileage is agreed at the start of the contract to accurately predict the depreciation/vehicle value at the end of the contract. |
Excess Mileage Charge | The amount charged per mile if the annual mileage is exceeded. |
Optional to purchase fee | An additional fee a customer must pay to gain ownership (title to the car). |
Benefits of a PCP Finance agreement?
Hire Purchase is popular for used car finance and offers a number of advantages.
Easy access to brand-new vehicles
PCP deals usually last between 36 and 48 months, meaning you can change your vehicle frequently to newer models with no strings attached.
Option to own the vehicle.
You have various options at the end of the contract. You can either pay the GFV and keep the car, hand it back or trade it in for a new one.
PCP finance is incredibly flexible.
You can play around with the deposit, monthly payments, and annual mileage to suit your needs.
Guaranteed future value.
Your vehicle could have a higher market value at the end of the contract, allowing you to use the extra equity towards a deposit on a new car.
If you decide to return the vehicle and have exceeded the annual mileage limit, you’ll need to pay for each extra mile you’ve driven. Additionally, the vehicle’s condition will be checked based on the BVRLA (British Vehicle Rental and Leasing Association) Fair Wear and Tear guidelines. Remember: any damage outside these guidelines might result in end-of-lease penalty charges.
Not directly. Chorley Group serves as a credit broker, connecting you with one of our lending partners. Once we've worked together to create a finance package that suits your needs, we'll promptly submit your application to one of our lending partners for approval—usually on the same day!
To be considered for car financing, you’ll need to be at least 18 years old and hold a full UK driving licence. A good credit rating is necessary for all finance agreements. While your credit approval depends on the lender's satisfaction, we’re here to help! We can conduct a 'soft credit check' to give you an idea of your eligibility before we work together on a PCP deal.
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