Personal Contract Purchase (PCP) Explained
PCP: Discover this flexible financing option that puts you in control, whether you decide to own, exchange, or return your vehicle
Personal Contract Purchase (PCP) is one of the most popular car finance options in the UK. It offers lower monthly payments with the flexibility to return the car, part-exchange it or pay an optional final balloon payment to own it outright. Here, Perrys explains how PCP works and whether it could be right for you.
What is PCP finance?
If you want to pay for your car using lower monthly repayments, Personal Contract Purchase (PCP) could be what you’re after.
PCP is a flexible type of car finance that allows you to drive a new or used vehicle without paying the full price upfront. Instead, you make monthly payments over an agreed period, and at the end of the term, you have three choices:
- Return the car – Hand the car back and walk away with nothing more to pay (as long as you’ve stuck to the mileage and condition agreements).
- Keep it – Feeling attached to your ride? Pay the optional final payment, often called a ‘balloon payment’, and it’s yours to keep.
- Trade it in – Use any equity (if the car is worth more than the final payment) as a deposit towards a new car.
Key benefits of PCP:
- Low, fixed monthly payments
- Low deposit
- Flexibility to pay off mid-term
- Ability to choose what you want to do with the car
Is PCP right for you?
In two minds about buying or leasing a car? Like to change cars every few years? PCP might be perfect for you. As well as the flexibility to choose at the end of the agreement, one of the main advantages of PCP finance is that the monthly payments are often lower compared to other finance options like Hire Purchase (HP). This is because you’re not paying off the full value of the car, just a portion of it – unless of course, you opt to pay the final balloon payment to make it yours.
However, if you drive a lot of miles or are keen to own the car outright without a large final payment, you might want to explore other car finance options.
How Does Personal Contract Purchase Finance Work?
Here's a simple step-by-step guide