PCP Finance Explained
A highly popular form of used car finance, you’ve no doubt heard of PCP before. Short for personal contract purchase, PCP’s are highly popular thanks to the level of flexibility they can afford a consumer.
When signing up to PCP finance plan you’ll most likely pay an initial deposit this is then subsequently followed by fixed monthly payments. However, you won’t automatically become the owner of the car when your finance term comes to an end. At this stage, you’ll most likely have two options. Either the car is returned to the dealer or finance company or alternatively, you’ll be able to pay a balloon payment at the end of your term to purchase the car outright.
The amount you pay over the course of a PCP term is dedicated by several factors. These include deposit, cost of the used car, interest rate, and the lenders expected value of the car at the completion of the finance term, also known as Guaranteed Minimum Future Value or GMFV.
Monthly payments on PCP will most likely be less than an HP deal, however, be aware that mileage limits apply. If you were to exceed the mileage stated in your term, expect to incur financial penalties.
If you are a careful driver that likes to take care of your car, you driver relatively small miles and like to frequently change your cars, say every three years, then a PCP finance plan for your used car could well be the way forward.