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 over a traditional Hire Purchase agreement.
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 three options:
- You can pay the outstanding finance amount and own the vehicle
- Part exchange the vehicle with SW Car Supermarket or SW Car Superstore and start another new agreement on a different vehicle.
- Return the car to the finance company
The amount you pay over the course of a PCP term is dedicated by several factors. These include;
- Deposit amount
- Cost of the used car
- The agreement interest rate
- The lenders predicted future 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 low miles and like to frequently change your cars, say every three years, then a PCP finance plan for your next used car could well be the way forward.