What is Personal Contract Purchase (PCP)?
Personal Contract Purchase (PCP) is a type of finance product that enables you to purchase a new or used car. It works in a similar way to a Hire Purchase (HP) agreement where you will usually make an initial deposit then pay monthly instalments over a term between 18 to 48 months. However, unlike HP, your monthly payments are paying off the depreciation of the car, not its entire value. At the end of your agreement, there is a final balloon payment that must be made if you want to keep the car.

How does PCP actually work?​

Once you have selected your vehicle, you will need to agree on your annual mileage and decide on the length of financing term with one of our Business Managers. We will determine the Guaranteed Minimum Future Value (GMFV) of the car at the end of the agreement and calculate a deposit and monthly amount that works for you. At the end of your agreement, you will have three options: return the car, keep the car by paying the optional final payment, or trade it in for another model.

What are the advantages of PCP?

PCP has several advantages over other financing options, most notably lower monthly repayments. What’s more, if you decide not to buy the car, you can simply walk away at the end of the contract. Similar to Personal Contract Hire (PCH), PCP enables you to drive a new or used car every few years without worrying about selling it on.

What should you consider when option for a PCP?

While PCP offers many advantages, it's important to consider several factors before signing up for it. For instance, if you want to buy the car, you will need to pay your final balloon payment (the Guaranteed Future Value). Additionally, you will need to agree on a mileage allowance at the beginning of your contract, and there may be excess mileage charges if you exceed this.

Can I settle my PCP agreement early?

Yes. You can settle your PCP agreement by requesting a settlement figure from the finance company. However, they will require you to pay off the difference between what your car is worth and what you still owe, and there may be a difference which is known as negative equity. Alternatively, at the end of your term, your car may be worth more than the Guaranteed Future Value, meaning you will have some positive equity to contribute towards your next vehicle. If you require a quotation, help or advice, please feel free to contact us today.

What is Hire Purchase (HP)?
Hire Purchase is a form of vehicle financing that allows you to buy a new car and pay for it in instalments over a fixed period of time. With HP, you will make monthly payments, which include interest, until the end of the agreed term, at which point you will own the car outright.

How does HP actually work?​

When choosing HP, you will be required to pay a deposit upfront with the remaining balance spread over an agreed period of time, usually between one and five years. During the agreement term, the finance company will retain ownership until you have paid off the entire amount, including interest. Only once you have made all the payments will you own the car outright.

What are the advantages of HP?

One of the most significant advantages of HP is that it is a straightforward and easy-to-understand financing option. You can budget effectively for your car payments since the monthly instalments are fixed. Additionally, HP often offers lower interest rates than other financing options, making it more affordable for many customers.

What should you consider when option for a HP?

When considering HP, you should think about the interest rate, deposit amount, monthly payments, and total cost of credit. In addition, you should also consider your budget and whether or not HP is the right option for you and if you wish to own the vehicle outright at the end of the agreement or prefer greater flexibility with your choices.

Can I settle my HP agreement early?

Yes, you can settle your HP agreement early, but there may be some additional fees and charges to consider. The exact amount will depend on how far into the agreement you are, and you should contact your finance company for more information.