Personal Contract Purchase (PCP) represents the vast majority of car finance plans chosen by UK drivers. The ability to keep monthly repayments low and enjoy the flexibility of an agreement is attractive to many customers.
Most PCP agreements are taken out on new and nearly new cars. Together with a car finance expert at the dealership, decide on the deposit you can make, the term length and mileage limit. It is typical to put down roughly ten percent of the vehicle's value as a deposit. The average PCP plan runs for between two and three years.
Another figure set at the outset is the car's Guaranteed Minimum Future Value (GMFV), often referred to as the 'balloon' payment. This is deferred to the end, meaning you pay off part of the vehicle value rather than the total. That difference can reduce the monthly amount considerably.
An important note is that you are not considered the legal owner of the car during the PCP term. This does protect you from depreciation in the model's value, yet will prohibit you from modifying or selling it before the agreement ends.
Once the term reaches an end, you will have several options: