Thinking about buying a new car, but feeling unsure about your financing options?
Have you considered Personal Contract Purchase (PCP)? It’s a fantastic choice if you want to finance your vehicle without breaking the bank each month. With PCP, you’ll enjoy lower monthly payments, which means more money in your pocket for other things you love.
This page covers all things Personal Contract Purchase, giving you insight into how it works, its pros and cons, aswell as the main differences between PCP and other finance options. Read on to discover how Personal Contract Purchase may be right for you.
How Does Personal Contract Purchase Work?
PCP car finance is a widely used method of purchasing a car. It involves paying a deposit followed by fixed monthly payments for an agreed term, typically two to four years. At the end of the term, you have three choices: return the car, pay a final balloon payment to own it, or trade it in and use any equity as a deposit on a new car. PCP agreements often have mileage limits and wear-and-tear guidelines, and interest rates vary depending on your credit score.
Pros and Cons of Personal Contract Purchase
Advantages of Personal Contract Purchase Car Finance:
- Make lower monthly car repayments than other car finance types (due to a balloon payment).
- Have the option to drive a new car every few years. At the end of the PCP agreement, providing all payments are made, you can do not have to own the car. Hand it back and find another car to finance.
- The Guaranteed Future Minimum Value will not change during the agreement term, meaning you can save towards it.
- With a PCP agreement offering lower monthly payments, you can drive a car that is out of your price range if you were to purchase upfront.
Disadvantages of Personal Contract Purchase Car Finance:
- At the start of a PCP agreement, you may be set a mileage limit for the vehicle. This is to protect the vehicles value if you choose to sell at the end of the car finance agreement. It is also used in calculating the Guaranteed Minimum Future Value of the car. If you are to exceed these mileage restrictions, there will be financial penalties to face.
- You do not own the car during the agreement, only when all payments are made.
- A balloon payment presents a significant financial burden. If you face unforeseen circumstances, it may become difficult to pay the balloon fee. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Now that you know the ins and outs of personal contract purchase car finance, you might be wondering what your next steps are.
At Marsh Finance, we make it easy for you to apply for car finance with our quick and simple one page application form. Easily fill out our form in under thirty seconds and you’ll find out if you’re pre-approved on the same day, without it impacting your credit score. Whether you’re looking to upgrade your car for work, family, or adventure, we’re here to help you make it happen. So why wait? Apply now and drive your dream car today!
Rates from 14.9%
Representative example: borrowing £10,000 over 60 Months with a representative of 17.9% APR, an annual interest rate of 17.9% (fixed), and a deposit of £0.00, the amount payable would be 59 repayments of £255.42 per month, with one final repayment of £265.42 (which includes the option to purchase fee of £10.00), with a total cost of credit of £5,335.20 and a total amount payable of £15,335.20.
Marsh Finance Limited are a lender, not a broker.
This is for illustrative purposes only and is not a quote or an offer of finance.