What Is PCP Car Finance: Your Thorough Guide Of This Popular Finance Product

Maybe you have been asking yourself ‘what is Personal Contract Purchase (PCP)?’. It’s a car finance product that is a great way to get a new car without having to pay for it all in one go. It’s ideal for those who want to trade up their car more often as it allows you the freedom to do with your car what you want at the end of your contract. Your agreement requires you to make monthly payments, rather than one big upfront payment. So if you’re wanting a newer car for a fraction of the price, PCP car finance could be the best option for you.

This guide will look at the pros and cons of PCP financing, how it works and whether or not it could be the perfect fit for you.

How Does PCP Car Finance Work?

Have you ever wondered ‘what is PCP car finance?’. Well, here, we will explain it and how it works.

PCP car finance can be simple to understand and is a great way to get a new car on a budget. Our passionate team could help you to understand how PCP car finance. Hopefully, this guide will give you the foundations to help you decide whether getting a car on PCP finance is best for you!

PCP stands for personal contract purchase and it allows you to buy a new or used car and spread the cost of it over a long period. This period typically lasts either two or three years but it will depend on the car you want and your financial circumstances.

One of our experts or a financial lender will be able to go through an agreement that may work for your circumstances, you should get in touch so you know what you could get.

About The payments Involved

Similarly to Hire Purchase (HP) car finance, customers need to make a down payment followed by monthly repayments on a PCP agreement. PCP and HP finance deals differ in that customers have different options at the end of the contract. You can either make a final ‘balloon payment’ at the end and keep the vehicle or return it and finance another car.

Most PCP agreements have interest included in the monthly payments you will pay, like most other financial products. Plus, the lender determines the monthly payments by predicting the guaranteed minimum future value (GMFV).

The GMFV is the determined price of the car at the end of your agreement. This takes into account the devaluation of the car over the length of your contract. Therefore, PCP deals come with a mileage limit. The mileage limit is to help the lender determine the GMFV for you. Typically, you can agree upon a realistic mileage limit with your lender before signing your contract. This allows you to determine how many miles you are predicted to drive each year. Be careful with your mileage on your car because exceeding it could result in more payments down the line.

When you sign up for PCP car finance from us, we’ll give you quotes based on how much deposit you want down and what car models fit within your budget. You can then decide which deal works best for your needs before taking it further.

Can I Get A PCP Deal With Bad Credit?

Luckily, it is possible for you to get a PCP deal with bad credit. We work with specialist lenders who may view your circumstances differently and could offer you a deal on your dream car. We recommend that you take some steps to get your finances in order when considering a car finance product. However, if you have done all that you can, our team of finance specialists could still help you!

What To Consider When Choosing A PCP Car Finance Deal

The Length Of The Contract

The length of your PCP contract is important to consider as it can help you to decide whether this type of finance deal is right for you. If you only want a car for a limited amount of time, then taking advantage of a shorter-term contract may be best suited for your situation. For example, if you have plans on moving house after two years and will not need the car anymore. This could be an ideal solution which lets you avoid paying more than necessary over the term period. However, if buying a new car isn’t something that you’re interested in, then getting a different car finance deal which may be suited better will benefit you more. Or, if you don’t think you could make any expensive payments, a PCP deal may suit your budget better.

Do I Want To Keep My Current Vehicle Or Trade It In?

Are there any factors that may make you want to keep a vehicle for a longer period? Perhaps you may be moving soon and getting a car now to keep would be best. Whatever your personal circumstances are, getting a car can be a big deal. Our passionate experts could help you decide what is best for you depending on your situation.

The Pros And Cons Of PCP

Pros of getting a PCP contract:

  • You could get a brand-new car that’s cheaper to pay for.
  • There’s flexibility at the end of your contract agreement.
  • You are protected against car depreciation since this is what you pay for in your PCP finance agreement.

Cons of getting a PCP contract:

  • You won’t be the outright owner of the car unless you pay the ‘balloon payment’ at the end of your contract.
  • There will be agreed annual mileage limits, you will incur financial penalties if you exceed them.
  • You must maintain your vehicle throughout your contract, otherwise, you will be required to pay for repairs/maintenance.

Even though there are limits within your PCP car finance deal, you will be notified of these before you sign your contract. Our finance specialists could help explain the particulars of a PCP car loan, or your lender will outline everything you will need to know. However, for many PCP finance customers, the pros outweigh the cons. The cheaper price tag, alongside the flexibility, means that most customers are happy to get a PCP car finance deal.

Who Benefits From PCP Car Finance?

PCP car finance is a great option for anyone who wants to drive a new car but can’t afford the full price. It’s also suitable for people who want to spread the cost of a car over a number of years, or who don’t want to pay for their vehicle all in one go.

If you don’t want to own the car at the end of your agreement, this is also a fantastic option! You have more freedom to decide what you want to do at the end of your agreement.

Is It Possible To Finance A Used Car With PCP Car Finance?

Even though most motorists who opt for a PCP car finance deal get a new car, it is possible to finance a used car on PCP deals. However, due to the nature of PCP deals, it would usually be best that you get a car under four years old with a lower mileage count. Although, used PCP finance deals all depended on what the lender offers. They could be a more affordable way for you to get your ideal vehicle, but it’s always best to weigh up your options beforehand.

To Conclude…

PCP car finance is a great finance deal for people who want to drive a new car but don’t have the money for it. As long as you keep up with your payments, there are no hidden costs and you could drive away in any vehicle that meets your requirements. If you want to buy a brand-new car with PCP, then get in touch with our passionate team, today!

They could guide you through the process of securing your dream vehicle!

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