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Guide to Personal Contract Purchase

When buying a new car you want to look at all the different purchase options available. Car finance is a good way to spread the cost of your vehicle and Personal Contract Purchase is one of the most popular kinds.


PCP is a type of car finance product with a wide variety of different options. It allows you to buy a more expensive car at a lower monthly cost and it is ideal for those who like to change their car every few years, meaning you can get behind the wheel of the latest models more often. Another big advantage of PCP is that the car you buy does not have the risk of depreciation.

How it works

At the start of a PCP agreement, the carís guaranteed future value is assessed. This is the value of the car at the end of the length of the agreement, factoring in depreciation. Your monthly payments are then based on the amount of money between the purchase price and the guaranteed future value. This means you are not paying for the total cost of the car, so the monthly payments and interest is lower.

At the end of a PCP agreement, you have three options. 1) You return the car to the dealer. 2) You pay what is known as a balloon payment and purchase the car (set at the start of the agreement). Or 3) you part exchange the car against a new finance agreement.

These three options make PCP a very flexible and attractive option for car buyers.

PCP is generally open to those with a good or excellent credit rating. There are often mileage and condition limits on the car because, if you decide to return the car, the dealer will want to make sure that the car matches the guaranteed future value and can be resold.

So if you have a good credit rating, are looking for lower monthly payments and want a variety of options at the end of the finance agreement, then PCP is the choice for you.

published: 12/05/2017 09:09:17

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