What is Personal Contract Purchase (PCP)?

Personal Contract Purchase (PCP) is a finance product.

It is similar to a Hire Purchase agreement as you will usually pay an initial deposit, followed by monthly instalments over a term typically between 18 to 48 months.

What makes PCP different to Hire Purchase (HP) is that your monthly instalments are paying off the depreciation of the car, and not its entire value, over the course of the term. Then, when you get to the end of your agreement, there is a final, balloon payment that must be made if you want to keep the car. The balloon payment is often referred to also as the Guaranteed Future Value (GFV).

How does PCP actually work?​

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When you have chosen your vehicle, you will then agree your annual mileage and decide on the agreement term with one of our Business Managers.

We will then determine the Guaranteed Minimum Future Value (GMFV) of the vehicle at the end of the agreement and work out a deposit and monthly amount that works for you.

At the end of your agreement you will then have three options:

Return – Simply return the car the back to us
Retain – Keep the car by paying the optional final payment
Renew – Trade it in for another car

For a quotation, help, or advice contact us and ask to speak to one of our Business Managers. 

What are the advantages of PCP?

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  • Similar to PCH, you can drive away a new or used car every few years (dependent on the chosen term) without worrying about selling it on.
  • If your car is worth more than the Guaranteed Future Value then you can use that equity towards a deposit on a new car.

What should you consider when opting for PCP?

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  • If you want to buy the car you will need to pay your final balloon payment (the Guaranteed Future Value).
  • Similar to PCH, 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.
  • You won’t be able to sell the car without settling the finance.
  • You won’t own the car until you have made all of your repayments.
  • You’ll need to keep the car properly insured, maintained and in your possession until the full value is paid off.

Can I settle my PCP agreement early?

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You can normally settle your agreement early by asking the finance company to provide you with a settlement figure. However, the finance company 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. On the other hand, you may find that at the end of your term your car is worth more than the Guaranteed Future Value, which means you will have some positive equity to contribute towards your next car.

What is Personal Contract Hire (PCH)?

Personal Contract Hire is a fixed cost rental agreement.

It’s different from Personal Contract Purchase (PCP) because there is no option to purchase the car at the end of the agreement and the vehicle must be returned.

How does PCH actually work?​

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Personal Contract Hire works by choosing from an initial rental payment in advance of 1-12 months, you then set the contract term between 2-5 years.

You then decide your annual mileage limit – the minimum is 5,000 and the maximum varies by vehicle. If your circumstances change during your agreement you may be able to amend your contracted mileage. You can also then decide whether to add an optional maintenance package at an additional cost.

At the end of the contract you must return the car and you’ll have nothing more to pay if the vehicle condition is in line with BVRLA guidelines and hasn’t exceeded the maximum agreed annual mileage.

If the vehicle doesn’t meet the mileage and condition terms, then excess charges will apply.

What are the benefits of PCH?

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  • Hassle free motoring - road tax is included and no disposal worries
  • Flexible initial rentals – choose between 1-12 months advanced payment which will help you set monthly rentals to suit your budget.
  • The higher initial rental in advance you pay the lower the remaining monthly rentals will be
  • Fixed monthly payments to suit your budget
  • You can terminate the contract early by paying 50% of the remaining rental cost and any other charges incurred
  • Optional vehicle maintenance packages to make sure your car stays in good condition

What should you consider when opting for PCH?

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  • There is no ownership option at the end of the agreement
  • Excess mileage charges may be incurred if you exceed the agreed mileage and return the vehicle to us.
  • The condition of the vehicle upon return must also be in line with BVRLA guidelines to avoid incurring charges.

What is Hire Purchase (HP)?

​Hire Purchase is a way to finance buying a new or used car. You will normally pay an initial deposit and will pay off the entire value of the car in monthly instalments. When all the payments are made, the Hire Purchase agreement ends, and you own the car outright. 

What are the advantages of HP?

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  • You’ll be able to drive away a car that you may not have managed to buy outright.
  • Unlike a PCP or PCH contract, you won't need to estimate your mileage at the start of your Hire Purchase agreement, so you'll avoid excess mileage charges.
  • Once you’ve made your final monthly payment, including the option to purchase fee, you'll have full ownership of the car.

What should you consider when opting for HP?

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  • Monthly payments may be higher than some other finance options, such as PCP, as you're paying off the full value of the car.
  • You won’t be able to sell the car without settling the finance.
  • You won’t own the car until you have made all of your repayments.
  • You’ll need to keep the car properly insured, maintained and in your possession until the full value is paid off.

Can I settle my HP agreement early?

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The short answer is yes, you can end your finance early. There are different provisions within each finance agreement that allows you to do just that. If you have got through two-thirds of the way through your finance agreement, the options to end the finance agreement early open up.

For a Hire Purchase agreement, there is an option of paying it off early through a settlement fee. A settlement fee covers the cost of any remaining unpaid instalments and interest payments remaining on the agreement. Once the settlement fee is paid, you take full ownership of the car early.

Under a Personal Contract Purchase agreement, you can also pay a settlement fee for bringing the agreement to an end early. After that, you can choose to hand the car back or you have a second option. Through a PCP agreement, you can take full ownership of the car by paying off the remaining Guaranteed Minimum Future Value also known as a balloon payment.

What is Personal Contract Hire (PCH)?

Personal Contract Hire is a fixed cost rental agreement.

It’s different from Personal Contract Purchase (PCP) because there is no option to purchase the car at the end of the agreement and the vehicle must be returned.

How does PCH actually work?

Personal Contract Hire works by choosing from an initial rental payment in advance of 1-12 months, you then set the contract term between 2-5 years.

You then decide your annual mileage limit – the minimum is 5,000 and the maximum varies by vehicle. If your circumstances change during your agreement you may be able to amend your contracted mileage. You can also then decide whether to add an optional maintenance package at an additional cost.

At the end of the contract you must return the car and you’ll have nothing more to pay if the vehicle condition is in line with BVRLA guidelines and hasn’t exceeded the maximum agreed annual mileage.

If the vehicle doesn’t meet the mileage and condition terms, then excess charges will apply.

What are the benefits of PCH?

  • Hassle free motoring - road tax is included and no disposal worries
  • Flexible initial rentals – choose between 1-12 months advanced payment which will help you set monthly rentals to suit your budget.
  • The higher initial rental in advance you pay the lower the remaining monthly rentals will be
  • Fixed monthly payments to suit your budget
  • You can terminate the contract early by paying 50% of the remaining rental cost and any other charges incurred
  • Optional vehicle maintenance packages to make sure your car stays in good condition

What should you consider when choosing PCH?

  • There is no ownership option at the end of the agreement
  • Excess mileage charges may be incurred if you exceed the agreed mileage and return the vehicle to us.
  • The condition of the vehicle upon return must also be in line with BVRLA guidelines to avoid incurring charges.