Personal Contract Purchase (PCP)

All individuals can use PCP, whether in business or not. It essentially works in the following way:

  • select the vehicle that’s right for you
  • decide how long you want the agreement (usually two or three years)
  • Next, simply estimate the mileage you expect to cover each year
  • Then choose a deposit you can afford, including the value of any part-exchange

It is recommended that you try to put down between 10% and 20% of the cash price of the vehicle.

A Guaranteed Future Value or GFV is forecast by the finance company. The GFV is the minimum value you can expect your car to be worth at the end of the PCP agreement, provided it is within the agreed mileage and in good general condition.

With PCP your monthly payments are fixed and will be less than with Hire Purchase Plans taken out over an identical term. This is because the GFV and deposit are deducted from the cash price and payments are based on the remaining balance plus interest.

At the end of the agreement you can simply hand the vehicle back to the finance company if you wish, or you have the option of paying the GFV (balloon payment) and keeping the vehicle.

Advantages of PCP

1. Small initial deposit
2. Low monthly payments
3. Option to purchase or return the vehicle at the end of the agreement
4. Ability to change to a different vehicle on a regular basis