Personal Contract Purchase (PCP)
Personal Contract Purchase (PCP) is a type of vehicle finance agreement for personal customers looking to fund a new or used vehicle in a manageable way
The monthly payments are not subject to VAT, however if you do take out the optional service package then you will have to pay VAT on the service costs.
- Low initial payment
- Fixed monthly payments
- You may be able to refinance the balloon payment
- No depreciation concerns if you wish to walk away at the end
- Maintenance and servicing can be included
- Fixed balloon or guaranteed future value to purchase payment when you first take out the contract
- Cost effective
- Can be used to finance new or used vehicles
- You will have to make a decision at the end of the contract as to whether you wish to sell the vehicle, return it or Keep it - this is often seen as an advantage to most people
- Early settlement can be expensive
- If you do more miles than stated in your contract you will be charged excess mileage for each mile over that stated in your contract
- You must look after the vehicle and return it in a well maintained condition otherwise you will be charged for any damage over and above that stated in the 'Fair Wear and Tear Guide'
- You must have fully comprehensive vehicle insurance
More Information on Personal Contract Purchase:
PCP is ideal for any individual who would like options at the end of their finance agreement. PCP customers make an initial payment when they first take out the contract, then pay fixed monthly payments and finally have an Optional Final Payment (OFP) at the end at the end of the contract which is also referred to as the GFV (Guaranteed Future Value).
You can trade in or sell your vehicle at a dealership and take another vehicle from them. If the trade in value is greater than the OFP you will be able to use the difference towards a deposit on a new vehicle. Or, you can simply return the vehicle to the funder, as long as you have not exceeded the mileage and the vehicle is in an appropriate condition for its age there will be no charge. Finally, you can keep the vehicle either by paying the OFP in full or you will find that some companies offer the opportunity to re-finance the OFP.