What is PCP?
PCP is a bit like Hire Purchase but there are some important differences. PCP has a guaranteed future value which is a larger balloon payment and defers some of the vehicles value to the end of the term. By deferring some of the vehicles value it makes the monthly payments up to that point lower than if your repayments covered the whole vehicle value as Hire Purchase for example would.
You can put a deposit down on the vehicle you want and make fixed monthly repayments until the end of the term. A deposit can be made up of either cash, a part exchange or a combination of both. Terms are typically 2, 3 or 4 years on a PCP.
When the term ends on PCP you have a choice:
1. You can make a lump sum payment for the balloon in order to purchase the vehicle outright.
2. You can part exchange your vehicle and use any equity you have (if its current value is more that the balloon payment) to put down as a deposit on a new vehicle via another finance agreement.
3. Proactive Vehicle & Equipment Finance (or another company of your choice) may also be able to help you refinance the balloon if you wish to keep the same vehicle.
4. Alternatively you can just hand the car back at the end of the agreed term and walk away without making any further payments (subject to being within the agreed annual mileage and any fair wear and tear guidelines).
What are the benefits of PCP?
Typically, monthly payments with PCP are lower than with Hire Purchase due to the balloon payment.
It can be simpler with PCP to roll the deal over at the end of the term and get another vehicle.
You are also protected to some extent against depreciation. If the value of the vehicle declines quicker than expected during the loan term and you are within your agreed annual mileage, you can simply hand the vehicle back to the finance provider.
What else do I need to consider?
One of the main downsides with PCP is that there is no guarantee you will become the outright owner of the car at the end of the term as you still have the balloon payment to make. If you can’t afford to make the balloon payment for example, you will have to hand the car back or start a new agreement.
There are also limits on annual mileage agreed at the start of the deal which will affect the amount you have to pay. If you exceed these limits, you will face additional charges if you hand the vehicle back, as you will have done more mileage than was originally anticipated.
In addition, you are expected to keep your vehicle in good condition and you may be charged for any damage that is outside fair wear and tear guidelines if you hand your vehicle back at the end of the term (even if you are within your agreed mileage limit). Further information on fair wear and tear guidelines can be found on the BVRLA website www.bvrla.co.uk
PCP finance is subject to status and people with lower credit scores may not be eligible.
Finally, like Hire Purchase, failure to keep up with your repayments means that the vehicle could be repossessed by the lender which may then affect your credit score and ability to obtain finance in the future.
Rates from just 9.9% APR.
(The exact rate you will be offered will be based on your
individual circumstances)
Representative APR 17.2%.
Representative example:
Borrowing £11,000 over 4 years with a representative APR of 17.2%, an annual interest rate of 17.2% (Fixed) and a deposit of £0.00, the amount payable would be £311.61 per month, with a total cost of credit of £3957.28 and a total amount payable of £14957.28.
Rates may differ as they are dependent on individual circumstances, the lender you are approved with and the vehicle/equipment purchased.
(Click here to find out what a Representative APR & example is)
Finance is subject to status.
Warning: Late payment may impact your credit file and the lender may reclaim the vehicle or equipment financed prior to the end of the term of the agreement.