What is Personal Contract Purchase?

PCP (Personal Contract Purchase) is an abbreviation for Personal Contract Purchase. PCP is a relatively new way to finance your desired new or nearly new vehicle. The PCP allows you to contract into an agreement over a set period of time, with an agreed maximum mileage.

The major benefits of PCP are that it offers a lower cost and is a more flexible alternative to other finance packages. The PCP also offers much greater flexibility at the end of the term, the driver can choose from these options:

Return The Car

With PCP, when the contract term comes to an end, the driver can advise the lender and simply return the car with nothing else to pay, subject to it being in a reasonable condition. The advantage of this approach is that there is no need to pay the "Final Optional Payment". Where a vehicle is returned in a condition that is considered by the lender to be below the anticipated standard for age and mileage at the end of the contract, charges may be applied to bring the vehicle to the required condition.

Keep The Car

PCP allows the driver to own the car outright, by paying the Final Optional Payment.

Summary:

Benefits Of Personal Contract Purchase (PCP)

    *      Fixed Monthly payments.
    *      Option to Purchase at the end of contract.
    *      Minimal Deposit necessary 1-3 Monthly payments subject to credit status.
    *      Ability to increase deposit to reduce monthly payments.
    *      Flexible contract terms with & without maintenance.

Disadvantages of Personal Contract Purchase (PCP)

    *      Dearer in the long run than a straight loan or hire-purchase
    *      Car belongs to the finance company until the PCP ends, so you can't sell it easily
    *      If you need to end the agreement early, you may have to pay a penalty
    *      Car is subject to agreed annual mileage limits (you'll pay extra if you exceed them) must be serviced correctly and kept in good condition