A personal contract purchase (PCP) is the most popular way to finance a car. It is often seen as a way to buy a car over three or five years, but most people do not go any further to buy the car. Here`s a look at PCP, including how it works, what needs to be taken into account, what to do if you have to terminate the contract prematurely, and what to do if you have money problems. With so many dealers offering PCPs, there will certainly be one that will match your next purchase of a new car, whether you see a supermini, crossover, hot hatch, estate or SUV. You can even receive PCP offers for used cars, allowing your money to go even further. As with all forms of credit, it is worth being aware of the pros and cons of leaving a PCP. The flexibility and guarantee of future car value when you get to the end of the plan are attractive, but dealers also like PCPs because the way they are structured means that buyers return to the same brand every three years and act in another car. With a PCP agreement, customers pay less per month than with an equivalent HP contract, and they have the option to keep the car at the end of the contract. You could better pay a billing figure to the financial company, which would be a last major payment to terminate the agreement. You can then keep or sell the car.
You must be fully equipped with the facts when entering into a PCP financing agreement, as it can sometimes be cheaper to enter into a lease instead. If you implement a PCP agreement, the dealer will give you a “guaranteed minimum value for the future” for the car. The GMFV is the minimum amount that the car will be worth at the end of the agreement. So if the car loses value unexpectedly, you will be protected. And if the car at the end of the PCP is worth more than the GMFV, you can use the equity as a deposit in your next deal. The most popular option, used by 78% of financial buyers, is an agreement on personnel contracts that offers flexibility and low monthly payments, even if they do not cover the total cost of the car. Get a personalized PCP offer on our sister page BuyaCar.co.uk A PCP financing agreement will allow buyers to pay payments that cover part of the cost of a new car – usually about a third of the list price – meaning that these monthly expenses are lower than if you borrow to buy a car directly. The purchase of a contract in a personal capacity is therefore a conditional sales contract and, under UK law, the buyer is protected by the Consumer Credit Act 1974 and the Financial Services Regulations 2004.  Before you sign up for a PCP agreement, you must go through a credit assessment that consists of two factors. First of all, the affordability of PCP payments over the life of the contract is based on your finances – think about how difficult it is for you to maintain your repayments.