Key Product
Personal Contract Purchase
A flexible option that lets you defer part of the cost
- Choose to pay the final amount, return the car, or trade it in
Benefits and risks of a personal contract purchase
Personal contract purchase (PCP) is a type of car finance that allows you to spread the cost of a new or used car over a fixed period, usually between two and four years.
At the end of the contract, you have three options: you can pay a final amount (also known as a balloon payment) to own the car outright, you can return the car to the dealer and walk away, or you can trade the car in for a new one and start a new PCP contract.
Some of the benefits of PCP are:
- You can drive a newer and more expensive car than you could afford to buy outright
- You have lower monthly payments than a conventional loan or hire purchase
- You have flexibility at the end of the contract to choose what suits you best
- You are protected from depreciation and negative equity, as the guaranteed future value (GFV) of the car is set at the start of the contract
Some of the risks of PCP are:
- You don't own the car until you make the final payment, which can be a large sum of money
- You have to stick to a mileage limit and keep the car in good condition, or you will face extra charges
- You may end up paying more interest and fees than other types of car finance
- You may find it hard to exit the contract early or switch to a different car
