Buying a brand new car using Personal Contract Purchase

Looking for a brand new car but wanting lower monthly payments and flexible terms? Then using Personal Contract Purchase (PCP) may be the ideal option for you...

Are you looking to buy a new car but confused when it comes to PCP?

In fact, research from 2015 suggested that a staggering 88% of men and 75% of women surveyed could not explain what a PCP was. The good news is that if you fall into that category, you’re certainly not alone – and we’re here to help!

The PCP (Personal Contract Purchase/ Personal Contract Plan) is the most popular car finance product on the UK market for both new and used cars. Due to manufacture contributions a PCP is more often than not the most attractive deal on offer.

In a traditional hire purchase agreement, you pay off the entire value of the car in equal monthly instalments. A PCP differs in that you have lower monthly instalments that only cover the car’s depreciation, and then a large final payment at the end, often referred to as a balloon payment or guaranteed future value. At the end of the agreement you have 3 options;

  • You pay the finance company the final payment and keep the car
  • You give the car back under the terms of the guaranteed future value (GFV)
  • You part-exchange the car at a dealership, who pays off the final payment for you

Therefore it is important you make note of your last instalment date as you will need to make the decision as to what to do next.​

What is the attraction of PCP?

When comparing the same car on PCP against HP, the big difference is that you are paying off a smaller amount of the car. This means;

  • Your monthly payments will be much lower, and/or
  • Your initial deposit will be much lower, and/or
  • Your repayment term will be shorter

We hope that you found this blog post useful, should you wish to find out about other types of finance packages available please click here.​