PCP Car Finance Explained
PCP stands for ‘Personal Contract Purchase’. Like most car finance options, PCP finance can be used on any number of cars, including new, nearly new and used vehicles that are up to three years old. Once you've selected your chosen vehicle, the dealership will agree a deposit amount, contract length, agreed mileage and a 'guaranteed future value' (GFV) of the car at the end of the contract.
What you pay is the difference between the car's value when it's purchased and the GFV at the end, (I.e. the depreciation) plus a little interest. This amount is split into management monthly payments. Once of the biggest benefits of PCP, is the flexibility it provides once the contract has ended.
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What are the benefits of PCP?
A PCP contract is usually set from 24 to 48 months, giving you the flexibility to decide how long you would like to keep the car before you change it. When you reach the end of the contract you have three options:
• Retain: Pay the guaranteed future value and option to purchase fee - and then the car is yours
• Return: Give the car back with nothing to pay (subject to mileage and fair wear and tear)
• Renew: Part Exchange your car and use any equity available (if applicable) as a deposit on your next new car
Should you decide to take out a PCP contract, you should be aware of the following:
Excess Mileage
At the beginning of the agreement, you decide on the total mileage you expect to do. It is normal to pay a fixed amount for every additional mile over this agreed amount, so bear this in mind if you hand your vehicle back at the end of your contract.
Wear & Tear
It is in your interest to minimize the vehicle’s ‘wear and tear’ and not exceed the agreed mileage. In simple terms ‘normal wear and tear’ means that for its age and mileage, the vehicle is in fair working order,
condition and repair.
Contact a member of the team at Inchcape to find out more.
