As someone in the market for a new vehicle, you may have come across the term PCP finance. PCP finance, which stands for Personal Contract Purchase, is a popular way of financing a car purchase. It is a flexible and affordable way of owning a car and has become increasingly popular in recent years. This comprehensive guide will take you through everything you need to know about PCP finance, including how it works, its advantages and disadvantages, how to get a car on PCP finance, and much more. You can also view the top PCP deals available on new cars here!
PCP finance is a type of car finance that allows you to spread the cost of a car over a set period, usually between 2-4 years. It is a form of hire purchase (HP) agreement where you pay an initial deposit, followed by monthly payments, and a final balloon payment at the end of the agreement. Unlike traditional HP, the balloon payment is optional, which means you can either pay it and keep the car or hand the car back to the finance company.
When you choose PCP finance, you have three options at the end of the agreement:
When you take out a PCP finance agreement, the finance company will give you a Guaranteed Future Value (GFV) for the car. This is the estimated value of the car at the end of the agreement, and the balloon payment is based on this value. The GFV is calculated based on the car’s make, model, age, and mileage.
There are several advantages of choosing PCP finance to fund your car purchase:
There are also some disadvantages of PCP finance that you should consider before choosing this option:
Getting a car on PCP finance is relatively straightforward. Almost all brands in the UK offer a PCP finance deal on a new car. Here are the steps to follow:
PCP finance is not the only way to finance a car purchase. Here are some other car financing options and how they compare to PCP finance:
Hire purchase is similar to PCP finance, but with HP, you pay off the entire cost of the car, plus interest. Unlike PCP finance, you do not have a final balloon payment.
A personal loan is an unsecured loan that you can use to finance a car purchase. With a personal loan, you will own the car outright, and there are no mileage or balloon payment restrictions.
Car leasing allows you to use a car for a set period, usually between 2-4 years. You do not own the car, and at the end of the agreement, you hand the car back to the leasing company. Leasing can be cheaper than PCP finance, but you do not have the option to own the car at the end of the agreement.
Before choosing PCP finance, there are some things you should consider:
Here are some tips to help you manage your PCP finance agreement:
PCP finance is a flexible and affordable way of owning a car. It offers lower monthly payments and protects you against depreciation. However, it also comes with some restrictions, such as mileage limits and a final balloon payment. Before choosing PCP finance, consider all the options available and make sure it is the right choice for you. If you decide that PCP finance is the best option for you, make sure you manage the agreement carefully to avoid any additional charges. Get the best PCP deals now and enjoy the benefits of owning a car.
Check out our top PCP deals here!
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