Personal Contract Purchase (PCP) offers fixed monthly repayments and the ability to change your car every few years.
You pay an initial deposit, followed by monthly repayments, (how many depends upon the term), and at the end of the agreement you have three options:
- Hand the car back to the dealer and walk away.
- Exchange your car for a new model and renew your PCP contract.
- Buy the car outright by paying off the balloon payment of the finance.
The benefits of PCP finance:
- Often lower monthly repayments compared to hire purchase or a personal loan.
- The flexibility to change your car, keep it or walk away at the end of the term.
The disadvantages of PCP finance:
- Not actually owning the car unless you pay the optional balloon payment.
- An obligation to keep the car in good condition and properly serviced.
- A risk of high costs if you need to leave the contract early, exceed your mileage limit or return the car with excessive wear and tear.