Whilst Hire Purchase car finance is popular for vehicle ownership, a growing trend for our customers is Personal Contract Purchase (PCP).
This clever car finance scheme allows you to offset the future value of your vehicle (at the end of your term) and choose to pay it in a lump sum and keep the vehicle or hand it back in agreed condition with nothing more to pay.
Vehicle price: £10,000
Annual Mileage Allowance: 6,000 miles
Term: 36 months
Guaranteed Future (based on this mileage): £5,000
Monthly Payments: £111 per month (plus administration fees and interest).
Using the example above, at the end of your contract and as long as the mileage of the vehicle is within agreed allowances and in good condition, you can:
Hand the vehicle back with nothing more to pay
Hand the vehicle back and start a new PCP agreement on a newer vehicle
Pay the Guaranteed Future Value figure (in this example: £5,000) and keep the vehicle
Re-finance the Guaranteed Future Value figure with the intention of ownership.
Advantages of Personal Contract Purchase
Personal Contract Purchase allows you to keep your monthly payments low whilst giving the option of ownership at the end of your contract. This flexibility usually comes with similar interest rates to Hire Purchase agreements so you are not punished for keeping your options open.
Disadvantages of Personal Contract Purchase
Unlike Hire Purchase agreements, you won’t own the vehicle after your final monthly payment. Only after the Guaranteed Future Value (or balloon payment) is met, then the vehicle will be yours to keep. Many of our customers are not worried about this as after three years, they often choose to replace their vehicle anyway.
Important Notes on Personal Contract Purchase
Every vehicle financed on Personal Contract Purchase is based upon an annual mileage allowance (to accurately gauge the future value). If you exceed this allowed mileage then you will be charged an agreed rate (pence per mile) at the end of your contract. The figure will be displayed on your personal quotation. For this reason (and to ensure you don’t receive any unexpected expenditure), we discuss with our customers the amount of mileage they achieve each year. Exceeding your annual mileage allowance is not expensive but it is something to consider when applying for PCP. If you are looking for a finance option with no mileage limitations, then Hire Purchase may be for you.
If you’re looking to finance your next vehicle on Personal Contract Purchase then you can do so using online application form below. Alternatively visit or contact us and we’ll be glad to offer our professional advice.
Charters of Aldershot Ltd is Authorised and Regulated by the Financial Conduct Authority in respect of insurance mediation activities only. Registered Address: Charters of Aldershot Ltd, 251 Ash Road, Aldershot, Hampshire, GU12 4DD. Registered in England Company Number 00637140
What does PCP personal contract purchase actually mean? Is Hire Purchase right for me? Will I own the car at the end of my contract? Let us take the worry away by answering your questions thoroughly and concisely.