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PCP Agreement | Is it the right car finance package for you?

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PCP agreements are increasingly popular

While Personal Contract Purchase (PCP) offers an alternative that is a sort of hybrid of other finance options, it is still a product that will only suit some and it is important for consumers to really understand what they are buying into and any potential pitfalls.

The prospect of driving away in a nicer vehicle than you thought you could afford is highly tempting and it can be easy to get carried away. But it is vital that consumers really understand the ins and outs as well as what will happen at the end of the contract. Take a look at our video below for a brief introduction to PCP agreement:

PCP now takes up 77% of the market so it is becoming an increasingly attractive option for car finance. The main thing to consider is what budget you have now, and what budget you will have at the end of the finance agreement when the time comes to pay your balloon payment. A PCP deal has three options when you reach the end of your agreement. 1 – Pay a balloon payment and keep the car. 2 – Return the car to the dealer. 3 – Use the car as a part exchange. Available solely to those with an excellent credit rating, one of the main attractions of PCP is that the monthly payments are lower because they are deferred to the end of the agreement. The balloon payment is then either paid in full, or used as the basis for a new finance agreement with the car finance provider.

PCP Agreement – What you need to consider

There are some key things to bear in mind when entering a PCP agreement.

  • Dewire Damage – Because you may decide to return the car or use it as part exchange at the end of your agreement, you will need to be wary of any damage caused to the car. There is some leeway when it comes to standard wear and tear, but be careful. Any damage not considered as normal will result in charges.
  • Excess mileage rate – There is normally a maximum amount of miles covered in the PCP agreement, so if you exceed the limit, you will incur a charge. Find out what the mileage limit is and what the charge will be should you go over.

The amount you pay on a PCP deal is based on the Guaranteed Future Value. This is calculated using the difference between the cost of the car when you buy it, and the cost of the car at the end of the agreement. The monthly payments you make will take into account the depreciation of the cars value across the term of the agreement. This GFV is often calculated based on mileage, so it is vitally important you keep to the limit. If you do decide to return the car, you can and will incur charges.

The PCP is an ideal option for someone with an excellent credit rating. It is best suited for those who can pay a high deposit and lower monthly payments. Look at what you can afford in advance and adjust your budget to match. Stretching your budget could result in a headache if you incur any charges at the end, so make sure you plan ahead.

So is a PCP agreement right for you?

If you think you have an excellent credit rating and can afford to pay a large deposit up front, then a PCP agreement is most likely the best finance package for you. By completing the Creditplus online application form, you will receive a decision on what finance is available. Even if you don’t have an excellent credit rating, Creditplus can help find the finance you need.

Our team of customer advisors are on hand to provide you with an honest evaluation of your credit rating and will match your profile with one of over 50 lenders. We provide the finance and we can also provide the car. Whether you know what car you want or not, we can find the car for you, we can even deliver it direct to your door.

Why not complete the online application form and find out just how soon you could be driving your new car.

Apply online for car finance

Still confused about your finance options? Visit our Help and Advice centre for the most popular questions and answers on car finance. Our discover the option most suited to your needs by completing our interactive car finance options tool.

Remember: Our customer advisors are always happy to answer your questions. Give us a call on 0800 1777 290 (landline) or 0333 6000 290 (mob), or visit our website and use our livechat system.

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