Personal contract purchase

If you want to enjoy low monthly payments, with a choice of settlement options, PCP is definitely worth considering. It’s an ideal solution if you’re looking to change your car regularly. With the option to Part-exchange the vehicle at the end of your contract, you can easily upgrade without the hassle of selling the car yourself. Plus, any Positive Equity can be used as a deposit towards your next vehicle.

A Balloon Payment is a final payment owed to the lender at the end of your contract. Deferring part of the cost of your loan as a balloon payment is an effective way of reducing your monthly repayments. With PCP, the balloon payment is optional, depending on how you wish to settle the agreement.

If you wish to own the vehicle at the end of the contract, the balloon must be paid. Alternatively, if at the end of your agreement, the vehicle is worth more than the estimated residual value, you can use the equity in Part-exchange towards the deposit for your next vehicle. Or you can simply return the vehicle to the leasing company with nothing further owing*.

*Subject to excess mileage and return conditions

The Balloon Payment for PCP is agreed by the lender at the start of your agreement, based on the vehicle’s estimated Residual Value (RV); the amount your vehicle is worth at the end of your contract. Sometimes referred to as the Guaranteed Future Value (GFV), the residual value is calculated based on the Depreciation of the vehicle over the length of your contract, taking into account the vehicle’s age, condition and your agreed Annual Mileage. If at the end of your agreement, the vehicle is worth more than the estimated residual value, you can use the equity as a deposit towards your next vehicle.

Your mileage is a key component to the Guaranteed Future Value (GFV) or Residual Value (RV) of your vehicle, (the amount your car is deemed to be worth at the end of your agreement). Exceeding your mileage limit will impact the GFV of the vehicle and this will normally result in an additional charge (known as excess mileage). But don’t worry – while your mileage is agreed at the start of your agreement, it can normally be renegotiated with the lender during the agreement.

PCP deals are typically only available to individuals with a good or excellent credit rating, so if you have a less-than-favourable credit score you may want to consider a finance option available to a wider range of credit backgrounds. For example, with Hire Purchase (HP) the cost of your loan is still divided into affordable monthly payments, but this time it covers the full cost of the vehicle and you own it at the end of the contract. Lease Purchase is similar to PCP where you have the option to defer part of the cost to the end of the agreement, but differs in that the final Balloon Payment is not optional.

Provided you have repaid 50% or more of the total amount owed – including any interest and fees, you may be eligible to end your agreement early through a voluntary termination. This allows you to end your contract and return the car without any additional charges, so long as the car is in an acceptable condition. If the car has sustained damage beyond the lenders fair wear and tear conditions, you will likely face a charge.

Yes, at Creditplus our PCP packages can be tailored to suit your individual circumstances. So, if you’re looking for a no deposit PCP agreement, simply get in touch using our quick, No-obligation Application form and a member of our team will contact you shortly.

Changing your car before the end of your contract is sometimes possible, but if your car is worth less than the amount you still owe, you will be required to pay the difference. The difference is sometimes referred to as Negative Equity.

PCP and HP are both great alternatives to buying a car outright, but there are a few differences worth noting. PCP offers you a choice of three settlement options at the end of your agreement. You can either; return the car to the lender, Part-exchange it, or pay a Balloon Payment to own the car yourself. With HP, there is no option to return the car or part-exchange it. Instead, the cost of owning the vehicle is evenly spread across your monthly repayments, and at the end of the agreement, the car is yours.

The choice of settlement options and low monthly cost makes PCP an attractive option, but it may not be suitable for everyone. For example, if you’re regularly driving long distances you may find the mileage restrictions limiting. And, if you decide you want to own the car at the end of the contract, you’ll need to budget for the Balloon Payment. PCP deals are also usually only available to individuals with a good or excellent credit rating, so if your credit score has taken a few knocks, you may want to consider a Hire Purchase (HP) instead.