Personal contract purchase

PCP definition

PCP or personal contract purchase is a popular loan option offering low, fixed monthly payments to help you budget with confidence. Unlike Hire Purchase, you set an agreed annual mileage limit upfront.

Your monthly payments do not cover the full cost of the vehicle, instead part of the cost is deferred to the end of the contract as an optional final payment, often referred to as the Balloon Payment, or settlement figure. At the end of the agreement, you have 3 options.

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3 options at the end of your agreement:

Return the car to lender

Pay the optional balloon payment and own it

Part exchange the car towards a new vehicle on finance

Advantages of PCP finance

PCP is the ideal solution if you want to keep your costs low, and your options open.

Apply online today for a no obligation quote, without affecting your credit score.

Why choose PCP?

You choose the deposit and contract length to suit you

Drive a newer car for less

Lower monthly payments make budgeting easier

Flexible end of contract options

Your end of contract options explained

1. Return the car to lender
At the end of your finance agreement, you can simply hand back your car after your final monthly payment with nothing further owing*.

2. Pay the optional balloon payment and own it
If you wish to own the car you simply pay the balloon payment and the car is all yours.

3. Part exchange the car towards a new vehicle on finance
If at the end of your contract, if there’s equity in the vehicle, it is often possible to part exchange the car, and use the equity towards the deposit on your next vehicle.

*Subject to excess mileage and return conditions

How does PCP work?

You want a PCP agreement for a Volkswagen Golf valued at £7,500. You opt for a 48-month contract with an APR of 8% and a 10,000 annual mileage limit. You have a £500 deposit, so the amount of credit required is £7,000.

Based on your agreed mileage, the lender calculates the Balloon Payment at £1,800. This becomes the final optional payment and is deferred to the end of your contract.

The rest of the cost is divided into 48 monthly payments of £139. With the optional balloon payment, the total amount payable is £8,969. However, at the end of your contract, you want to upgrade your vehicle, so instead of paying the balloon payment, you part-exchange your vehicle to finance your next upgrade.

Work out your monthly budget using our PCP Finance Calculator.

Terms and conditions apply. Subject to status

Representative example: borrowing £7,500 over 48 months with a representative APR of 18.9%, an annual interest rate of 18.9% (Fixed) and a deposit of £0.00, the amount payable would be £223.86 per calendar month, with a total cost of credit of £3,245.06 and a total amount payable of £10,745.06.

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