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Personal Contract Purchase

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We've partnered with CarFinance 247 to find you their best deal from a range of car finance lenders. Their service is free to use and getting a quote won't impact your credit score. A hard search only happens when you apply for a deal.

If you've already found your next car and just need the finance deal, they can help set it up for you. If you're still looking for your dream car, their car search gives you access to over 130,000 cars from across their trusted dealer network.

Once you’ve requested a quote, you will get a call back from one of CarFinance 247's account managers to discuss it in more detail. Alternatively, you can arrange to have them call you at a more convenient time.

Carfinance 247 searches their panel of trusted lenders to present you with a quote over the phone with the best overall value. However, account managers will also discuss alternative options over the telephone.  

Please note, car finance options discussed will depend on lenders checks and whether your chosen car meets their criteria.

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*Correct as of November 2022

What is Personal contract purchase (PCP) car finance?

Personal contract purchase (PCP), is a flexible form of car finance, giving you the option to buy the car at the end of the PCP agreement. PCP deals typically run from three to four years.

You’ll need to pay an initial deposit followed by monthly payments. If you want to buy the car at the end of the PCP agreement, you’ll also need to make a balloon payment – a large one-off amount.

Personal contract purchase can give you both flexibility and the chance to get a better car. Drivers tend to get a higher-spec car for lower monthly payments than they could with hire purchase car finance.

How does PCP work?

There are three main stages to PCP car finance:

  • Put down a deposit at the beginning of the PCP deal. This is typically 10% of the car’s value, which means you’ll owe 90% of the car’s value at the start of the contract.
  • Make monthly payments to pay off the depreciation on the car, which is the difference between what you owe at the start of the PCP agreement and what the dealer believed the car would be worth at the end. The latter is known as the "guaranteed minimum future value." While you’re making your monthly payments, you’re effectively only leasing the car from the finance company.
  • The end of the PCP agreement is when you either give the car back or buy it. You could get a new PCP agreement by returning your current car and replacing it with a brand-new model. To keep the car, you'll need to make a balloon payment. This covers the amount the dealer estimates the car would be worth at the end of the deal. Some finance companies charge an admin fee if you buy your car at the end of the PCP contract.

What should I consider when getting PCP car finance?

Here are some things to keep in mind when taking out PCP car finance:

Mileage as almost all PCP deals have an annual mileage limit. If you go over the agreed limit, there’ll be extra charges to pay.

Depreciation is based on “fair usage,” so the car needs to be kept in good condition. If you damage the car, the depreciation will be more than the dealer estimated at the beginning of your PCP agreement. So if you want to give the car back at the end of your deal, you’ll have to pay extra as the car will be worth less.

Changing your car usually means extra charges if you want to change your car before the end of the PCP contract term. So think carefully if you’re considering ending the PCP deal early. It may be better to wait until your agreement ends.

Your credit history is taken into account when you apply for PCP car finance. If you have poor credit, you might not be rejected, but your monthly payments and/or the total cost will be higher than if you had good credit.

If you're concerned about your credit rating, our guides on improving your credit and car finance with bad credit may be helpful.

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Representative APR 19.9%

What other types of finance are available?

When it comes to paying for a new car, there are various car finance options, so most people will be able to find something that suits their needs.

Here are some of the main alternatives to personal contract purchase:

Hire purchase (HP) usually involves paying a deposit of 10% of the car’s value at the start of the contract. You must then make monthly payments for the term of the HP contract, which typically lasts 3 to 5 years. There’s no balloon payment at the end of the agreement – you’ll own the car once you’ve made the final monthly payment.

Personal contract hire (PCH) is an agreement to lease the car. You’ll pay a deposit followed by monthly payments. At the end of the PCH contract term, you’ll give back the car. As long as you don’t exceed a given mileage level, maintenance and servicing are usually included.

Personal loans are also an option. You could take out a loan to buy the car and you’ll be the owner of the car as soon as you hand over the money to the seller. If you choose a longer loan term, you’ll pay more in interest.

What's the difference between PCP and HP?

PCP deals let you just pay off the depreciation on the car through your monthly payments rather than the actual value of the car – it means the monthly payments with PCP car finance tend to be lower than with HP. Choosing PCP rather than HP often allows people to drive a higher-spec car.

With hire purchase car finance, you pay off the value of the car with your monthly payments, so you’ll automatically own the car at the end of your HP payment term – there’s no balloon payment. If you choose PCP car finance, you’ll only own the car if you decide to make the balloon payment at the end of your contract term.

Most drivers who choose PCP are happy to opt for a new PCP deal at the end of their agreement term. So PCP might be best suited to those who wish to change their car every few years. HP might be a better choice for people that want to actually own their car.

How do I get cheap personal contract purchase deals?

Here are some ways you could make a personal contract purchase cheaper:

  • A higher initial deposit will lower your monthly payments
  • Choose a longer PCP agreement term to hopefully reduce your monthly payments. This could also mean you’ll pay more in interest
  • Look at the interest rate over the term of your personal contract purchase deal – a lower interest rate means lower monthly payments
  • Set the annual mileage allowance at the right level as you’ll be charged more if you exceed it
  • Take care of the car – you’ll have to pay for any deterioration or damage that’s not “fair usage” should you want to hand back the car at the end of the PCP agreement

How much can I borrow?

Check what your monthly repayments are likely to be

How do I find a PCP deal?

To see if you could be offered a PCP finance quote, you'll just need to have these details ready:

  • How much you need to borrow to buy the car
  • Your personal details, including occupation
  • Your monthly income before tax

Once you've requested a quote, one of Carfinance 247’s account managers will call you to discuss it in more detail. Alternatively, you can schedule a call at a time that’s more convenient for you.

Please note, car finance options discussed will depend on lenders checks and whether your chosen car meets their criteria. If a lender does offer a PCP loan as an option then this will be discussed over the phone with an account manager.

What our car finance expert says

When looking at finance options for a car, it's sometimes hard to know which option is right for you. PCP breaks the process down in to 3 easy steps and can offer a more flexible form of finance. The monthly payments are also usually lower than HP or a personal loan.

However, with PCP you won't own the car at the end of the deal unless you make a balloon payment. If owning the car is important to you, think about whether or not you'll be able to afford a large one-off payment.

Matthew Harwood Signature

Matthew Harwood

Car finance expert

Need more help?

Can I end my PCP car finance early?

You can usually end your PCP car finance deal early but it can be costly to do so. If you’re considering ending your PCP agreement early, you should think carefully and check the wording of your contract.

Can I change the terms of my PCP agreement?

You can’t usually change the terms of your PCP agreement at a later stage. That’s why it’s important to read the wording of your contract and make sure you’re happy with the terms at the beginning.

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