Personal Contract Purchase

Personal Contract Purchase (PCP) is a type of vehicle finance agreement for personal customers looking to fund a new or used vehicle in a manageable way

In the same aspect as Business Contract Purchase, PCP or Personal Contract Purchase is yet another agreement that allows you to finance a vehicle, except for personal customers who are also looking for a way to easily and manageably fund a new vehicle.

Although monthly repayments are again not subject to VAT, if you do decide to take out a service package or maintenance package, then VAT is paid on any service costs.

There are numerous advantages to choosing PCP:

  • Fixed monthly payments
  • Cost effective
  • Low initial payment
  • Can be used to finance new or used vehicles
  • You may be able to refinance the balloon payment
  • No depreciation concerns if you wish to walk away at the end
  • Fixed balloon or guaranteed future value to purchase payment when you first take out the contract
  • Maintenance and servicing can be included

 Disadvantages to Personal Contract Purchase:

  • Insurance for the vehicle must be fully comprehensive
  • Ideally, funders will only typically lend to those with good credit scores
  • Although some see this as an advantage, when your lease is at an end you have to decide whether to sell, return or keep the vehicle.

More Information on Personal Contract Purchase:

As in the same way that BCP or Business Contract Purchase works, PCP is designed to offer the customer options, or more of them. It’s an ideal solution for those wanting more choice of what to do at the end of their finance agreement. Like any other long-term vehicle lease agreement (lasting between 12 and 60 months) an initial payment is made (usually based upon an agreed number of monthly payments). Fixed monthly payments then follow, before having an Optional Final Payment (also known as the GFV or Guaranteed Future Value) at the very end.

So, there are several choices you can make at the end of your contract when choosing PCP. You can make the decision to keep your vehicle by paying the OFP entirely, with some funders offering to re-finance the optional final payment, you can sell or trade in your car at a dealership and drive away in a new vehicle from them or, if you wish, you can hand the vehicle back over to the finance company. If there are no excess mileage concerns to consider and the vehicle’s condition is within tolerable levels stipulated by the BVRLA’s ‘fair wear and tear’ guidelines, you won’t have anything more to pay.

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