Everything you need to know about PCP and how it can help you afford your dream car

PCP stands for personal contract purchase plan, and it is one of the most popular ways to financially pay for a new car. The main premise of PCP is that you pay a deposit on a car and then pay smaller monthly payments for around three years. The first thing you need to do is choose what vehicle you would like. There are many different options for paying with PCP, and you get to select the amount of deposit you would want to spend, the minimum mileage and the length of the agreement. What you choose can change the amount you pay monthly, for example, if you pay a higher deposit your monthly payments will decrease.

When you set up a PCP deal, the salesperson will give you a GMFV (Guaranteed Minimum Future Value) for the car, which is the amount the car will be worth at the end of the agreement. If the amount drops at any time in the deal, you will be covered by this. If at the end of the agreement the car is worth more than the GMFV then you will receive equity.

An Example of getting a car with PCP

Take the new C4 Cactus Hatch, imagine you would like to purchase this using PCP.

  • C4 Cactus Hatch total cost: £18,090
  • 36 Monthly repayment - £161.15
  • Deposit - £5000
  • Annual repayment - £1,933.80
  • Amount paid all together at the end of agreement - £10,801.40
  • Optional final payment - £6,506

When the deal is over

Once the agreement is over, you have three options as to what to do next. You can either:

1. Buy the vehicle outright for the GMFV (Guaranteed Minimum Future Value). If you do this, you will then completely own the car and will no longer have to pay any more finance and can keep the car for as long as you want.

2. If the vehicle is not wanted you can return it as long as it meant the sufficient fair wear and tear limits.

3. Hand it in and swap it for a new car. This is the most common option for people using PCP and is an excellent option if you want a newer or different vehicle. If at the end of the deal the car is worth slightly more than the GMFV then you will have some equity. This equity can be used towards the deposit on a new PCP deal.

So what are the positives of PCP?

  • It is a flexible deal. The deposit and repayment amounts are adaptable, and you get to decide on the amount.
  • Lower monthly repayments compared to loan or hire purchase.
  • PCP can help you get your dream car that you might not have been able to afford, but with these low monthly payments you are now able.
  • Customers can return, renew or own the vehicle at the end of the agreement giving you the freedom to decide then.
  • If you wanted to, you could drive new vehicles every couple of years
  • Any equity left in the car can be used to put towards a deposit on a new finance scheme
  • Dealers will usually provide service and maintenance packages, warranties and insurance, that lets you get all of these services in on monthly payment.

If you want to find out more about PCP and how you can use it to get your next vehicle, call one of our dealerships or pop in for a chat with a salesperson to find out!

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