Your Guide to PCP [Personal Contract Purchase]
Here is your guide to PCP car finance, you will find all the information you need to know when considering Personal Contract Purchase and how it works. PCP was designed originally to be a personal leasing product for private individuals, However, because PCP is now classed as a conditional sale agreement, it offers private individuals protection under the Consumer Credit Act 1974 and the Financial Conduct Authority.
Personal Contract Purchase gives you the flexibility to set your own preferred contract term and mileage per annum at the start of the agreement, then at the end of the contract, you are given three options, either purchase the vehicle outright, part exchange the vehicle with a dealer and any equity going towards the deposit on your next vehicle, or simply hand your vehicle back to the finance company and walk away.
Capital Car Finance offers some of the lowest PCP rates in the country and has done consistently for the past 15 years, Our Representative APR [Annual Percentage Rate] which is the total charge for the loan including interest, is much lower than most UK providers and is currently set at just 5.9% APR for our PCP product.
Breaking it down into
small affordable amounts
There are several factors and variables to consider when calculating your monthly repayments for PCP, the finance company will take into account the following criteria:
- Your vehicle invoice price at the start of the agreement.
- How much is your initial deposit, this can be from zero to a maximum of 40%, although 10% is considered to be the optimum..
- What term would you like the agreement will be taken over, this is normally taken over 24, 36 or 48 months.
- How many miles per annum will be doing.
- How much will your GMFV [Guaranteed Minimum Future Value] payment or final balloon payment be.
- What is the interest rate charged by the lender.
After all the above has been taken in to consideration, your monthly payments can then be calculated.
You will also agree on a GMFV (or GFV) which is the guaranteed minimum future value figure – sometimes called a balloon or residual value. This figure is calculated by the finance company and is based on how well your vehicle holds its value in the market.
At the end of the PCP agreement, you have 3 options:
- Option 1 – You can return the vehicle to the finance company and if you have not exceeded the agreed mileage, you will have nothing more to
- Option 2 – You may keep the vehicle and simply pay off or refinance the outstanding Guaranteed Minimum Future Value [GMFV] payment.
- Option 3 – You can part-exchange your vehicle and if the trade-in value is greater than the GMFV, the difference is yours to keep.