Guide to PCP Car Finance
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
How Are Your Monthly Payments Calculated?
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:
1.
Your vehicle invoice price at the start of the agreement.
2.
How much is your initial deposit, this can be from zero to a maximum of 40%, although 10% is considered to be the optimum.
3.
What term would you like the agreement will be taken over, this is normally taken over 24, 36 or 48 months.
4.
How many miles per annum will be doing.
5.
How much will your GMFV [Guaranteed Minimum Future Value] payment or final balloon payment be.
6.
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.
What Is The Guaranteed Minimum Future Value?
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.

PCP Car Finance – The Benefits
So, what are the benefits of PCP?
Buying an older car may seem like a safer option – after all, it will be cheaper to purchase, however, one large repair bill can completely wipe out any saving you made on the initial purchase of an older vehicle.
Firstly, you will know exactly where you are financially, with fixed monthly payments that are normally significantly lower than other forms of traditional car finance.
What About Depreciation?
Depreciation is the single biggest cost of owning a motor vehicle, so getting the best deal offsets the cost of buying your next vehicle. The difference between what you pay for the car and what you get when you sell it, is the amount of money you have lost in depreciation.
The aim for many people is to reduce this gap as much as possible – PCP does this by guaranteeing you a future value at the start, so therefore the risk of any negative equity is removed, as the future value of the vehicle is guaranteed.


IS PCP COMPLICATED ?
PCP isn’t complicated at all. It’s a standard regulated conditional sale, with more flexibility and most of the vehicle in the UK are bought this way now. Its also regulated by the FCA and covered by the Consumer Credit Act 1974 so you know you’ll be safe when you enter into this type of agreement.
WILL I SAVE MONEY OVERALL?
Some people argue that PCP works out to be more expensive as you pay a lump sum at the end for what is a for a 3-year-old car [assuming it’s a 36-month contract] but you must consider that you have had the car from new [or nearly new]. Obviously as with buying any new car, the expense incurred will depend on how good the deal was at the start.
Unfortunately, although the PCP procedure is the same wherever you go [i.e. deposit, monthly payments, GMFV etc), that doesn’t necessarily mean that you will get the same value for money wherever you go. Capital Car Finance offers some of the most competitive rates in the UK for PCP and even now considers cars up to 5 years old.
PCP vs HIRE PURCHASE?
Personal Contract Purchase isn’t complicated at all. It’s a standard regulated conditional sale, with more flexibility and most of the vehicle in the UK are bought this way now. Its also regulated by the FCA and covered by the Consumer Credit Act 1974 so you know you’ll be safe when you enter into this type of agreement.
Getting The Best PCP Deal

So how do you make sure you are getting the best deal?
Whether or not you get a good deal comes down to a few different factors…
- The obvious one being the price that the dealer is selling the car for at the start [e.g. How much you are paying for the vehicle]
- The amount of your deposit at the start of the agreement.
- The APR – As with any finance deal, a lot can depend on the rate charged, fortunately Capital Car Finance have some of the cheapest rates in the UK.
- The GMFV at the end on the contract.
There are several ways to ensure that you are getting the best deal…
- Do your research and shop around, some dealers will offer better deals on certain types of car, so it pays to be flexible as it gives you more options.
- Sometimes you will find that if there has been an overproduction of certain models, this could mean that it’s very likely you’ll get a better deal on that model as the dealers want to move them on due to there being a lot of them about.
- If you have a particular make or model in mind, it’s worth shopping around to find out who has the best deals, capitalcarfinance.co.uk has relationships with several major UK dealer groups and in most cases can find something very competitive if required.
- Don’t allow yourself to be bullied by the dealer, remember you don’t have to take their finance from them, you can take out your finance from where you like, you just want the best price for the vehicle.
- Don’t assume that because the monthly payments are lower on one car than another, that it is a better deal, remember there are several options to consider, especially with PCP [see above].
- The APR, most of us understand this if you’ve ever bought anything on finance, or borrowed money, you’ll know what a difference the APR can make, so don’t be fobbed off, always ask exactly what the APR is, remember if the dealers don’t tell you, it’s probably because it’s too high!
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Anonymous
Verified Customer
Professional service throughout which was easy at every stage whilst being updated at every stage.
2 days ago
Rachel Cooper
Verified Customer
Worked with James Dale who was above and beyond helpful. Turned quotes around quickly and engaged with the car dealership for me so the whole process was seamless. Least stressful PCP process I’ve been through, excellent finance rates as well and reassuring security measures. James was generally just super friendly to work with - I would absolutely recommend him and would use again, as well as capital car finance.
1 month ago
Sunil Nair
Verified Customer
Super smooth process and easy to deal with.
Thanks Tom and team!
1 month ago
Alex Hallett
Verified Customer
James was very easy to deal with. Got everything sorted and approved very quickly. Strongly recommend
1 month ago
Greg Ireland
Verified Customer
Jacob and Alex were great, and were it not for the dealership messing us around it would have been an overall quick and smooth process... i dont believe there was anyhing more that Capital Car Finance could have done in this respect. Quotes for various vehicle options were very quick in coming through and never a hint of anything being too much trouble. Would definitely use again.
1 month ago
Maddy Riches
Verified Customer
James Dale was professional friendly and organised. He sorted our car finance in a quick turnaround of time. Kept us informed regularly. Good interest rate compared to high Street banks. Would definitely use your services again. Thank you
1 month ago
Paul Harris
Verified Customer
no drama and a great deal. Can't recommend highly enough
1 month ago
Dominic Paglia
Verified Customer
Great, quick service. Would highly recommend
1 month ago
John Speakman
Absolute pleasure dealing with this company and specifically Tom. Very professional, excellent communication and fast! 100% recommend.
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1 month ago
Karl Macrow
Verified Customer
First time I’ve used Capital Car Finance.
I’d happily recommend them to anyone. They where quick and efficient, the whole process was easy and pain free and the price difference from the dealer and other providers was huge.
1 month ago
Jade
Verified Customer
James was amazing! So patient with me when I had a million and 1 questions. Always at the end of the phone and never made me feel like a hinderance! I would 100% recommend capital car finance again!
1 month ago
Mark Kerry
Verified Customer
I'd like to thank Jacob from Capital Car Finance. From initial quote on Monday funds were transferred on Thursday and seamless with everything in between.
I couldn't find anyone close to match the rate I was offered.
Really great experience, thank you.
1 month ago
Corentin Raffaillac
Verified Customer
Excellent service and helpful
1 month ago
Anonymous
Verified Customer
Excellent customer service. Tom was always on hand to answer queries and the whole process was quick with excellent communication throughout. Very competitive finance options, completed very quickly. Thank you
1 month ago
Tom Capper
Verified Customer
Jacob was extremely helpful and made the process very smooth and answered any queries I had along the way. He also saved me a decent amount of money compared to what the dealer was offering me. Would recommend to anyone looking for a new car
1 month ago
Aidan Smith
Verified Customer
Jacob was excellent and very easy to deal with. My experience with both leasing company that let me down which led me to the used market and then the dealer I bought the used car from was shockingly unprofessional but dealing with CCF and Jacob was the exact opposite. Professional, timely and easy. 100% recommend.
2 months ago
Carey Scargill
Verified Customer
Speedy, helpful and friendly and certainly a lot cheaper than the rates I was being offered!
Would definitely recommend!
2 months ago
Paul
Verified Customer
Excellent service from Alex from start to end. Best rates and excellent service.
3 months ago
Bradley Atkinson
Verified Customer
Really great service from Tom at CCF, who gave me impartial information, friendly and fast processing of a deal and worked effectively with the showroom to get the deal through.
3 months ago
Joe - London
Verified Customer
I recently purchased a car using PCP and I worked with Capital Car Finance to secure the funds. From my early search and initial enquiries through to finalising and settling payment, James was superb. He was very helpful and had a strong knowledge of all the products and was able to help close out the funding in a quick and efficient manner - most importantly, with a competitively priced product and service. I'd highly recommend.
3 months ago
Is Personal Contract Purchase better than a personal loan?
You need to look at all the aspects when considering both products and it is not necessarily just down to the monthly payment, here are some factors to consider.
- One of the most beneficial aspects of PCP is that there is no chance of negative equity, this is because you have an agreed a guaranteed minimum future value of the car at the start of the agreement, which is bound by the consumer credit act so even in the unlikely event of the bottom falling out of the car market, you are
- A personal loan cost has nothing to do with the depreciation of the vehicle as it is secured on you and not the vehicle you are buying. However, if you decide to sell the car part way through the agreement you will still have an outstanding balance remaining on the personal loan to consider and if you do decide to settle a personal loan early, you could also end up paying all interest back as there is no rebate of interest with most providers
- In most cases, a personal loan is secured against you, i.e. secured on your property or business if you have If things were to go wrong and your income changes, you could end up losing more than just your car etc.
- PCP offers the opportunity to hand back your car at the end of the term, and avoid all the hassle of reselling, if the car is valued higher than the agreed GMFV, then you will get what’s left over after settling the GMFV, which you can then use as a deposit on your next vehicle. However, should the car be valued at LESS than the GMFV then you will not have to make up the shortfall.
- PCP offers you the opportunity to have a newer car that you otherwise might not be able to afford. When you come to the end of the contract and you decide that you want to keep it or pass on to a relative sell to or friend. It’s satisfying for them to know the history of the vehicle and the fact that it’s been looked after from day 1.
PCP offers you the opportunity to have a newer car that you otherwise might not be able to afford. When you come to the end of the contract and you decide that you want to keep it or pass on to a relative sell to or friend. It’s satisfying for them to know the history of the vehicle and the fact that it’s been looked after from day 1.
Unfortunately, it’s a common known fact that all motor vehicles do depreciate and go down in value, but essentially PCP divides this depreciation into affordable monthly chunks over an agreed period. This can either help you to build a deposit towards your next car or save up enough to settle the final GMFV at the end of the PCP contract, should you decide to purchase the vehicle at the end of the agreement.
What Next?
Now you’ve got all the facts and hopefully fully understood this product guide to PCP, you’re probably ready to discuss some options with one of our trained advisers, Capital Car Finance have specialised in the PCP car finance market for over 12 years now, so we have the experience and knowledge to advise you on the best way forward, why not give us a call now on 01925 589020 and we can talk through some numbers with you.