Personal Contract Purchase, or PCP, is the most popular choice for drivers in the UK looking to finance a car. The reduced monthly payments and the flexibility of PCP plans makes them attractive to a wide variety of customers.
PCP is mainly available with new and nearly-new vehicles. At the start, you will agree a deposit amount, mileage limit and length of finance term. Deposits are typically around ten percent of the car's value, and plans often run for two to three years.
Payments are based on the Guaranteed Minimum Future Value (GMFV) of the vehicle, also known as a 'balloon payment'. This means that, on PCP, you are effectively paying off only part of the car's full value. There is no need to worry about any depreciation on the vehicle. However, during the agreement you are not the car's legal owner – this only becomes the case if you make all the payments.
When the PCP agreement comes to an end, your options are: