The Benefits Of PCP Car Finance vs Outright Purchase

There’s no denying that buying a new car is an exciting time for anyone. However, a dark cloud of stress can be quickly cast over the occasion if the correct finance option is not selected. Fear not, as at Fast Car Finance, we guarantee every vehicle purchase is a positive experience by ensuring all owners have the knowledge needed to make a wise decision.

In 2024, 55% of car owners who opted for vehicle finance as a purchase method selected a PCP deal. In this blog, we’ll highlight the benefits of this car finance option compared to an outright purchase.

What’s the Difference Between PCP Car Finance vs an Outright Purchase?

There are many decisions involved with buying a car. As well as choosing the right make and model, careful consideration must be given to the chosen finance option.

An outright purchase means the total market value, at the time of acquisition, must be paid in exchange for vehicle ownership. Whilst this option can be ideal for those customers with access to the required cash from savings or investments, for many buyers they prefer to spread the cost over their likely period of ownership. Cars are an expensive purchase and in most cases, they are usually a depreciating asset, so it makes more sense to utilise finance rather than use your own hard earned savings.

Personal contract purchase finance, otherwise known as PCP, allows a car to be paid for via monthly payments with the option to make one final lump sum payment at the end of the contract term.

The final payment is often referred to as a “guaranteed future value” or GFV and is calculated based on the term of the finance and indicated annual mileage . It means that the borrower can have peace of mind, as they are covering the expected loss in the vehicle’s value over the loan term, while the lender guarantees a set price to buy back the vehicle at the end of the agreement.

What Are the Benefits of Opting for PCP Car Finance Instead of an Outright Purchase?

Options at the End of the Contract Period 

Unlike a Hire Purchase finance agreement, which is paid via fixed monthly instalments of an equal amount,  PCP loans have a final payment to settle and take ownership of the vehicle. However, there is no obligation to keep the same vehicle and pay the final amount, meaning flexibility is available until the end of the agreement. Should the final payment (the GFV) not be paid, owners can choose to trade in the vehicle for a new PCP deal or simply return it, so long as the mileage and condition meet the initial agreed terms.

Suitable for Lower Budgets

Another benefit, compared to spending a chunk of money on an outright purchase is that PCP is well suited for customers looking for an affordable way to buy a vehicle. In addition to lower deposits, the monthly payments are also typically lower than those of Hire Purchase contracts.

Reduced Depreciation Risk

For customers who want a guaranteed future value for their car, PCP can be an attractive option. Not only is the depreciation risk taken into consideration when the contract terms are agreed, but it also provides greater flexibility to choose a newer model from the same manufacturer if you look to part exchange at a later date.

More Chance of Access to Positive Equity

There is also a possibility of having some equity available at the end of the PCP loan term if the future resale market value of your cars make and model dictates. This can potentially put PCP borrowers in a healthier position than outright owners.

Get in Touch

Are you looking for a PCP that suits your budget? Check out our car finance calculator and get in touch for a speedy quote.