PERSONAL CONTRACT PURCHASE (PCP) CAR FINANCE
Personal Contract Purchase (often referred to as PCP) is similar to a Hire Purchase or Conditional Sale Agreement but offers an additional optional final payment to buy the car at the end of the loan term. This optional final payment is known as a guaranteed future value (the GFV).
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Personal Contract Purchase is an increasingly popular way of buying a new or used car and is similar to Hire Purchase in three areas:
- You pay a deposit
- You have fixed monthly payments
- You get a choice of loan term (typically 12 to 60 months).
Personal Contract Purchase can only be taken out on cars of a certain age. Fast Car Finance can arrange Personal Contract Purchase on vehicles from new to five years old.
At the beginning of the agreement, the finance company calculates a Guaranteed Future Value (GFV) for your car. This is based on the following information;
- Age of the vehicle
- The vehicles current mileage (if used)
- Your anticipated annual mileage
- Your required loan term
From the above information, Fast Car Finance will calculate the projected future value of your car – typically this will be based on the car’s anticipated future trade value. We work in conjunction with our panel of PCP lenders to ensure that this calculation is as accurate as possible for your specific car.
Arranging car Personal Contract Purchase is simple and straight-forward with us.
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today for further information.
RECENT PCP CAR FINANCE
IMPORTANT
The finance company guarantees the cars future value, subject to certain return conditions. This should mean that the value of your car at this time will be “at least” the same as the amount outstanding (hence, a Guaranteed Minimum Future Value). So, if you want, you can simply give the car back to the finance company and the finance is settled. If the market value of the car is less than the amount outstanding, that’s not your problem – the finance company takes the loss.
At the end of the Personal Contract Purchase agreement you have three choices:
- RETURN THE CAR to the finance company -this won’t cost you anything so long as you have kept within the agreed mileage and the car is in good condition
- KEEP THE CAR – this means that you make a final lump sum payment as outlined when you signed your agreement. This balloon payment is called the GFV (Guaranteed Future Value)
- TRADE THE CAR IN FOR A REPLACEMENT – any equity left following the repayment of the GFV can be used as a deposit to towards the next one.
Personal Contract Purchase may be the right choice for you if you answer “yes” to one or more of the following statements
- YES – I want my monthly payments to be as low as possible
- YES – I like the flexibility of having 3 different options at the end of the agreement
- YES – I like the idea of changing my car every 2, 3 or 4 years
- YES – I want to avoid increased maintenance and service costs associated with running an older vehicle.
If you are confused between Hire Purchase (HP) and Personal Contract Purchase (PCP) read on:
EXAMPLE:
Imagine a car costs £30,000 to buy now and in 3 years’ time it will be worth £15,000
- With a Hire Purchase arrangement over 3 years, you will pay £30,000 plus interest and at the end of the payment term you own the car which will be worth £15,000. So when you want to part-exchange the car you will have spent £30,000 plus interest and you will be given £15,000 for the car. Overall you will have spent £15,000 plus the interest.
- With a PCP arrangement the finance company guarantees the final value of the car (the GFV). So instead of paying off £30,000 (plus interest) and getting back £15,000. You will only be paying £15,000 back plus interest and may end up getting nothing for the car.
The net result is the same really, but how you get there is quite different.
Arranging a Personal Contract Purchase Agreement is simple and straightforward with Fast Car Finance. Are you ready to get in the driving seat? Please Contact Us
