PERSONAL CONTRACT PURCHASE ( PCP )
Personal Contract Purchase (PCP) is an increasingly popular choice for car finance. It offers the best in flexibility at the
end of the agreement, together with low, fixed monthly payments.
PCP is perfect if you are opting out of your company car scheme. Your company car allowance can fund your monthly
payments, but there is no company car tax to pay.
At the beginning of the agreement your car's guaranteed future value (GFV) is calculated, based on an agreed mileage
and age. This is deferred as a final 'balloon' payment.
With PCP you don't have to commit to buying the car at the outset. You use it for an agreed period of time usually 1-4 years and then decide at the end of this period what you would like to do. You have four options:
- Buy the car by paying an agreed minimum residual value
- Part-Exchange the car for another
- Sell the car privately (selling the balloon)
- Or, subject to mileage and condition, return the car with nothing more to pay (e.g. if depreciation resulted in negative equity)
The benefits of Personal Contract Purchase
- Low risk – A minimum future value is guaranteed
- Low deposit – Doesn’t tie up personal or business assets
- Low fixed monthly payments – Perfect for budgeting
- Upgrade car – Lower payments can help you choose a higher specification vehicle
- Choice – Buy the car, part-exchange it or just return it
- Tax advantage – The cash alternative when you opt out of a company car scheme is not subject to company car tax
- VAT free – No VAT on your payments