Personal Contract Purchase
Learn more about Personal Contract Purchase finance.
Rates from 9.9% APR. Representative Example: Hire Purchase agreement, based on a vehicle with a cash price of £8,000.00, with £0 deposit, borrowing £8,000.00 over 5-years with a representative APR of 25.4% fixed, the amount payable would be £224.83 per month, with an option to purchase fee of £10.00, a total cost of credit of £5,489.80, and a total amount repayable of £13,489.80. Jigsaw Finance Limited t/a My Car Funder is a credit broker, not a lender.
About PCP (Personal Contract Purchase)
A Personal Contract Purchase (PCP) is a loan secured against the vehicle, and the repayments are calculated based on a portion of the vehicle's value.
The finance company guarantees a minimum value for the vehicle at the end of the agreement, known as Guaranteed Minimum Future Value (GMFV) or Optional Final Payment (OFP). PCPs typically last from 2 to 4 years, and the size of the deposit, anticipated mileage, and agreement length determine the repayment amounts.
Advantages
You can relax about the car's future trade-in or resale value because the lender ensures that your car will have a guaranteed minimum value at the end of the agreement.
The arrangement is very flexible, offering various options at the end, including the possibility to purchase the car if you wish.
It's worth noting that most cars included in PCP deals are covered by the manufacturer's warranty (although it may expire before the contract ends), as PCP deals are typically available for new or nearly-new cars.
Disadvantages
Ownership of the car only occurs at the conclusion of the contract if you settle the Guaranteed Minimum Future Value (GMFV) or Optional Final Payment (OFP).
If the anticipated GMFV/OFP is closely aligned with the actual car value, you may have minimal equity to transfer to another deal.
Additionally, exceeding the agreed-upon mileage may result in extra charges, typically ranging from 6 to 20 pence per mile.
The Guaranteed Minimum Future Value is based on keeping the car in a good condition. You will be charged extra to put right anything that’s not down to normal wear and tear.
What happens at the end of the agreement?
Hand it back
If it is worth less than the GMFV, you can return the car and walk away (subject to mileage and condition.)
Pay it off or refinance
You can pay the GMFV (plus any Option to Purchase fee) and keep the vehicle. You will become the legal owner of the vehicle.
Part exchange or sell
If the part-exchange value is greater than the GMFV, it can be used as a deposit for your next vehicle finance agreement or 'cash-back'. You could sell the vehicle privately once legal title is gained and settle the GMFV.