PCP Finance Explained – Personal Contract Purchase Guide

Want to know more? Read on for a complete guide to PCP finance explained, including how it works and why it could be a great solution for your next car purchase.

What is PCP finance?

PCP is a type of car finance that allows you to secure the keys to a reliable car, without the hefty upfront costs or ownership commitment of a traditional purchase.

Here’s how it works:

Get the ball rolling: The early stages of a PCP agreement usually see your financial provider perform a credit check. Ideally, they’ll use a ‘soft search’ that won’t leave a mark on your credit score. The fun part is researching cars and deciding on a vehicle. When this is done, you’ll discuss the terms of your PCP agreement with the lender. This usually includes the value of your initial deposit and how long you’d like the agreement to be.

Deposit: You put down an initial deposit to show the dealer you’re serious and lock in your preferred car.

Drive away: Once the paperwork is sorted, it’s time to drive away in your new car and enjoy the open road.

Monthly payments: After your initial deposit, you pay manageable monthly instalments. These payments typically cover the depreciation of the car over the agreed term. With PCP finance, your monthly payments are typically lower than with other options as they don’t cover the full cost of the car. This can make getting behind the wheel of a new model surprisingly affordable.

Balloon payment: At the end of the PCP agreement, you have a few choices. You can either return the car (in good condition, of course), part-exchange it for a new one, or pay a final ‘balloon payment’ to buy the car outright. If you need more clarification on how balloon payments work, simply ask your lender for more Personal Contract Purchase information.

The benefits of PCP finance explained

Wondering if PCP finance is the right route for you? Let’s break it down with a closer look at some of the key advantages:

Lower monthly payments

PCP payments are usually lower compared to a traditional car loan or Hire Purchase (HP) agreement.

Flexible choices

PCP gives you options at the end of the agreement, allowing you to decide if you want to keep the car or swap it for a new one. If you need your options at the end of your Personal Contract Purchase, don’t hesitate to ask your lender for clarification.

Newer cars

Love that new car smell? PCP agreements allow you to get behind the wheel of a car that’s fresh from the showroom.

Lower upfront costs

Smaller deposits make PCP a real drawcard for motorists without much capital to invest.

Fixed interest rates

With PCP you’ll enjoy the comfort of fixed interest rates, making it easier to budget.

Warranty cover

Many PCP deals come with manufacturer warranties, giving you peace of mind when it comes to maintenance.

PCP vs. other auto finance options

Still not sure if PCP is your ideal route? Now we’ve got PCP finance explained, let’s compare it to other options to get a better understanding of the pros and cons:

Hire Purchase (HP)

HP agreements let you spread the cost of the car over a set term, but instead of options at the end of the agreement you own the car outright. It’s like paying off a mortgage and owning your home when the final instalment is made.

Personal Contract Hire (PCH)

PCH agreements involve leasing a vehicle throughout your duration of a contract.  Unlike PCP and HP loans, PCH doesn’t involve borrowing money for car ownership. Instead, you initiate the leasing agreement with a non-refundable deposit and then make monthly ‘hire’ payments that give you use of the car. At the end of the contract, you’ll return the vehicle without the option to purchase it and become the outright owner. It’s important to note that PCH agreements often come with restrictions, including mileage limits and caps on acceptable wear and tear.

Personal loan

With a personal loan, you borrow a lump sum to purchase the car and own it from day one. Interest rates are usually significantly higher for personal loans.

Hit the road with PCP Finance

Ready to start your PCP finance journey? Remember, it’s important to fully understand the terms and conditions of your PCP agreement before you sign on the dotted line. It’s like checking the weather forecast before a long drive – being prepared is the key to a seamless trip.

Why choose My Car Credit for PCP finance?

At My Car Credit, we’re your trusted co-pilot when it comes to securing the best PCP finance deals. Why choose us for PCP finance?

Expertise: Our team has the knowledge and experience to guide you through the entire PCP process, from start to finish. If you need PCP finance explained, we have your back.

Variety: We work with a wide range of lenders to offer you the best PCP deals. Worried about having car finance declined? As well as high street banks, we partner with smaller lenders who can help you get finance, even if your credit score is less-than-perfect.

Choice: As well as partnering with a wide range of lenders, we offer a huge amount of choice when it comes to cars. No need to limit yourself to particular makes and models. We pride ourselves on helping every client secure the keys to their dream car, whatever that might be. It’s like having access to a huge showroom of cars, all in one place.

Flexibility: We tailor our PCP agreements to suit your specific needs, offering you a good amount of flexibility when it comes to things like deposit size, contract length and vehicle options.

Support: Need your Personal Contract Purchase explained? We’re here to answer your questions, provide guidance and make your PCP journey as smooth as possible.

Ready to get behind the wheel? Give us a call on 01246 458 810 to find out more about PCP finance options or email us at enquiries@mycarcredit.co.uk for a speedy response.