Car finance continues to appeal to drivers across the UK because it’s a flexible, affordable way of funding the purchase of a new, nearly-new or used set of wheels.

PCP car finance is one of the most popular types of auto finance agreement. With lower monthly repayments and flexible deposit options compared to other car finance choices, there’s a reason why drivers nationwide continue to choose PCP car finance.

With that said, PCP is a little more complicated than other car finance options because of the end-of-term options. We break down everything you need to know about a PCP term below.

What you need to know about a PCP term

Personal contract purchase (PCP) car finance is a flexible agreement that offers lower monthly repayments compared to other types of car finance.

With PCP, you’ll be splitting the price of your vehicle into three chunks – a deposit, your monthly repayments, and an optional final payment that’s also known as a balloon payment.

A PCP term is typically anywhere from 36 to 60 months, or three to five years. The longer the term of your PCP finance agreement, the lower the monthly repayments will be, as the cost is being spread over a longer term. However, you will generally pay more interest overall because you’re borrowing money for a longer period.

How does the end of a PCP term work?

With PCP, you won’t own the car outright at the end of your agreement, unless you choose to make an optional final payment, also known as a balloon payment, along with a small option to purchase fee,.

In fact, it’s because of this optional final payment that the monthly repayments on PCP are lower compared to other car finance agreements.

However, it does mean that you need to decide whether you want to make this final payment once you reach the end of your PCP term.

Bear in mind that this payment is optional with PCP – you don’t have to make it. You can always choose to hand the car back, and you won’t face any surplus charges, provided you haven’t caused undue damage to the vehicle and the vehicle is within the contracted mileage.

Alternatively, you can make the final balloon payment and you’ll formalise ownership of the vehicle. Balloon payment finance can help to make this final lump sum more affordable by breaking it down into manageable chunks – much like any other car finance agreement.

You can also choose to part exchange the vehicle for a higher spec model if you find yourself in ‘positive equity’. This happens when the car is worth more than the lender anticipated at the end of your PCP term and is a great option for drivers who like to update their car for a newer model.

Find out more about PCP finance today

If you are looking to start your car-buying journey, check out our online car finance calculator to crunch those numbers and take your first step to owning your next dream car.

Rates from 9.9% APR. Representative APR 12.4%

Evolution Funding Ltd T/A My Car Credit

My Credit Rating


  • You are a home owner
  • You have been on the electoral role for a long period of time
  • You have current credit arrangements and mortgage with no defaults
  • You have no CCJs, credit arrears or missed payments
  • You rarely apply for credit
  • You are employed or self-employed


  • You are on the electoral role
  • You are a home owner or long standing tenant
  • You have a stable employment history
  • You have current credit arrangements with occasional missed payments
  • You have no CCJs


  • You are or have recently been on the electoral role
  • You may have recently changed address
  • You may have occasional missed payments
  • You may have an old CCJ
  • You may have regularly applied for credit


  • You may have had frequent changes in address
  • You may not be traceable on the voters roll
  • You may have exceeded credit card limits
  • You may have missed payments on current agreements
  • You may have had a CCJ in the past


  • You may not be traceable on the voters roll
  • Your credit cards are over their limits
  • You have recent CCJs
  • You may have been refused credit elsewhere
  • You may be in a debt management plan

X monthly repayments of

Typical rate

Loan amount

Total payable




*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 12.4%, annual interest rate (fixed) 12.36%, 47 monthly payments of £196.44 followed by 1 payment of £206.44 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,939.12, total amount payable is £9,439.12.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!