Personal Contract Purchase(PCP) is our most popular choice for motor finance due to its flexibility, low initial deposit commitment, low monthly repayments and guaranteed value for the vehicle at the end of the agreement.
This type of finance is ideal if you plan to change your car at the end of the contract period.
Using a Personal Contract Purchase (PCP) plan the customer will make an initial payment, followed by a series of monthly payments and a final large, but optional payment, called a GFV.
A PCP plan will enable the customer to purchase a new vehicle with lower monthly repayments by deferring a large amount of the total cost of the vehicle to the end of the contract - this amount is known as the Guaranteed Future Value (GFV), often referred to as the optional final balloon payment. The GFV is set by the finance company and is based on the chosen vehicle and the annual mileage stipulated by the customer. The annual mileage can be set between 6k and 30k per annum and will affect the figure given for the GFV.
"With PCP your monthly payments cover the loss in value of the car over time - you're basically paying the monthly depreciation of the car plus the interest on the outstanding balance. At the end of the contract you have the option to buy the car at a previously set price".
The Guaranteed Future Value plus the customer's deposit is subtracted from the cash price of the vehicle and the monthly payments are based on the balance (plus interest on the balance and the GFV). At the end of the agreement the customer will have a choice of making a final lump sum payment in order to complete the agreement, or to simply return the car to the finance company without any further obligation.
By only repaying the difference between the cash price and the optional balloon payment you are only financing the depreciation of the car.
At the end of the contract you have four options:
Within a PCP quote there are some things you can do to lower your monthly payment.
You can get an online PCP quote for any new car directly from the details page for that new car. Simply click on the finance tab once you've found a car you're interested in, enter your details and click submit.
Author: Alex Davis
Date: 11th September 2008