PCP Car Finance

PCP Car Finance: The "Maybe I'll Keep It, Maybe I Won't" Option 

Shopping for a new car but getting a headache from all the finance options? Why do you think we exist? Let's chat about PCP (Personal Contract Purchase) - it might just be the flexible friend you're looking for. 

What's PCP All About Then? 

Think of PCP as the commitment-phobe's dream when it comes to car finance. It lets you drive away in something shiny and new without the scary upfront cost, gives you lower monthly payments than traditional finance, AND lets you decide what happens at the end. 

It's a bit like dating before deciding whether to put a ring on it - you get to enjoy the relationship for a few years, then choose whether to commit long-term or move on to something newer and flashier (maybe)! 

How It Works in Real Life 

Meet Emma. Emma recently got a £25,000 Audi A3 on PCP. Here's how her deal broke down: 

1. She put down a £2,500 deposit (10% of the car's value – it doesn't need to be this) 

2. The finance company estimated the car would be worth about £10,000 after three years (the Guaranteed Future Value) 

3. So she's essentially financing £12,500 (the £25,000 price minus her deposit and minus that future value) 

4. This means her monthly payments are just £387 (incl. APR) for a car that would have cost over £500 per month on traditional finance like HP – more to that here. 

After three years, Emma has three choices: 

• Hand back the keys and walk away (maybe to get another new car) 

• Pay that £10,000 final payment and keep the Audi 

• Use any equity if the car's worth more than expected toward another PCP deal (although this is rare. Remember what happened after COVID when used car prices shot up – yeah, that doesn't happen anymore for most cars). 

How Does PCP Compare to Other Car Finance Options? 

Car finance can be proper confusing, so let's break down the differences in plain English: 

PCP vs Hire Purchase (HP) With HP, you're paying to own the car from day one, which means higher monthly payments but no balloon payment at the end. At the end, you own it. This does mean higher monthly payments but usually similar deposits. 

PCP vs Personal Leasing (PCH) Leasing is basically long-term renting – there's no option to buy at the end. Most of us lease because we have zero interest in ever owning it, worrying about surprise repairs costs, depreciation etc. There is also no APR with leasing and it includes road tax for the whole duration, whereas PCP only includes the first year's road tax. That said, there is no guarantee you'll get to buy the car at the end of your lease. 

PCP vs Lease Purchase Lease Purchase looks similar with lower monthly payments and a balloon payment, but there's one massive difference – that final payment isn't optional. You HAVE to buy the car at the end. PCP keeps your options open. 

The Good Bits About PCP 

Those Lovely Lower Monthly Payments 

Because you're only financing part of the car's value, your monthly payments are significantly lower than if you were buying outright or going down the HP route. This could mean driving a nicer car than you thought you could afford! 

You're Not Stuck With Your Decision 

Life changes – that's just how it goes. Maybe you'll get a job closer to home and won't need a car anymore. Perhaps your family will grow and you'll suddenly need something bigger. With PCP, you're not locked into ownership – you can just hand the car back at the end and move on. You can even give it back early, depending on how much of your PCP balance you've paid. 

Upgrading is Easy 

With PCP, you can have it every few years without the hassle of selling your old car privately. When your contract ends, you can seamlessly move to another PCP deal on a brand-new model. However, leasing is probably be a better option if this sounds like you!  

The Not-So-Good Bits 

That Balloon Payment Can Be a Shock 

If you do fall in love with your car and want to keep it, that final payment can be a hefty sum. Make sure you're prepared for it if ownership is on your radar. 

That said, you could refinance or get a bank loan to pay for it. Just be careful if it is out of warranty!  

Mind Those Mileage Limits 

PCP deals come with annual mileage limits, and exceeding them can cost you. Be honest about how much you drive when setting up your agreement. 

Keep It in Decent Nick 

Excessive wear and tear beyond what's considered "fair" can result in charges when you return it. Return a PCP car with a cracked bumper and a coffee-stained passenger seat and the finance company might just charge you. 

Who's PCP Perfect For? 

From chatting with friends and family who've gone down the PCP route, I've noticed it tends to work brilliantly for: 

• People who like driving newer cars and enjoy upgrading every few years (although leasing might be better) 

• The indecisive types who aren't sure if they'll want to keep the car long-term 

• Budget-conscious drivers who want lower monthly payments but don't want to commit to leasing 

• Those who want some flexibility in case their circumstances change 

Is PCP Your Cup of Tea? 

Ask yourself: 

• Do you like the idea of lower monthly payments? 

• Do you enjoy changing cars every few years? 

• Are you unsure whether you'll want to own the car long-term? 

• Do you want the flexibility to change your mind? 

If you're nodding along, PCP could be right up your street! 

On the other hand, if you're absolutely certain you want to own the car for many years, HP might be better despite the higher monthly costs. And if you know for sure you'll never want to own it, straight-up leasing could work out slightly cheaper. 

Still scratching your head about what's best for you? Don't worry – most people find car finance a bit mind-boggling at first! Drop us a line for a proper chat about your specific situation. We can talk through your budget, how long you plan to keep the car, and what matters most to you. No jargon, no pressure – just friendly advice to help you make the right choice.