What is PCP Car Finance: Your Complete Guide

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Joe Brayne

Car Prchasing Guru

Perhaps you’ve been trying to figure out what Personal Contract Purchase (PCP) is. It’s a method of motor financing that makes purchasing a new vehicle simple and doesn’t ask for an upfront payment. It is appropriate for those who want to frequently upgrade their cars. This is because it provides you with the flexibility to handle your car whatever you like when your contract expires. Your agreement requires you to make recurring instalments as opposed to a significant upfront payment. Therefore, if you want a new vehicle at a substantially lower price, PCP car financing can be your best option.

This article will discuss PCP financing’s advantages and disadvantages, as well as how it works and how you could be you are eligible for it.

How Do PCP Car Loans Work?

PCP car financing, which is normally simple to grasp, can be used to buy a new car on a limited budget. Our staff could help you understand how PCP car finance operates. This article should help you establish the basics necessary to assess whether financing a car through PCP is suitable for you.

You may buy a new or used car while spreading the cost over a long period using a personal contract purchase. Typically, this time frame will last two or three years, depending on the type of car you want and your financial circumstances.

You can talk about a contract that may be suited for your circumstance with one of our professionals. And when you might be closer to signing the contract, your financial lender could also go through any particulars of your contract. Get in touch to find out what you might get.

Look Into the Payments Involved

Like Hire Purchase (HP) financing, customers must deposit a down payment on a PCP arrangement before beginning monthly payments. PCP and HP finance agreements differ at the end of the agreements. PCP car finance gives customers several options at the end of the contract, whereas HP ends with the customer outright owning the car. You can choose between keeping the car after making a final “balloon payment” or returning it and obtaining a new car loan under a PCP agreement.

Most PCP agreements include interest in the monthly payments you must make, much like the majority of other financial products. The calculation of the monthly payments made by the lender also projects the guaranteed minimum future value (GMFV).

The agreed-upon cost of the vehicle at the end of your contract is known as the GMFV. This covers the depreciation of the car during your contract. Additionally, mileage limitations are included in PCP agreements. The mileage cap is designed to make it easier for the lender to figure out your GMFV. You and your lender can typically agree on an acceptable mileage cap before to signing your contract. This allows you to calculate the approximate annual mileage you will travel. Watch your car’s mileage because exceeding the limit could result in additional costs.

When you apply for PCP auto financing from us, we’ll give you the rates. These rates will depend on the amount of the down payment you want to make and the vehicle models that fall within your pricing range. After that, before continuing, you could decide which offer best fits your needs.

Can I Get a PCP Loan with Poor Credit?

Fortunately, you may still be able to get a PCP agreement even with poor credit. We work with specialised lenders who might view your circumstances differently and offer you a bargain on the car of your dreams. We urge you to organise your finances before considering a car financing plan. If you’ve tried everything else, our group of financial professionals might still be able to help.

Things To Consider When Considering A PCP Car Finance Deal

The Agreement’s Duration

If you’re deciding whether this sort of financing is right for you, consider how long your PCP contract might last. If you only require a car for a short time, using a short-term contract might be your best option. For instance, suppose you decide to move after two years and no longer require the car. This could be the best choice to prevent you from paying more than necessary for the term. Finding a different automobile financing solution may provide you with more benefits if you are not interested in buying a new car. Or, if you don’t plan on making any expensive payments, a PCP agreement could match your spending plan better.

Should I keep or trade in my current vehicle?

Do you have any reason for keeping a vehicle for a longer period? It would be best to get a car now that you can keep if you might be relocating shortly. Regardless of your unique situation, purchasing a car is a major accomplishment. Depending on your specific situation, our dedicated consultants could help you choose wisely.

Benefits and Drawbacks of PCP

Pros of getting a PCP contract:

  • You might purchase a brand-new car at a lower price.
  • There is flexibility at the end of your finance agreement.
  • You are shielded from depreciation because your PCP finance agreement covers the cost of your car.

Cons of getting a PCP contract:

  • You won’t fully own the vehicle unless you pay the “balloon payment” at the end of your contract.
  • There will be set annual mileage limits. You’ll incur fees if you exceed them.
  • Throughout your contract, you must keep up with maintenance requirements for the term of your contract; otherwise, you’ll be charged for repairs and upkeep.

Your PCP auto loan deal has limitations, but you will be made aware of them when you sign your agreement. The specifics of a PCP auto loan can be explained by our finance specialists, or your lender can go through all you need to know. The advantages frequently outweigh the disadvantages for PCP finance consumers. Due to the cheaper cost and flexibility of PCP auto loan plans, many customers are happy with them.

PCP Car Finance Deals Benefit Who?

Anyone who wants to drive a new car but can’t afford the full cost may want to think about PCP car financing. It also works well for people who want to spread out the cost of a vehicle purchase over several years. This is because they won’t want to pay for their new car all at once.

If you don’t want to own the car when your lease is over, this is also a wise choice. You have more freedom to do what you want once your agreement is ended.

Can I Finance a Used Car Through PCP?

Even though most drivers who use this form of vehicle financing buy brand-new cars, it is easy to finance a used automobile with PCP deals. It is normally advised that you choose a vehicle that is under four years old and has fewer miles on it, though, given the nature of PCP packages. Depending on the lender, utilised PCP financing offers change. Although they might be a more cost-effective option for you to buy the car of your dreams, it’s always a good idea to weigh all your options first.


PCP car finance is a useful loan option for those who want to drive a new car but lack the money to do so. If you make your repayments on time, there are no extra fees, and you are free to utilise any car that suits your needs at the end of your agreement. If you wish to purchase a new car through PCP car finance, get in touch with our passionate experts today!

They could assist you in the search for your next vehicle!

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