• Personal Contract Purchase (PCP)

Personal Contract Purchase (PCP)

  • What is Personal Contract Purchase?

Next, there’s PCP. The press like to make out that this is the new kid on the block but in reality, it’s been around since Ford launched its ‘options’ programme in the early 90s. Many love to refer to this as a lease but it’s not, it’s designed as a route to ownership and provides flexibility for people who are unsure whether they want to own the vehicle or not at the end of the agreement.

With PCP you pay a deposit, make your monthly payments and at the end of the contracted monthly payments you have three options:

  • 01. Make the final payment (normally referred to as the balloon) and own the car outright.
  • 02. Use any equity toward the deposit on your next car. The equity will be the difference between the actual value of the car and the Guaranteed Minimum Future Value (GMFV). The GMFV is set at the start of the contract.
  • 03. Hand the car back and walk away.

Advantages of PCP

  • The flexibility of car ownership at the end of the agreement.
  • The potential of the car being in equity at the end of the contract, allowing you to sell the vehicle, settle the finance and keep the difference.

Disadvantages of PCP

  • The balloon payment can be substantial, making it not viable for you to pay in a single payment.