Personal Contract Purchase

What is PCP?

Personal Contract Purchase, or PCP, is a financing option that has grown in popularity in recent years. It provides a flexible way to pay for a vehicle, allowing customers to better match their finances with their desired vehicle. With the PCP option, customers get the opportunity to pay fixed monthly payments over an agreed period of time, while also having the option of either handing the vehicle back at the end of the agreement or taking ownership of it by paying off the outstanding balance.

At the start of the agreement the finance company will work out what the car will be worth at the end of the agreement and set a GFV (Guaranteed future value). This is calculated by using Future Values and takes into consideration the annual mileage the vehicle will cover over the term of the agreement.

At the end of the agreement customers will have 3 options:

  1. Pay or re-finance the outstanding balance and keep the vehicle.
  2. Part Exchange the vehicle if the value of the car exceeds the outstanding balance.
  3. Hand the vehicle back to the finance company and end the agreement.

Advantages of PCP

The major benefit of PCP is that it allows customers to manage their budget while still being able to purchase a high-quality vehicle at an affordable cost.

With PCP, customers have the ability to adjust their monthly payments by choosing the length of their contract. At the end of the term, they can either choose to buy, Part Exchange or return the car to the finance company. This makes PCP an ideal option for those who want more flexibility when purchasing a car.

Disadvantages of PCP

The main disadvantage of a PCP agreement is that the buyer will not own the vehicle outright unless they pay the final optional payment at the end of the contract period. Most customers typically opt for returning or part exchanging their vehicle rather than paying for ownership.


Personal Contract Purchase (PCP) is a type of financing that allows customers to purchase a vehicle over an agreed period.

This form of credit offers customers many benefits including fixed monthly payments and the ability to change the car on a more regular basis.

It is important to understand the structure of PCPs. They involve an initial deposit which can be either a cash deposit, part exchange or a combination of both, followed by fixed monthly payments. At the end of the chosen term the “Balloon Payment” will become due. At this point there are three options: Make the final payment and take ownership of the car; Part Exchange the vehicle; or hand the car back to the finance company.