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Personal Contract Plan

Over 80% of cars are financed using Personal Contract Purchase or Personal Contract Plan (PCP)

If you are looking to pay lower monthly rates and change your car regularly, a Personal Contract Plan could be just the answer for you.

What is Personal Contract Plan (PCP)?

A personal Contract Plan which is also known as Personal Contract Purchase is a popular car finance option, probably because unlike Hire Purchase or a Personal Loan, you’re actually only repaying the difference between the cost of your car and its predicted value at the end of the agreement, plus interest and fees. The predicted value is calculated and guaranteed by the finance provider, which is why it’s known as the Guaranteed Future Value (GFV). This means the monthly payments are typically lower than other types of car finance.

How do PCP agreements work?

Firstly you choose the right vehicle for you then you will make three decisions that will affect your monthly repayments

  • Your deposit – how much money you want to pay upfront
  • Your repayment period – the length of the contract
  • Your estimated annual mileage

Once these have been decided your monthly payments can be calculated and GFV fixed.

During your agreement you have the option to settle the finance at any time by repaying the outstanding balance including the GFV.

Then, at the end of your contract you’ll have three options:

  • You can give the car back subject to mileage and vehicle condition
  • Alternatively, you can keep it as long as the balloon payment has been paid off

Or you can trade your car in and choose a new vehicle.

What is the difference between PCP and PCH?

People often get confused about the difference between PCP and PCH. PCP is a purchase plan, at end of your contract you have the option to buy the car. Whereas PCH is a hire plan and you do not own the car at the end of the agreement. For more information on the differences between PCP and PCH watch our videos here.

How do I arrange a Personal Contract Plan agreement?

Personal Contract Plan agreements can be arranged at your local dealership and will be sent to a finance company who actually provide the money. Finance companies are regulated by the Financial Conduct Authority (FCA) like banks, so your applications will be subject to affordability and credit checks (see our video on Affordability here).

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