Personal Contract Purchase (PCP) is one of the most popular ways to finance a new car in the UK. With PCP car finance, you can drive a brand new vehicle by paying lower monthly repayments compared to other finance options.
As your trusted PCP finance broker in the UK, we're here to guide you through the ins and outs of PCP, ensuring that this flexible and affordable financing solution is accessible to everyone, regardless of their credit history.
How does PCP car finance work?
PCP car finance works through a three step process:
- Monthly Payments With PCP, you'll pay lower monthly instalments compared to traditional car loans, making it budget-friendly. These payments cover the car's depreciation over the contract term.
Apply for your loan
- Balloon Payment At the end of your PCP agreement, you'll encounter the famous "balloon payment." This is an optional final payment that allows you to take ownership of the vehicle outright.
Receive the money
- Options at the End Here's where PCP shines – you have three choices. You can pay the balloon payment and own the car, return it without any further obligations, or trade it in for a new car and begin a new PCP agreement.
Pay it back over time
PCP finance example
You take a £20,000 car on a 4 year PCP deal with a £2,000 initial deposit and £250 monthly repayments. At the end of the 4 years, a final balloon payment of £10,000 is required to own the car. Alternatively, you can return the car without owing anything more or use its value towards a new PCP on your next car.
- The monthly payment you'll make will be determined by:
- The amount of your down payment
- The specific vehicle you have selected
- The price of the car you intend to purchase
- The applicable interest rate
- Your annual mileage
- The projected residual value of the car at the conclusion of your agreement.
PCP car finance calculator
- 36months
- 42months
- 48months
- 60months
This helps you get a more accurate finance estimate
These estimates are subject to credit checks, and may change if you do apply for finance.
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£0/pm
| Loan amount | £7,500 |
|---|---|
| Length of Loan | 60 months |
| Monthly payment | £0 |
| Interest rate | 9.9% APR |
| Optional final payment | £0 |
| Amount of interest | £0 |
| Total payment | £0 |
Comparing PCP with other finance options
PCP differs from other types of car finance like hire purchase (HP) and personal loans. With HP, you pay towards owning the car with no balloon payment at the end. Personal loans provide a fixed sum to buy a car outright.
The benefits of PCP include lower monthly repayments and the flexibility to change cars more regularly. However, you do not own the car until the final payment is made.
| Finance features: | Hire purchase (HP) | Personal contract purchase (PCP) | Personal loan |
|---|---|---|---|
| Requires initial deposit | Optional | Optional |  |
| Car is yours at the end of the agreement |  | Optional | |
| Fixed monthly payments | | | |
| Optional balloon (final) payment | | | |
| Avoid excess mileage charge | | | |
| Secured against an asset (e.g. a car) | | | |
| Support with vehicle issues | | | |
The pros and cons of PCP car finance
Some key advantages of PCP finance include:
- Lower monthly repayments than other finance options
- Fixed interest rates mean payments do not change over the agreement term
- Chance to regularly change into a new car, usually every 2-4 years
- Flexibility at the end of the contract to suit your needs
However, there are also some disadvantages:
- You do not own the car until the final "balloon payment" is made
- Mileage limits usually apply, with excess charges if you exceed agreed "annual mileage"
- Repaying the loan early can be expensive compared to other finance types
- Returning the car at the end means no asset is retained
Is PCP finance right for me?
PCP car finance is worth considering if:
- You want lower monthly payments to get a more expensive car
- You plan to change cars regularly, usually every 2-4 years
- You drive an average annual mileage that suits contracted mileage limits
- You are comfortable not owning the car until all payments are finished
However, PCP may not suit if:
- You want to own the car with no final payment
- You drive high annual mileages that would exceed limits
- You prefer the flexibility to repay finance early with no penalties
Apply for pcp car finance
Looking to for a PCP car loan to purchase a car of your dream? See if a Personal Contract Purchase could be an option for you.
Learn more & applyChoosing the best PCP car deal
To find the most suitable PCP agreement, shop around and compare:
- Interest rates - the lower the rate, the less you pay overall
- Deposit amount - a larger deposit reduces monthly costs but increases your upfront payment
- Contract length - shorter terms usually have higher monthly payments
Also consider:
- Mileage allowance - pick one that exceeds your estimated annual mileage
- Maintenance packages - these cover servicing costs for a monthly fee
Getting the above right from the start will help ensure affordable, stress-free motoring.
PCP car finance for bad credit score
It is possible to get PCP finance with bad credit score or limited credit history. Getting a PCP with bad credit is entirely possible. In fact, there are specialist lenders who understand that not everyone has a perfect credit history. They can assess your individual circumstances and match you to appropriate PCP deals, even if you have limited credit history or a poor credit rating.
Improving your credit rating is a smart step to take. Registering on the electoral roll and having a guarantor or a larger deposit can significantly boost your chances of securing a bad credit PCP. It's essential to discuss your situation honestly with PCP brokers. They have the expertise and resources to help you find the best bad credit PCP agreement tailored to your needs.
Deposit requirements for PCP
Most PCP deals require an initial deposit, but zero deposit agreements are sometimes available too.
A larger deposit reduces the amount borrowed, lowering your monthly costs. But a zero deposit PCP means no large upfront payment.
Lenders will assess you individually to decide suitable deposit options. Having an excellent credit history and stable finances can improve your chances of a zero deposit PCP deal.
Why choose us as your PCP broker
As an independent pcp car finance broker, we have access to the widest range of PCP finance products from all major lenders. This allows us to search the entire market for you, not just a single provider.
Our PCP experts will match your circumstances with the most suitable deals. We handle all the application paperwork and liaise with lenders on your behalf. This saves you time and hassle.
We are committed to transparency and finding the right PCP agreement for your needs. Contact us today to discuss your requirements - we're happy to help!
Meet our car finance lenders
We work with over 15 lenders offering 100+ HP and PCP deals so that you could have the best offer.
FAQ's
- What is PCP finance?Personal Contract Purchase (PCP) is a form of car finance that provides lower monthly repayments by deferring a portion of the loan to a final balloon payment at the end of the agreement. You can then choose to pay the balloon, return the car, or use equity towards a new PCP.
- Do you need good credit for PCP?Good credit allows access to the best PCP finance rates but near prime and bad credit applicants can still get deals. Specialist lenders assess applicants individually so speak to a broker about tailoring PCP to match your credit profile.
- What happens at the end of the PCP agreement?
At the end of your PCP contract, you have three options:
- Pay the outstanding balloon payment to own the car
- Use equity in the car as a deposit for a new PCP deal
- Return the car to the finance company with nothing further to pay (subject to condition and mileage)
- What else to consider before PCP finance?Ensure you can afford the monthly repayments comfortably and pick an annual mileage limit that exceeds your needs. Check if fees apply for late payments or exceeding the mileage. Also consider insurance, maintenance and any other running costs.
- Will PCP affect my credit score?PCP finance shows on your credit file so make sure payments are made in full and on time. Provided the agreement is managed well, PCP can help build your credit score over the duration of the contract.
- Can I settle my PCP early?You can pay off your PCP finance agreement early but early settlement fees often apply. This covers the lender's loss of interest from ending finance sooner than originally agreed.
- Are there additional PCP charges?Check your agreement for any fees like arrangement, documentation or late payment fees. Excess mileage charges also apply if you exceed pre-agreed annual limits. Maintenance, roadside assistance or insurance cover sold alongside PCP will have separate fees too.
- Can you modify a car on PCP?Modifications like tuning, body kits or non-standard wheels can negatively impact a car's resale value. Most PCP agreements do not allow cosmetic or performance modifications. Check your contract terms or consult your lender before making any changes.