If you want to buy the car you will need to pay your final balloon payment (the Guaranteed Future Value) Similar to PCH, you will need to agree on an approximate mileage estimate at the beginning of your contract.
If your car is worth more than the Guaranteed Future Value then you can use that equity towards a deposit on a new car.
Similar to PCH, you can drive away a brand new car every three years without worrying about it running out of warranty, or selling it on. If you decide not to buy the car, you can simply walk away when you’ve made all the monthly payments. Monthly payments on a car financed by PCP are usually lower than if your car is financed by a Hire Purchase agreement.
Once your monthly payments are finished, you’ll have three options: This means lower monthly payments for you, but you will need to pay a final payment at the end (the Guaranteed Future Value) if you want to buy the car. You’ll pay this difference off in monthly instalments. This is the car’s expected value when your contract ends.įor you, this simply means that the money you’re actually borrowing and repaying is the difference between what the car is worth now, and what it will be worth at the end of your contract (the depreciation). What makes PCP different is that your monthly instalments are only paying off the depreciation of the car, rather than the entire value of the car.Īt the start of your PCP contract, a Guaranteed Future Value (GFV) of the car is estimated. Personal Contract Purchase (PCP) is similar to a Hire Purchase agreement as you will usually pay an initial deposit, followed by monthly instalments. You’ll have to take out comprehensive car insurance - it’s not included in your contract. You will need to agree an approximate mileage estimate at the beginning of your contract - there may be a mileage charge if you exceed this. There’s no option to buy the car at the end. It’s flexible - you can change your car easily, and you will have access to new cars that you may not have been able to afford to buy. Your monthly payments on the car will be much lower than if you were buying it. It’s hassle free, as you can drive away a new car without worrying about the warranty running out, or how you’ll re-sell it. When the contract expires, you simply return your car or take out a new contract on a new vehicle. You lease the car for an agreed period of time by making fixed monthly payments. Personal Contract Hire (PCH) is a type of long-term rental that will suit you if you’re not looking to buy the car at the end of your contract. You won’t be able to sell the car without settling the finance.
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Monthly payments may be higher than other finance options, such as PCP, as you’re paying off the full value of the car. Unlike a PCP or PCH contract, you won’t need to estimate your mileage at the start of your Hire Purchase agreement, so you’ll avoid excess mileage charges.Once you’ve made your final monthly payment, you’ll have full ownership of the car. You’ll be able to drive away a car that you may not have managed to buy outright. When all the payments are made, the Hire Purchase agreement ends and you own the car. If you choose to pay for your car with a Hire Purchase agreement, you will normally pay an initial deposit and will pay off the entire value of the car in monthly instalments. This guide will show you three of the most popular finance plans – Hire Purchase (HP), Personal Contract Hire (PCH) and Personal Contract Purchase (PCP) – to help you decide which is right for you.
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