PCP Car Deals

What is PCP Finance?

PCP car finance is a flexible form of paying for a car over a number of months/years. There are direct similarities to HP finance, in that there is typically a deposit to be paid at the start of the contract, followed by a certain number of monthly payments.

However, there are a couple of extra factors to a PCP deal over and above HP.

Firstly, there is a mileage limit to adhere to during the contract; this agreed limit affects the monthly payment in so much that the more miles done during the contract, the higher the monthly payment and vice-versa. If you go over this limit, there will be a charge at the end of the contract for every mile over.

Example PCP Finance Quote

Cash Price: £15,017; Total Deposit: £2,249; Amount to Finance: £12,768; Monthly Payment: £179.99; GMFV: £6,547.50; Interest Payable: £2,429.02; Total Amount Payable: £17,446.02; Annual Mileage: 5,000 (20,000 contract limit); Excess Mileage Charge: 3.6ppm; Duration of Agreement: 49 Months; Number of Monthly Payments: 48; APR: 6.3%; Fixed Rate: 6.24%

You will likely find on many PCP deals offered by manufacturers on new cars a Manufacturer Deposit Contribution – this goes towards the total deposit for the vehicle on top of your own. For example, in the quote above, the Total Deposit is made up of a £1,750 Manufacturer Contribution and a £499 Customer Deposit.

The mileage, as you can see, is given on an annual basis. In this example, this is set at 5,000 miles a year over a four-year period, equating to a total 20,000-mile limit. This doesn’t mean you have to do 5,000 per year, it’s more that it gives you a 20,000 limit for the contract as a whole.

For some, Personal Contract Purchase has its disadvantages:

Final payment to own the car costly – the GMFV will be a large sum and needs to be paid to own the car, though can be refinanced

Additional mileage costs – extra charges may apply if you go over your mileage limit

Good credit score required – typically, a decent credit score is needed to get accepted for PCP finance

Damage to vehicle a consideration – if handing the car back at the end, you’ll likely have to pay for any damage caused during your time with it

Firstly, it will depend on how old the car is as to whether you can finance it through a PCP deal, so ask ahead of time if you’re after such a finance package for a used car of interest.

This will also affect the length of the contract you’re able to take. While you can get a PCP deal on a new car of up to five years, given the age of a used car, this might be brought down to maximum of three. This is important to take note of as the shorter the contract, the higher the monthly payments cost.

In addition, a car’s cost can also rule it out of having PCP available if it its value is too low to accommodate this finance type.

Finally, you typically won’t get quite as much assistance on something like the deposit. While contributions from manufacturers and dealers are popular on new cars, used cars don’t tend to benefit from the same availability, so you may have to fork out more of your own money at this stage on a used vehicle.