PCP Allows customers to purchase a car of their choice at a very attractive fixed monthly finance payment, with the benefit of a low initial deposit outlay and a guaranteed minimum future value (GMFV) at the end of the agreement.
PCP car finance is particularly useful if you are a company car driver opting out of the company car scheme (Cash for Car), because you can use your company car allowance or mileage reclaims to fund your monthly PCP payments and avoid paying excessive company car taxes.
Personal Contract Purchase provides the benefits of driving a higher specification vehicle for a lower monthly payment. Unlike the traditional car purchase plan, this is achieved by deferring a percentage of the total cost of the vehicle until the end of the contract which is known as the GMFV. At the end of the agreement the customer has three options:-
If you think the vehicle is worth less than the GMFV you can simply return it to the finance company. As long as the vehicle is in good condition and has not exceeded the agreed mileage, you have nothing more to pay. The finance company guaranteed this future value and they will absorb any loss.
If you want to keep the vehicle, you simply pay off the outstanding GMFV to the finance company.
You can part exchange the vehicle at a motor dealers for your replacement vehicle. If the trade-in value is greater than the GMFV, this sum can be used towards a deposit on the new agreement. Alternatively, you can sell the vehicle privately and keep any profit over and above the GMFV.
At the beginning of the agreement, you decide on the total mileage for the contract period. If you decide to hand your vehicle back to the finance company and your mileage exceeds the agreed mileage, you simply pay a fixed amount for every extra mile.
It is in your interest to minimize the vehicle's 'wear and tear' and not exceed the agreed mileage. When the agreement has finished, the vehicle may well be worth more than the GMFV, providing you with extra value. In simple terms 'normal wear and tear' means that for its age and mileage, the vehicle is in fair working order, condition and repair. A detailed guide will be provided to you by the finance company at the start of your agreement.