Personal contract purchase explained

Personal contract purchase, usually known as PCP, is a very popular way to purchase a car that has some great benefits. The detail below explains the key features of this method of financing your next car purchase.

PCP explained

A PCP is a way to purchase a vehicle which defers some of the vehicle cost until the end of the finance agreement.

The deferred amount is known as the Guaranteed Minimum Future Value (GMFV) or sometimes as the Optional Final Payment. Interest on this deferred amount is included in the monthly payments that you are quoted.

You have the flexibility to choose the amount of deposit and the term of the agreement and as this is a fixed interest loan the payments will not change during the agreement.

Finance Explained
*At the end of the agreement you have three choices:
  • 1. Pay the GMFV in order to own the car;
  • 2. Hand the car back.
  • 3. Use any value above the GMFV as a deposit against another car.
  • There is no guarantee that there will be any value above the GMFV.

You agree an annual mileage as part of this agreement and it is important that this is accurate. If you exceed the agreed mileage, and choose to hand your car back at the end of the agreement, then excess mileage charges will apply. Your car must also be in fair condition for its age and mileage. Your vehicle is at risk of repossession if you do not maintain the contractual repayments.