Understanding Personal Contract Purchase (PCP) in Three Easy Steps
If you’re considering buying an expensive car, you’ve likely heard of Personal Contract Purchase (commonly abbreviated to PCP). PCP is one of the most popular forms of finance options available, and it’s the one you’ll most commonly encounter.
You may be excited to get your new car, but it’s crucial to first understand what you’re getting into and exactly how PCP can help you; you may also already be utilising a PCP contact but haven’t fully understood the terms.
Whichever category fits you, in this article, you’ll learn the fundamentals with three easy steps!
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What Exactly Is PCP?
The key advantage of PCP is that it allows you to make low monthly payments on your vehicle so that you don’t have to pay outright.
You’ll have to pay some sort of deposit on the car’s value, which is usually within the range of 10-20%. You don’t pay for the full value of the vehicle: only for the depreciation during the contract term.
At the very end of the contract term, you’ll need to pay something called a balloon payment – this represents the remaining value of the vehicle. At that point, you can decide to keep the car, return it, or trade it in for a new one.
The Benefits and Risks of PCP
As stated previously, the main perk is the low monthly payments, but it’s also the flexibility PCP affords you in being able to return the car or trade it in that makes this sort of contract appealing. It means that you’re never totally locked in.
There are a couple of downsides, however. You’ll have to keep a close eye on the mileage and take especially good care of the car, or you could be hit with some hefty extra charges come the end of the term. PCP agreements are also subject to interest rates which change over time, meaning you might end up paying more than you think.
PCP Claims: The Importance of Understanding Your Agreement
Unfortunately, it’s becoming more common for people to be mis-sold PCP finance deals: many have found that their contract was not fully explained to them and that they’ve even been deliberately misled. For example, many people have a potential BMW PCP Claims if they signed a contract with BMW Finance between 2007 and 2021. If this has happened to you, private claim-back firms can help you right through the process.
To avoid this eventuality, it’s critically important that you fully understand each element of your contract; ask for everything to be explained in full and always have a witness present.
Wrapping Up
Hopefully, you now have a better understanding of Personal Contract Purchase. As is the case with any contract, there are pros and cons, and the most important aspect is that you don’t rush into anything. Providing you go in armed with the knowledge you need and pay close attention to the terms, PCP can be a great choice for driving a car that otherwise wouldn’t be on the cards.
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