What is Personal Contract Purchase (PCP)?
Personal Contract Purchase agreements are ideal for those wishing to invest in a new car on a regular basis, enabling you to pay an initial deposit followed by fixed monthly repayments over an agreed period of time. Instead of the full value of the car, however, these repayments cover the depreciation in value of the car over the course of the agreement. At the end of the scheme, you will have the option to return the vehicle, trade in for a new agreement, or pay a final balloon payment - known as the Guaranteed Future Value - to buy outright.

How does PCP actually work?​

A PCP agreement requires you to pay an initial deposit followed by fixed repayments over an agreed period of time up to 48 months. These payments cover the depreciation in value between the sale price and the Guaranteed Future Value. At the end of term, you can return the vehicle, pay the Guaranteed Future Value to buy outright, or trade in for another vehicle. 

What are the advantages of PCP?

The advantages of a PCP agreement include lower monthly repayments compared to other purchase plans, the opportunity to return the vehicle with nothing further to pay, and the chance to change vehicles on a regular basis. 

What should you consider when option for a PCP?

You should always consider the annual mileage you plan to cover as any miles in excess of this will be charged extra. Plus, you will be responsible for all maintenance and insurance throughout the agreement, despite not being the outright owner. 

Can I settle my PCP agreement early?

Yes, but you will be required to request a settlement figure. This will represent the difference between what the car is worth and what you still owe - a figure that may result in negative equity.

What is Hire Purchase (HP)?
A Hire Purchase scheme is arguably the most common and straightforward form of vehicle finance. It’s chosen by those who want to own their vehicle outright, but need to spread the cost over fixed instalments. Following payment of an initial deposit, you will agree to a remaining term in which to pay off the outstanding balance, meaning you will be the overall owner of the vehicle at the end of the term.

How does HP actually work?​

Many Hire Purchase agreements require a deposit of at least 10% of the vehicle’s value. The remaining balance will then be paid off in fixed monthly instalments over a 12-60 month period. Once all the payments have been made, you’ll typically be required to pay a small ‘Option to Purchase’ fee - often £100-£200. You’re then the outright owner of the vehicle.

What are the advantages of HP?

Hire Purchase enables you to spread the full cost of vehicle ownership over a set period of time, making purchasing more affordable. There will be no mileage restrictions and you will be the outright owner of the vehicle at the end of the agreement.

What should you consider when option for a HP?

Monthly repayments for a Hire Purchase agreement may be more expensive in comparison to PCP arrangements, and you will not be the overall owner until the last payment is made. You will also be responsible for insurance and maintenance costs, and cannot sell the vehicle without first settling your finance.

Can I settle my HP agreement early?

Settling early can be achieved by requesting a settlement figure from your financing company. This will cover the outstanding balance of the vehicle and any interest you owe.

What is Personal Contract Hire (PCH)?
Personal Contract Hire is sometimes referred to as Personal Lease, and is a hassle-free way for customers to obtain a vehicle for an extended period of time. It’s a long-term hire agreement whereby you lease the vehicle with fixed monthly payments and then return it at the end of the agreement.

How does PCH actually work?​

Most PCH contracts require you to pay three months’ rental upfront, followed by fixed instalments over a period of 24 to 60 months. You may have the option of adding a maintenance package to your agreement, which covers servicing and MOTs. At the end of the agreement, you hand back the car.

What are the advantages of PCH?

PCH is a hassle-free way to obtain a vehicle, as there’s no responsibility of ownership at the end of the agreement. The monthly payments are typically more affordable than those where you become the outright owner of the car, and you can change your vehicle every few years.

What should you consider when option for a PCH?

Annual mileage is agreed at the beginning of the term, so ensure your estimate is as accurate as possible, since excess mileage will be charged per mile when you hand back the car. It’s also worth noting that you won’t own the vehicle, or have the option to purchase it, so any damage incurred will be charged at the end of the agreement. You’ll also be responsible for the insurance and maintenance of the vehicle throughout the lease.

Can I settle my PCH agreement early?

While it may be possible to cancel your agreement early, it’s not generally recommended, as charges will likely apply.