PCP Finance

Personal Contract Purchase (PCP) is one of the most popular forms of car finance in the UK. It offers a flexible way to finance a vehicle with lower monthly payments compared to other options like Hire Purchase. With PCP, you essentially lease the car for a period of time and have several options at the end of the agreement: you can purchase the vehicle, return it, or trade it in for a new one.

How PCP Finance Works

PCP Finance is structured to give you the freedom to decide what you want to do with the car at the end of the contract. Here’s how it works:

  • Initial Deposit: Like most car finance agreements, you begin with an upfront deposit. This reduces the amount you’ll need to finance, lowering your monthly payments.

  • Monthly Payments: The monthly payments are calculated based on the difference between the car's initial value and its expected value at the end of the agreement (known as the Guaranteed Future Value, or GFV). These payments are usually lower compared to options like Lease Purchase because you’re not financing the entire value of the car.

  • Final Payment (GFV): At the end of the term, you have the option to make a final payment to buy the car outright. This payment is the pre-agreed GFV, reflecting the anticipated value of the car after depreciation.

Flexibility with PCP

One of the key benefits of PCP Finance is the flexibility it offers at the end of the agreement. You can choose from the following options:

  1. Buy the Car: If you’ve fallen in love with your car and want to keep it, you can pay the GFV and take ownership.
  2. Return the Car: If you decide that you no longer want the vehicle, you can simply return it to the lender with no further obligations (provided you’ve stayed within the mileage limits and the car is in good condition).
  3. Trade-In: If you’d like to upgrade to a newer model, you can trade in the vehicle. If it’s worth more than the GFV, you can use the difference as a deposit on your next car.

Understanding Mileage and Wear & Tear

PCP agreements include mileage limits and conditions on wear and tear. This is because the lender needs to ensure the car retains its expected value at the end of the term:

  • Mileage Limits: You’ll agree on a mileage limit at the start of the contract. If you exceed this limit, you’ll be charged extra per mile when returning the car. It’s essential to set a realistic limit based on your driving habits.

  • Wear & Tear: The vehicle must be returned in good condition, allowing for normal wear and tear. Excessive damage could lead to additional charges.

Can I End My PCP Agreement Early?

Yes, it’s possible to end a PCP agreement early, though it may involve additional costs. Here’s how it works:

  1. Request a Settlement Figure: Contact your lender to obtain a settlement figure. This is the amount you’ll need to pay to end the agreement early, which includes the outstanding finance and potentially the GFV.

  2. Sell or Trade-In the Vehicle: If the vehicle’s value exceeds the settlement figure, you could sell or trade it in. Any difference could be used as a deposit on your next vehicle or given as cashback.

  3. Early Termination: If you’ve paid off at least 50% of the total amount payable, you may be able to voluntarily terminate the agreement by returning the car without paying any further finance (subject to meeting the conditions of the contract).

FAQ

What is the difference between PCP and Hire Purchase?

The main difference is in the structure of payments and ownership. With PCP, you have lower monthly payments because you’re only paying for the car’s depreciation and have the option to buy the car at the end by paying the GFV. With Hire Purchase, you’re paying off the full value of the car over the term, and ownership automatically transfers to you after the final payment.

Are there any additional charges in PCP?

Yes, there can be additional charges in PCP if you exceed your agreed mileage limit or if the car has excessive wear and tear when you return it. There’s also the final balloon payment (GFV) if you choose to purchase the car at the end of the agreement.

Can I end a PCP agreement early?

Yes, you can end a PCP agreement early by paying the settlement figure provided by your lender. If the car is worth more than the settlement figure, you can use the difference as a deposit on your next vehicle. Alternatively, if you’ve paid off at least 50% of the total amount payable, you might be able to return the car and walk away from the agreement.

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Representative APR: 19.9% APR
We act as a credit broker, not a lender
Representative example: borrowing £6,500 over 5 years with a representative APR of 19.9%, an annual interest rate of 19.9% (Fixed) and a deposit of £0.00, the amount payable would be £166.07 per month, with a total cost of credit of £3,464.37 and a total amount payable of £9,964.37. This is an example only, lender fees may apply. The exact rate you will be offered will depend on your circumstances. All finance subject to status.
*Our lenders operate using an initial "soft search" which does not impact your credit score however, if you wish to proceed with the finance offered, the lender may carry out a "hard search" prior to sending you the finance documentation to sign.

Finance Calculator

Amount to Finance
Monthly Budget
-
£
+
-
£
+
24
36
48
60

Approximate Monthly Payments

Excellent Credit
10.9% APR
108
Good Credit
17.9% APR
127
Fair Credit
24.9% APR
146
Poor Credit
39.9% APR
193

The above rates and monthly payments are an example only. The actual rate you will be offered by lenders could be lower or higher depending on your circumstances


Representative example: borrowing £6,500 over 5 years with a representative APR of 19.9%, an annual interest rate of 19.9% (Fixed) and a deposit of £0.00, the amount payable would be £166.07 per month, with a total cost of credit of £3,464.37 and a total amount payable of £9,964.37.

*Our lenders operate using an initial "soft search" which does not impact your credit score however, if you wish to proceed with the finance offered, the lender may carry out a "hard search" prior to sending you the finance documentation to sign.

Approximate Amount You Could Borrow

Excellent Credit
10.9% APR
10.00
Good Credit
17.9% APR
10.00
Fair Credit
24.9% APR
10.00
Poor Credit
39.9% APR
10.00

The above rates and monthly payments are an example only. The actual rate you will be offered by lenders could be lower or higher depending on your circumstances


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With no impact to your credit score*

Representative example: borrowing £6,500 over 5 years with a representative APR of 19.9%, an annual interest rate of 19.9% (Fixed) and a deposit of £0.00, the amount payable would be £166.07 per month, with a total cost of credit of £3,464.37 and a total amount payable of £9,964.37.

*Our lenders operate using an initial "soft search" which does not impact your credit score however, if you wish to proceed with the finance offered, the lender may carry out a "hard search" prior to sending you the finance documentation to sign.

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Chelcie Rowe
Chelcie Rowe
Excellent customer service. Friend, helpful and patient. Knowledgeable and reassuring. This company helped when nobody else could in regards to finance, and Leon was exemplary.
Celin Roisin
Celin Roisin
Kirsty has been an absolute star the entire way - even when we had to change car last minute, she had it sorted and kept me feeling confident and secure throughout the entire process! I would recommend her to anyone and whoever gets her as an advisor is so lucky!!!!
Andrew Dean
Andrew Dean
Really smooth process, the guys were great from start to finish and couldn't be happier with my new car. Legends!
Dyan Walker
Dyan Walker
Excellent service. Ali was professional, attentive and extremely thorough. He explained everything clearly and was able to close the deal for me quickly. Initial contact was made on Saturday and by Monday everything was completed. 5* service.
Martin Ball
Martin Ball
Hello well had never brought a car this way before but was helped though the whole thing by great staff found a great car and within 24hours had a new car 5⭐ customer service
Toni Seraphin
Toni Seraphin
Was not expecting to be looking for another car so soon... and this was at no faulty of Happy motors... They handled the issue with my first car rapidly. Damian, Leon on the day of the bad event went above and beyond to rectify the issue and dealt with the dealership. This meant that Kirsty had to put up with me once again to find another car... and bless her understanding and patience again for dealing with me haha! I eventually found my car, and again Kirsty and happy motors were superb, quick and efficient fro. Auto trader add to the car being at my door... superb. I recommend this team to anyone and will spread their name far and wide.. and sorry to say Kirsty... I will definitely be back again without doubt or hesitation.
John Henry Oluebube Maduka
John Henry Oluebube Maduka
I recently had the pleasure of working with Kirsty at Happy Motor Finance to secure financing for my new car, and I am beyond impressed with the service I received. From the moment we connected, Kirsty was incredibly knowledgeable, patient, and attentive to my needs. They took the time to explain all the financing options available to me, ensuring that I could make an informed decision.What stood out the most was their commitment to finding the best possible Car, rates and terms that fit my financial situation. Kristy navigated through the paperwork with ease, making the entire process smooth and stress-free. A couple of times I was feed up and wanted to give up but Kirsty reassured me that this will workout in the end. Thanks to Kirsty's expertise and dedication, I am able to drive away in my dream car with a financing plan that works for me. I highly recommend Kirsty from Happy Motor Finance to anyone looking for a reliable and supportive finance company and representative. Thank you, Kirsty, for your outstanding service! I appreciate You😊
Kane Miller
Kane Miller
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Hashem Ahmed
Hashem Ahmed
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Company Name & Contact Details
Happy Motor Finance
Pennington House
16 Carolina Way
Salford Quays
Salford
M50 2ZY
0161 524 0582
Happy Motor Finance Limited is registered in England and Wales under company number: 14387669. Registered office address: Pennington House, 16 Carolina Way, Salford Quays, Salford, M50 2ZY

Happy Motor Finance Limited (FRN - 989250) is authorised and regulated by the Financial Conduct Authority. We act as a credit broker not a lender. We work with a number of carefully selected credit providers who may be able to offer you finance for your purchase. (Written Quotation available upon request). Whichever lender we introduce you to, we will typically receive commission from them (either a fixed fee or a fixed percentage of the amount you borrow) this will not affect the rate you are offered or the amount you will pay back. The lenders we work with could pay commission at different rates. All finance is subject to status and income. Terms and conditions apply. Applicants must be 18 years or over. We are only able to offer finance products from these providers.

Happy Motor Finance Limited are registered with the Information Commissioners Office under registration number: ZB408604

VAT Number: 456 0212 21
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