Personal Contract Purchase (PCP) is an increasingly popular car finance option. PCP offers the greatest flexibility at the end of the agreement, combined with fixed, low monthly payments.
If you are opting out of your company car scheme, PCP is the ideal choice. Your company car allowance can fund your monthly payments, without paying company car tax.
At the beginning of the agreement your car’s guaranteed future value is calculated, based on an agreed mileage and age. This is then deferred as a final ‘balloon’ payment.
With PCP you don’t have to commit to buying the car at the outset. You can use it for an agreed period of time (24-60 months) and then decide what you would like to do.
You have four options:
- Purchase the car, by paying an agreed minimum residual value
- Part-exchange the car for another
- Sell the car privately, therefore settling the balloon
- Or, subject to the mileage and condition, return the car with nothing more to pay (e.g. if depreciation resulted in negative equity)
The Benefits of PCP:
- Low Risk – a minimum future value is guaranteed
- Flexible Deposit – allowing you to free personal or business cash
- Control – you decide the deposit, you decide the term
- Low Fixed Monthly Payments – perfect for budgeting
- Increased Choice – buy the car, part-exchange or just return it
- A Better Car – choose a higher specification car with lower payments
- Flexibility – does not compromise your other lines of credit
- Tax Advantage – the cash alternative when you opt out of a company car scheme is not subject to company car tax
- VAT Free – no VAT on your payments