A Personal Contract Purchase (PCP) is a loan secured against the vehicle, where repayments are based on part of the value of the vehicle.
The finance company guarantees the minimum the vehicle will be worth at the end of the agreement known as the Guaranteed Minimum Future Value (GMFV) or Optional Final Payment (OFP). This is offset until the end of the agreement. PCP's can run from 2 to 4 years and repayments are determined by the size of the deposit, how many miles the customer intends to do and the length of the agreement.
|Initial Payment / Deposit||You may be asked to pay an initial payment / deposit|
|Fees||An arrangement fee charged by the lender that can be paid at the start of the agreement or spread over the term of the agreement. There is also an Option to Purchase Fee to pay if you want to keep the vehicle at the end of the agreement.|
|Restrictions||The vehicle must be kept in good condition and serviced and maintained according to vehicle manufacturer's recommendations. Mileage restrictions may also apply. There may be excess mileage charges.|
|Ending the Agreement||At the end of the PCP agreement you have three options:|
|Hand it back: If it is worth less than the GMFV, you can return the car and walk away – subject to mileage and condition.|
|Pay it off or refinance: You can pay the GMFV (plus any Option to Purchase fee) and keep the vehicle. You will become the legal owner.|
|Part exchange or sell: If the part-exchange value is greater than the GMFV, it can be used as a deposit for the next finance agreement or 'cash-back'. You could sell the vehicle privately once legal title is gained and settle the GMFV.|