Personal Contract Purchase is commonly referred to as a PCP and is another of the popular finance types that we here at Leodis Financial can offer.
Because PCP offers a balloon payment at the end of the agreement, it makes the monthly payments lower, so this option is becoming more and more popular for high-cost vehicles. You can have this agreement for a maximum of 48 months, but the vehicle can be no older than 7 years of age by the end of the agreement (If your vehicle is, say, 4 years old at the time of purchase, then you could only have the pcp for 36 months).
At the beginning of the agreement, you will agree your annual mileage and based on this your ‘Guaranteed Minimum Future Value’ (GMFV) will be calculated. If you go over the agreed mileage, you will not only get additional charges, but this can affect the GMFV. The balloon payment is based on the initially agreed GMFV and is due at the end of the PCP agreement.
Like the other agreements, there are a number of choices for you to decide on at the conclusion:
The most straight forward option is if you pay the balloon payment, the vehicle then becomes yours.
Alternatively, you can hand the car back to the dealership and walk away with no further payments due (unless there are additional mileage charges).
You can use any remaining equity in the vehicle towards your next vehicle once the balloon has been paid, meaning you own the vehicle.
You could look to refinancing the balloon payment.
Things to consider when choosing a PCP option to finance your vehicle:-
Make sure you have calculated and agreed enough miles per annum so you don’t go over and incur charges.
If you decide to terminate your PCP agreement early, there may be additional charges added.
HERE’S WHY YOU CAN HAVE CONFIDENCE IN LEODIS FINANCIAL
We are an independent reputable finance broker based in the UK and we are approved by SAF. Our team is hand selected so we can therefore ensure they work to the same exacting standards and will work hard to meet your needs for the purchasing of your vehicle. We always put our customers at the heart of our business.