What is Personal Contract Purchase (PCP)?
What is Personal Contract Purchase (PCP)?
Personal Contract Purchase is a flexible product for private individuals, similar to Personal Contract Hire, that offers you either the option to purchase the vehicle at the end of the contract at a pre agreed figure, sometimes called a guaranteed future value, or, you can return it to the funder, subject to mileage and condition. Charges may apply and will be subject to the vehicle being free from accident damage and excess mileage. It has the same flexibility as personal contract hire with the options to tailor your agreement to your requirements and if you don’t wish to pay the guaranteed future value at the end of the contract, you can hand it back, subject to the terms, and start again.
The information below gives you a good idea of how the rentals are calculated and the benefits to you along with the points to consider about this product before choosing it.
What affects the Monthly Rental Price?
A number of factors come into play when calculating the monthly payment and these need to be considered when thinking about which vehicle to purchase. Our team here are happy to discuss these in detail, we believe it important you make an informed decision that is right for you, not us.
Vehicle Purchase Price – This a big factor, the more expensive the vehicle, generally, the more you can expect your payment to be, although strong residual values can sometimes buck this trend, resulting in a nice surprise. We source and negotiate the price of the vehicles ensuring we achieve the most competitive prices, and don’t worry, we only buy from the manufactures franchised dealers.
Residual Value – The amount the funder believes the vehicle will be worth at the end of the contract term. They decide this based on how old the vehicle will be and how many miles will be on the clock at this point (and condition of course), they monitor previous sales of the vehicles closely and constantly monitor industry data, which gives them a good idea of where to set it in the first place. The good news is - If they get it wrong and it sells for less than they had hoped to, it’s not your problem hence the term, guaranteed future value. This is subject to condition and mileage. The vehicle must be returned free from any accident damage and within the mileage parameters set at the outset.
Mileage & Contract Length – The more miles you do, the more the value of the vehicle drops, so of course, the guaranteed future value will be less and subsequently, the payments will be higher. Contract Length can have a varying impact, normally the longer you have the vehicle the lower the payment, but this is not always the case.
Maintained Contracts - You can choose to include the full maintenance package also, this includes; servicing, mechanical repairs, tyre replacement and comprehensive breakdown cover. Ideal if you do not want any surprise bills and a fixed monthly cost.
The Key Benefits of Personal Purchase (PCP)
- You can have a guaranteed future value, subject to mileage and condition, enabling you to purchase the vehicle at the end of the contract. However, if you do not wish to pay the guaranteed future value you can arrange for the funder to collect the car and dispose of it, if they sell it for less than they’d hoped it is not your problem (subject to the vehicle mileage not being over contractually agreed and subject to there not being any damage over and above what is considered, “Fair Wear & Tear”)
- Fixed Monthly Costs, making budgeting easier, maintenance can be included also.
- Flexibility in contractual terms such as contract length, annual mileage and vehicle choice, allowing for tailor made solutions.
- Option of ownership at the end (optional).
- No disposal risk if you choose to return the vehicle, subject to the conditions.
- Often gives you access to vehicles that may have been out of budget when looking to purchase.
Points to Consider
- Early Termination of the contract can be expensive.
- If you exceed your agreed mileage you will be charged an amount at a pence per mile rate already agreed in your contract terms.
- You are responsible for insuring the vehicle on a fully comprehensive policy.
- Road fund is usually only included for the first year.
- You must return the vehicle in a well maintained condition, this is always a point of concern for customers, but our funders work to a Fair Wear & Tear guide that shows what is and what isn’t acceptable, please speak to our team should you wish to see a copy before agreeing to the terms.