What is PCP in Used Car Finance

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Here at Essex Car Company we are specialists in used car finance in Essex. There are a few different types of car finance available to you as a consumer, but the most popular options are PCP and HP. If you don’t know the difference between PCP and HP finance we recently wrote an article that you can check out just here.

Within this article we will talk about PCP and explain it in more detail so you’re best placed to understand which finance product will suit you best. First of all PCP stands for ‘Personal Contract Purchase’, which is basically a loan that helps you buy a car. With a PCP deal you won’t be paying off the full value of the car AND you won’t officially own the car unless you choose to pay the large lump sum come the end of your term).

PCP is made of up three main parts in terms of money:

-          The deposit: Your deposit can be any amount you want to pay and with some car finance lenders it can even be nothing (no deposit finance) but usually it would be between 10% and 15% of the cars value but it is important to remember the larger your deposit the less you need to borrow and the lower your monthly payments.

-          The amount you are borrowing: This is the value of the car minus the deposit. Remember with PCP your repayments aren’t there for you to pay the full amount of the car. The repayments will covered the difference between what you’ve borrowed and the final payment the finance company will set (also called a balloon payment).

Then your monthly payments will be calculated by dividing the amount of finance you’ve agreed to by the term (usually from 36 months to 48 months). Remember when you’re getting used car finance the lower the interest rate the better the deal you’re getting.

You can either sort out your own car finance from a high street lender or broker or you can leave it to the dealership you’re buying from. Here at Essex Car Company we have relationships with a plethora of high street lenders and motor finance houses so we can do the legwork for you.

-          The final payment: If you want to keep your car past the finance term then you’ll need to pay the final balloon payment. This is the guaranteed future value that the finance company expects your car to be worth come the end of your agreement. It’s a personal choice on what you want to do and the finance company will contact you to ask what you want to do. If it turns out your car is worth more than the final payment then you can choose to trade it and use the extra cash as a deposit for a new deal.

If you’re looking for used car finance in Essex or used car finance in London then Essex Car Company are happy to help and if you have any questions please contact us and a member of our dedicated in house team will be able to help.