How to Go About Personal Contract Purchase
Personal Contract Purchase (PCP) is one of the primary forms of car finance that you often come across in the market. By opting for this option, you’ll need to defer a more significant portion of your payment throughout the tenure of the loan. You may continue to make payments worth a much smaller amount for as long as your agreement is in force. However, for owning a car outright, you’ll only need to make a balloon payment or pay for a lump sum. It’s certainly a good option for you if you wish to shed the burden near the end of the agreement term.
You’ll need to bear a deposit worth 10% while signing up for a PCP agreement. The deposit amount may vary, or you may not have to pay for it with some PCP. You’ll then need to bear a particular payment for a specific period.
How to Differentiate PCP from HP
Hire Purchase is an alternative method of vehicle financing. Under this method, the entire cost of your car and the interest determine the monthly payments. This, in turn, makes the fees more expensive. At the same time, you’ll remain the owner of the car by making your payments on a timely basis; you won’t need to worry about the final balloon payment.
You won’t need to pay back the entire cost of your vehicle throughout the tenure of the PCP agreement. This is the primary difference of a PCP agreement with that of HP. You’ll only need to pay the difference between an estimated value of the car at the completion of your agreement term and its initial cost; it’s the value that is deferred till the very end.
The Guaranteed Future Value (GFV) is estimated to be worth the final value that you pay for owning the car instantly. The GFV is determined with the help of depreciation rates based on the projected mileage apart from the model and make of your vehicle.
You must remember that you’re meeting an interest on the entire price of your car instead of the amount they’re lending. However, you may even check out a few car finance deals worth 0% interest offered by a few car manufacturers. You’ll be meeting APRs worth 4-7%.
How to Achieve PCP finance
You’ll need to get in touch with a manufacturer or dealer for arranging the PCPs. You’ll need to contact another finance company and arrive at an agreement. You’ll need to bear a deposit worth 10% of the car price unless you choose a PCP that doesn’t require you to pay a deposit. Again, if you’re purchasing a brand new vehicle, you may avail deposit contributions from a few manufacturers by opting for financial products that they approve.
Is it Good to buy a Car on PCP?
PCPs are an excellent option for those of you that wish to sell your car off in just a couple of years. It’s also a good thing for you to consider if you aren’t sure about retaining your vehicle till the end of your agreement. Although you may use it for financing a used car, it’s a much favorable option for funding a brand new car. You may choose to go with much lower monthly payments with the PCPs.
PCPs work more effectively when you begin a new one after the existing agreement ends. The PCPs are also your best option when your car has substantial value to fulfill a new deposit as well as the balloon payment.