PCP finance, or Personal Contract Purchase is a firm favorite of motor manufacturers and dealers in today’s competitive car market. Often these deals, characterised by low monthly payments with an optional final ‘balloon’ payment, are heavily subsidised by motor manufacturers, with attractive interest rates and finance deposits.
Advantages of PCP Finance
The clear advantage of these types of deals for the manufacturer is that they know when you have a decision to make on your new car, and you may find that the phone calls begin with a few months left on the agreement, to see of you can be tempted into a new vehicle again. Also the manufacturer knows that it can generate that most useful commodity, a range of 2 to 3 year old part exchange stock, for its used car forecourts.
So if it is so good for the dealers, is it also good for the consumer?
Well actually yes.
PCP deals allow for a deferred payment at the end of the agreement. This can simply be paid if you wish to buy the vehicle outright. You can also use any equity (if the value of the vehicle is higher than the finance settlement, or balloon payment), as a deposit towards a new vehicle.
PCP Finance the best choice?
Other advantages of using a deferred payment at the end include lower monthly payments over a shorter period. This is because you only pay off a proportion of the vehicle over the shorter period, not the full amount. This makes the overall scheme more affordable, although it should be noted that you pay interest over the full price of the vehicle, including the final balloon.
In general PCP Finance deals make new car ownership much more affordable for all. No matter which manufacturer you go to, or which car dealership you enter, if you are looking for a brand new vehicle purchase then there is a good chance that the best deal on offer will be a PCP.