PCP Finance

PCP (Personal Contract Purchase) is one of the most popular ways to finance a vehicle. Not only is it cost effective in terms of monthly payments over a traditional HP agreement, but it also gives users three options to choose from (keep/buy, trade, or return) at the end of their contract.

Introduced in the late 90s, PCP is built upon a traditional Hire Purchase (HP) agreement, the biggest difference between both finance options is the future value of the vehicle, which is decided by the lender at the start of the initial contract and then deferred until the end.

This value, also known as the Guaranteed Minimum Future Value (GMFV), is determined by a list of criteria: such as the starting mileage, an annual mileage limit as projected by the user, and the car’s age.

It’s important to remember though, that unless you choose to pay this GMFV at the end of your finance deal – the car is not yours.

PCP car finance works as a form of leasing, so making any changes or exceeding the limits outlined in your contract may have financial repercussions.

At the start of a personal contract purchase finance agreement, you will be expected to pay a starting deposit. This is normally a figure between 10% to 30% as standard, before starting to pay off your balance in fixed monthly payments over a pre-agreed period of time.

A PCP finance contract offers the advantage of consistent monthly payments, which are typically lower than those of traditional Hire Purchase (HP) finance plans, for a predetermined duration.

This kind of agreement does allow a more flexible ownership cycle, with the chance to swap your car more regularly if you want to, along with the bonus of newer cars and the benefits that come with those (manufacturer warranties, safety features, technology).

We find on average PCP customers tend to switch around 3 years into a 4-year agreement, making the most of any positive equity they may have accrued (this is not guaranteed) as a deposit for their next car.

At 24 to 48 months into your payment period, customers have three choices available.

You might decide to hand the car back after your payment period ends and walk away with nothing more to pay. It’s important to note that the car must still be in excellent condition and within the agreed mileage limit – otherwise, you could face further penalties, such as excess mileage charges. If essential maintenance has been neglected, you could also be responsible for the cost of repairs.

But if you are keen to keep the keys, all you have to do is pay off the remaining GMFV and drive away — the vehicle is now yours. You can do this is one lump sum or by refinancing the rest of the GMFV, our team are extremely well versed in refinancing so don’t hesitate to get in touch! If you want to change your vehicle, you can simply part-exchange it towards the new one and the dealer will normally pay off your settlement as part of the process.

As with all products within the industry, it is still important to be mindful when taking out a PCP  car finance agreement.

Despite its obvious benefits in terms of flexibility and (typically) lower monthly payments, there can be some situations where a PCP agreement might become more expensive in the long run when compared to a Hire Purchase.

Opting for a smaller deposit at the beginning of your agreement might seem like a sensible choice, but it can also cause issues should you exceed the limits.

Financial penalties such as excess mileage charges will not only hit your wallet; they are also liable to put you at risk of negative equity too, which is a frequent mistake made by people navigating this part of their finance journey.

At Magnitude Finance, we’re here to help. Our experienced and discerning financial experts will be able to offer you tailored advice and offer support on car finance options where needed, ensuring that everything is handled to the very best standards.

Whilst both options have their advantages, the best pick for you will ultimately come down to your preferred payment schedule and what you’d like to do with the vehicle once your agreement period is up.

PCP finance is a popular alternative to using traditional loans to secure funding on a chosen car. This is because the future value of the chosen vehicle is calculated and used as the final payment at the end of the agreement term – so you’re safe from fluctuations in price.

As long as you deliver those fixed monthly payments on time, what you do with the vehicle at the end of the contract is entirely your choice – giving you the freedom to change your mind throughout.

We also know that circumstances change and you may wish to settle your finance agreement early. With PCP finance – as a regulated agreement under the Consumer Credit Act – you have the option to do this. At Magnitude, our team of financial experts are on hand to help smooth out the process, making sure that you get an accurate quote that covers the exit fee.

This fee is the amount still owed, plus potential penalty charges that may be accrued. This is usually an exit fee totalling at 58 days interest charge. As with all our leading financial products, we can discuss the best options for you and your situation, ensuring that you drive away happy.

You can also determine an estimate of this figure by using our settlement calculator or get an accurate and straightforward quote by getting in touch with our team directly.

Please note that this calculator does not take exit fees into account when producing a number.

We know your time is precious, which is why clients old and new can get in touch with our team of dedicated car finance experts in the way that suits them best. From easily accessible quotes from our industry-leading calculator, our WhatsApp chat, Live Chat, or a good old-fashioned phone call, the choice is yours.

As well as being fiercely independent, we’re proud of the proven track record we have in helping clients get behind the wheel of their dream cars. A number of our team are self-confessed petrol heads, who love nothing more than rising to the challenge of tailoring the ultimate bespoke PCP finance packages for all our clients.

When it comes to the end of your PCP finance deal, we can also offer further assistance should you wish to continue your journey with us. Whether you are funding something new or refinancing to keep your current car, we can fuel the funding for whichever purchase comes next.

At Magnitude Finance, we’re determined to make every step of the finance process simple, smooth and straightforward. In just a few clicks, our free online PCP car finance calculator will give you the best quote for your chosen vehicle. All you have to supply is the details for the car of your choice, just add the registration, or add these manually – and our calculator will produce a precise figure. We regularly update our calculator so our clients are always at the forefront of the latest model releases and industry upgrades.

Getting a PCP finance quote from us couldn’t be easier. The choice is yours here, you can use our free online finance calculator for a quote in just a few clicks, you can call us on 01943 660703, use our Live Chat or WhatsApp facilities, or simply fill in our handy contact form at the bottom of the page – and a member of our dedicated team will get in touch.

At Magnitude Finance, we always work with our clients in mind. That’s why we work tirelessly to create the best packages for you and your interests, offering advice and support when needed. When it comes to supplying customers with no-nonsense, no-obligation quotes, we’re the perfect pit stop.

If you feel PCP is the right product for you, try our free online finance calculator for a quote in just a few clicks!