Personal Contract Purchase is highly attractive and increasingly popular. It combines low, fixed monthly payments with exceptional flexibility at the end of the agreement. Your car has a guaranteed future value is calculated (based on agreed mileage and age) and becomes deferred as a final payment (balloon).
Crucially, you don't commit to buying the car at the outset. Instead, you use it for 24-42 months, deciding at the end of the agreement what you want to do. Either:
1) Buy the car by paying an agreed minimum residual value
2) Part-exchange the vehicle for another
3) Sell the vehicle privately (settling the balloon)
4) Or, subject to mileage and condition, return the car with nothing more to pay (e.g. if depreciation resulted in negative equity)
PCP is ideal if you're opting out of a company car scheme. You use your company car allowance to fund your PCP monthly payments without paying company car tax.
Why consider Personal Contract Purchase?
- Low risk - A minimum future value is guaranteed
- Low deposit - keeps valuable personal or business cash available
- Low fixed monthly payments - perfect for budgeting
- Choice - Buy the car, part-exchange it or just return it
- A better car - lower payments can help you choose a higher specification car
- Tax breaks - If you're opting out of a company scheme, your cash alternative isn't subject to company car tax
VAT free - no VAT on payment
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