How to Take a PCP from a Car Dealer

A Personal Contract Purchase (PCP) is a method of motor vehicle financing that may avoid the depreciation trap and can be cheaper than repaying a loan. A PCP agreement allows you the option to set up a contract term with monthly payments. At the end of the term, you can purchase the vehicle outright or hand it back to the contract provider.

Instructions

Difficulty: Moderately Challenging

1. As with all financial products think about your long-term goals and your individual situation in relation to a PCP.
2. Think about the benefits. For example, there’s no negative equity and there can be less risk of depreciation.
3. Think about possible problems. Remember that you won’t own the car outright and you will have to keep up with payments.
4. Break it down and work out the approximate monthly price you’ll be paying. There are a number of factors involved when considering the monthly contract price such as: how much the vehicle costs new; how much deposit you are placing on the contract; the terms of the contract; how many miles you are intending to do; and the finance rate.
5. Work out how much you can afford to pay upfront and per month. Double-check. Is this still the best package for you? If you think you can afford it and it is, start to shop around!
6. Compare PCP quotes for new vehicles from different car dealers. Although the PCP procedure will be the same wherever you go (deposit, monthly payments, balloon payment, etc) that doesn't mean that you will get the same value for money wherever you go.
7. Don't allow yourself to be blinded into paying over the odds for a car because you don't have to pay for it all at once. Ask yourself if you were buying the car upfront, would you be happy with the deal or would it be too expensive for you? If you wouldn't pay for it upfront, it's not worth it.

Tips & Warnings

• Always get at least three different offers from car dealers before you commit to buy. This way you’ll be able to make a better decision and hopefully save a few more pennies!
• Always thoroughly investigate financial products before you commit to them and never rush in to anything without making a full assessment of your finances.
• PCP was designed specifically to be a personal contract for private individuals. Should you enter into a PCP plan, it is classed as a conditional sale agreement that offers you protection under the Consumer Credit Act 1974 and the Financial Services Regulations 2004.
• A PCP is a standard contract wherever you go. As long as the company providing you cover is regulated by the CCA you know you’ll be safe when you enter into the agreement.