Personal Contract Purchase (or PCP as it's referred to) is one of the more commonly used personal lease agreements. One of the main reasons for its popularity is down to the fact that a Personal Contract Purchase agreement gives you the option to buy the vehicle at the end of the contract term for a guaranteed price.
A deposit is required, this can either be a multiple of the rental (i.e. x3 or x6) or a set amount that you are comfortable with. You must set the annual mileage estimated. The greater the deposit amount, the lower the monthly rental. The contract term is normally set between two and four years. Generally speaking the longer the contract term, the lower the monthly payment. However, on occasions the finance company will offer a better monthly payment on a shorter term - so it's always worth checking!
The monthly payments are fixed for the contract term.
Next comes the Guaranteed Future Value (GFV) - you will also hear this being referred to as the "balloon payment". This is the amount the finance company calculate the car to be worth at the end of the contract term. There are three options available at the end of Personal Contract Purchase agreement:
Buy The Car - You can purchase the vehicle at the GFV price. Make the payment and the title/log book etc are put into your name.
Part Exchange - You can part exchange the vehicle. If the vehicle is worth more than the GFV then use that amount towards the deposit on your next vehicle.
Hand The Car Back - That's right, you can simply hand the car back at the end of the contract term and walk away. Even if it's worth less than the GFV! There are no charges for doing this, unless the vehicle is damaged beyond fair wear & tear or the agreed mileage allowance has been exceeded.
To sum up...a Personal Contract Purchase agreement is a great way to get a brand new vehicle without having to put down a large deposit, there are no residual risks and there is flexibility at the end of the contract.
If you have any questions or just want some straight talking advice please feel free to call our team on 0151 728 4711 or visit Stable Vehicle Contracts.If you are considering changing your lease car or van in the near future why not join the thousands of subscribers who already receive our weekly newsletter. Each week we aim to send out a selection of the very best contract hire & leasing offers in the UK!