A Guide To PCP Finance

Motoring can be an expensive business and weighing up which financial option is best for you can be a minefield. With that in mind, we take in-depth look at PCP and why it could be a great financial option when buying your new car…


Personal Contract Purchase (PCP) is the most popular method in Britain when it comes to car finance. It is essentially a loan deal, although you won’t own the car at the end of the deal unless you choose to. It is a great option if you like to change your car on a regular basis.

So, how does it work? It’s actually very simple. You put down a deposit (usually 10% of the value of the car). Then, a contract is drawn up that calculates how much money you will be repaying per month. The term is usually from around 3-5 years.

Once the term has finished, you have three options. You can either hand the keys in and walk away (essentially renting a car for the past few years), or hand the keys in but sign a new PCP deal on a more modern vehicle. Alternatively, if you decide you want to keep the vehicle, you will have to pay the outstanding balance on the car. This is called a balloon payment.

PCP is a very popular option because of the level of flexibility it offers, coupled with very affordable monthly repayments for what is likely quite a high-spec car. It is great if you are the kind of person who likes to change your car on a regular basis.

A PCP often comes with a set mileage agreement which is worth bearing in mind. If you exceed this limit when you come to hand the keys in, you will have to pay a penalty fee. It is better to over-estimate your mileage and accept that this will slightly increase your monthly premiums.

If you begin driving a car on a PCP deal and decide that you are indeed in love with it, you will have the rest of your term to begin putting money aside to pay off the balloon payment and make the car legally yours.

If you are considering buying a new vehicle and need help with any aspect of car finance in Wrexham, get in touch with the team at Acton Autosales who will be happy to help.