Personal Contract Purchase (PCP) car finance

Here’s what you need to know to help you decide if a Personal Contract Purchase (PCP) deal is right for you.

How a PCP deal works

PCP is a finance agreement where you pay a deposit followed by fixed monthly instalments, with an optional final payment. It allows you to spread the cost of the car over a period of time and could be the right option if you like to change your car regularly.

HP and PCP representative example. If your borrow amount is £6,000 with a deposit of £1,000, a selected term of 48 months, at a representative APR of 17.9% (fixed) and an annual fixed rate of interest of 17.9%, you would pay £171.83 per month. Total charge for credit will be £2,247.84 and total amount payable is £9,247.84. This representative example is for illustration purposes only and some vehicles may not match the lenders criteria by age or mileage. CarMoney may still be able to offer an alternative option to help you purchase the vehicle. For full T&Cs please click here.

This calculator is for illustration purposes only. Your actual repayments could be lower or higher depending on your personal circumstances. The make, model and age of the car you’d like to purchase will also impact the final figure quoted.

PCP might be right for you if you:

  • Are thinking of changing your car in a few years time.
  • Want to make lower monthly payments with an optional final payment at the end to own the car.
  • Want a more expensive model with lower monthly payments than a HP agreement.

What happens at the end of the PCP agreement?

The typical length of a PCP agreement is usually between 24 and 48 months and you have three options when it ends:

  1. You can hand the car back to the lender
    The car needs to be in good condition and within the agreed maximum mileage or you may need to pay additional charges. Most lenders will pick up the car but it’s worth checking the terms of your finance agreement.


  2. You can change the car for another one
    If the actual market value of the car is higher than what the lender predicted, you can put the difference towards a new agreement, subject to your financial status.


  3. You can buy the car
    At the end of the agreement there will be a ‘balloon’ or ‘optional final payment’. This is the predicted value of what the car will be worth and is also the final amount you’ll need to pay if you want to own the car. If you decide to make this payment, including any purchase fees, you’ll then own the car.

Popular questions about Personal Contract Purchase

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If you’re looking for a car on a HP plan, you can use our CarMoney car finance calculator before you get started.

When you apply for a PCP agreement, a hard credit check is completed to help the lender make a decision on your finance application. This type of check will be visible to other lenders and can have an impact on your credit score. New finance agreements are subject to status.

There may be extra charges if you go over your agreed maximum mileage.

When you apply for PCP finance you’ll need to estimate your annual mileage. It’s important your estimate is as accurate as possible as you’ll be charged per mile over the agreed maximum mileage.

Normal wear and tear based on your agreed maximum mileage is expected, but you may also be asked to pay for any additional damage to the car.

You have the right to end your PCP agreement at any time by paying off your outstanding finance. This is known as settling your finance agreement.

If you’d like to settle your agreement early, you’ll need to contact the lender to receive a settlement letter confirming what you still owe (your settlement amount). This won’t include any remaining interest that you would have paid if you carried on with your agreement. This is known as an interest rebate. The amount of interest that you get back depends on where you are in the agreement.

Yes, you can. If you want to do this, it’s known as exercising your voluntary termination rights.

If you choose to cancel your agreement, you’ll need to make any remaining payments that are due up to this point. If the amount you’ve already paid for the car (including the deposit) is less than half the total amount payable, then you’ll need to make an additional payment to pay off the difference.

There may be extra charges if the car is not in good mechanical and cosmetic condition and is outside of reasonable wear and tear, or if you’ve exceeded the agreed maximum mileage allowance.

If you haven’t paid half of the outstanding amount and you’re experiencing financial hardship at any point during your agreement, some lenders may offer financial assistance.

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