What is a personal contract purchase (PCP) agreement
PCP is a similar type of car finance to hire purchase you still pay monthly instalments. The difference is that your monthly payments are only paying off the depreciation of the car, rather than the entire value of the car.
Returning the vehicle at the end of the agreement can get tricky. You have to make sure the vehicle is is good condition otherwise you will be charged for damages, this can become very costly.
Also at the beginning of your agreement you will state how many miles you will drive a year, be careful how many you choose because if you go over the allowance you will be charged for it.
How you pay for a PCP agreement
Personal contract purchase agreements work on monthly re-payment plans over 1–5 years.
Who owns the car?
The finance company own the car during the repayment period. If you choose to buy the car at the end of the period rather than giving it back, it becomes yours once you’ve made the final balloon payment.
Falling behind with your payments
If you fall behind with your payments the finance company may take the car off you. They will sell it and use the money to repay your debt. If money they get is not enough you’ll have to pay the difference plus any court costs.
If you have paid half of the amount owed, you can hand the vehicle back. You will have to pay any monies owed up to the time you end the agreement.