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Contract Hire and Leasing Guide

Benefits of Personal Contract Purchase (PCP)

Personal Contract Purchase (PCP) is a versatile and increasingly popular method of vehicle financing that offers a blend of affordability and flexibility, making it an attractive option for many drivers. Unlike traditional hire purchase agreements, PCP allows for lower monthly payments because it factors in the vehicle's Guaranteed Minimum Future Value (GMFV), also known as the balloon payment, at the end of the agreement term.

This innovative approach to car financing means that consumers can enjoy driving a newer vehicle for a lower monthly outlay, with the option to purchase the vehicle at the end of the term, part-exchange it for a new one, or simply return it to the dealer.

One of the key benefits of PCP is its adaptability to individual financial circumstances and driving needs. Initial down payments can be adjusted to suit the buyer's budget, and the length of the term typically ranges from 24 to 48 months, providing considerable flexibility. This financing option is particularly appealing to those who prefer to change their vehicle regularly, enjoy the benefits of driving a newer car with the latest technology and safety features, and appreciate having predictable monthly expenses without the unpredictability of car depreciation.

At the conclusion of a PCP agreement, customers are presented with several choices. They can opt to make the balloon payment to own the car outright, use any equity above the GMFV towards a deposit on a new PCP deal, or simply return the vehicle. It's important to be mindful of the contract's mileage limit, as exceeding this can incur additional charges. However, for many, the possibility of driving a new or nearly new car in a cost-effective manner, with the flexibility to adapt or change at the end of the agreement, makes PCP an attractive and practical choice for financing a vehicle.

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