Car leasing has numerous advantages over buying a car outright – the car is leased and not purchased. So what if you could combine all of the advantages of a regular car leasing deal, but also have the option to own the vehicle outright?
Well you can, thanks to a process known as Personal Contract Purchase (PCP). Personal Contract Purchase agreements are growing in popularity and are actually a straightforward method of car finance as this guide to personal contract purchase will explain
- What is Personal Contract Purchase?
- What are the pros and cons of Personal Contract Purchase?
- Is Personal Contract Purchase right for me?
What is Personal Contract Purchase?
Broadly, Personal Contract Purchase (PCP) is the same as a personal contract hire agreement – but with one key difference.
At the end of the contract, there is an optional balloon payment that the individual can choose to pay in order to take ownership of the vehicle. This amount is determined at the outset and allows the driver to keep the vehicle if they are happy with it. However, it is not essential – on the contrary, as with a personal contract hire deal, you could choose to return the car to the leasing company and walk away.
A mileage limit will apply to all Personal Contract Purchase deals. This is because the leasing company will use the mileage limit to determine the vehicle’s depreciation and therefore its residual value. So it’s important to be honest with the leasing company about how much travelling you are likely to do – exceeding the mileage limit will lead to an excess mileage charge.
Personal contract purchase is seen as a direct alternative to hire purchase and is subject to the protections set out in the Consumer Credit Act.
For the best PCP deals in the UK, contact the Autobahn sales team:
Email:
Sales@autobahn.co.uk or call 08456 444993 option 1.
What are the pros and cons of personal contract purchase?
There are many advantages to personal contract purchase including:
- Fixed prices – you know exactly what you have to pay each month, which can help you budget.
- Initial down-payment – only a small deposit is required.
- Option to defer payments – if you include a balloon payment at the end of the term, you can defer payments.
- Re-finance – if you prefer, you can re-finance the balloon payment at the end of the term.
- Maintenance packages – most Personal Contract Purchase agreements will include maintenance packages that can range from basic servicing to total vehicle management.
- No depreciation concerns – it is not necessary to buy the car at the end of the term and so you can still choose to walk away without re-sale concerns.
- Access to more ‘upmarket’ vehicles – one of the key elements of a personal contract purchase deal is that it gives you access to previously unaffordable vehicles due to the low deposit and low monthly payments.
There are very few disadvantages to a Personal Contract Purchase deal but it is usually more expensive than Hire Purchase agreements. It is also worth remembering that you will have to arrange comprehensive car insurance as the car will not be yours until the balloon payment is made.
For the best PCP deals in the UK, contact the Autobahn sales team:
Email:
Sales@autobahn.co.uk or call 08456 444993 option 1.
Who is Personal Contract Purchase right for?
Generally, Personal Contract Purchase is seen as the ‘best-of-both worlds’, in that you can choose to walk away from a deal, or exercise the option to buy.
If you travel fixed distances and have a stable lifestyle, the mileage issue should not be a problem.
Consequently, Personal Contract Purchase deals are well-suited to people who want to drive a car and who want to keep their options open with the right to buy.
For the best PCP deals in the UK, contact the Autobahn sales team:
Email:
Sales@autobahn.co.uk or call 08456 444993 option 1.