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How to Get Cheap Car Finance Through PCP

Personal Contract Purchase is one of the most popular forms of car finance. Its a flexible agreement which allows you to benefit from low monthly payments and low interest rates. There’s also a lot of freedom with PCP as you can choose a term and budget that suits you and also hand the car back to the dealer or keep the car at the end of the deal. The guide below looks at PCP car finance deals in more details and looks at how you can get cheap car finance through this type of agreement.

How does PCP car finance work?

PCP car finance doesn’t have to be confusing, but it can be a little more complex than other options. For example, hire purchase allows you to spread the value of your chosen car into equal monthly payments with interest. However, PCP lets you finance part of the cost of your chosen car and most of the value is differed till the final balloon payment. PCP can be offered on both new and used cars which gives the driver more flexibility. The lower payments also means that you could get a brand-new car but with payments similar to that of a used car on HP! PCP deals can be spread over 3-5 years and at the end of your agreement, you have 3 options.

  • Hand the car back to the dealer. Once all payments have been made, the car is within the agreed mileage and comes back in good condition, the car can then be returned to the dealer with nothing else to pay.
  • Pay the balloon payment and keep the car. If you want to keep the car you have been driving, you will need to pay the final balloon payment or refinance it and then the car is yours to keep.
  • Get another can on PCP. If you want to get another car on PCP, you can use any equity in your current deal and put it towards getting a newer, better car on finance with a new PCP agreement.

Benefits of getting a car on finance through PCP:

There are many benefits to car finance, from getting a used car on PCP to choosing low monthly payments to help spread the cost, it’s no wonder it’s one of the most popular car finance agreements.

Low monthly payments

Due to the structure of PCP car finance, drivers can benefit from low monthly payments, as most of the value of the car is differed until the final balloon payment. This means it can be a great way to finance a newer, and better car but still pay lower monthly instalments.

Choose whether you own the car.

PCP car finance gives you the freedom to choose whether you want to own the car at the end of the agreement. Whilst it can be possible to obtain ownership of the vehicle, it may not be the most cost-effective way to do so. If you wish to keep the car, you will need to pay the balloon payment first which can be thousands of pounds which not many people can afford to pay.

Low interest rates

Personal Contract Purchase agreements can benefit from low interest rates. Interest rates are really important when it comes to car finance as it can mean that you are paying more than you need to be without realising. Your interest is also included in your monthly payments so choosing a low interest rate car finance deal can be beneficial. People with good credit scores usually also benefit from the best car finance rates so if your score is a little on the low side, it could be a good idea to improve your score before you start applying.

Factors to consider before getting a PCP car:

There are so many benefits of PCP and for many drivers it’s a no brainer. However, there are a few factors that you should consider before you commit to getting one.

Mileage and damage charges

At the start of your PCP agreement, you will need to set an agreed mileage and also agree to keep the car in good condition. If you exceed your mileage or damage the car, you can face additional costs at the end of the deal when you choose to hand the car back.

Large balloon payment

The balloon payment at the end of a PCP is usually thousands of pounds to pay. If you wish to keep the car, you will need to pay this amount off first. You could try find a lender who will help you refinance the payment also, but it may not be the cost cost-effective way to get a car. PCP deals are usually best suited to those who just want to use the car for a period of time and have no intention of buying it.



Jeff Campbell