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How Does PCP Work?

When you’ve chosen your ideal vehicle, you’ll sit down with one of our advisors to agree your annual mileage and the term of the agreement – typically 18 to 48 months. We’ll then determine what the car’s Guaranteed Minimum Future Value (GMFV) will be at the end of the lease period, and tailor a package with a deposit and fixed monthly amount that suits your budget.

At the end of your agreement you have three options: Return the car to us with no further commitments, trade it in for another vehicle of your choice, or pay the optional final payment to own the car outright.

What is Hire Purchase (HP)?

Hire Purchase is a straightforward way to finance a new or used car, and is ideal for those who want to own their vehicle outright. After paying an initial deposit – usually around 10% of the vehicle’s value, the balance is paid off in fixed monthly instalments over a period of 12-60 months. 

At the end of the agreement, you pay an ‘option to purchase’ fee, normally of £100-200, which makes you the car’s owner.

Frequently Asked Questions

Vehicle finance can be complicated, so it’s natural that customers have questions when they’re deciding which package to apply for. Here, we’ve answered some common queries – but if you need more information, don’t hesitate to contact one of our expert advisors, who will be happy to help.

Personal Contract Purchase (PCP) Questions

How does PCP actually work?

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After agreeing an annual mileage and agreement length, you’ll make fixed monthly payments until the end of the lease. When the final payment has been made, you can either return the vehicle, trade it in for an upgraded model, or buy it outright.

What are the advantages for PCP?

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  • The monthly payments are usually lower, since you’re paying off the vehicle’s depreciation value rather than its full market value.
  • You can upgrade your vehicle every few years.
  • You have the option of handing back the car without any further commitments.
  • If the car is worth more than its agreed Guaranteed Future Value, you can use that equity towards a deposit on a new car.

What should you consider when opting for PCP?

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  • You don’t own the vehicle – the only way to do so is to make the final balloon payment (the Guaranteed Future Value) at the end of the contract.
  • Exceeding the mileage allowance will incur extra charges.
  • You won’t be able to sell the car without settling the finance first.
  • You’re responsible for the car’s insurance, road tax and maintenance while you are the registered keeper.

Can I settle my PCP agreement early?

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Yes, it’s possible to settle your agreement early. Simply ask your finance provider for a settlement figure, or ask one of our advisors for help.

Hire Purchase (HP) Questions

What are the advantages of HP?

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  • There’s no mileage allowance that you need to adhere to, so you can travel as far as you like without incurring extra costs.
  • You can spread the cost of your vehicle over a period that suits you, meaning you may be able to afford more than you think.
  • Once you’ve paid your final monthly instalment and the option to purchase fee, you have full ownership of the car.

What should you consider when opting for HP?

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  • You’re paying off the vehicle’s full value, which means monthly payments may be higher than with PCP.
  • You won’t own the car until you’ve made all the repayments, so if you wish to sell it early, you’ll need to settle the finance first.
  • During the course of the contract and beyond you’ll need insure, tax and maintain the car.

Can I settle my HP agreement early?

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Yes – simply request the settlement figure from your finance provider. Most offer the option to end the agreement early once you have got two-thirds of the way through it. You’ll pay a settlement fee, which covers the cost of any remaining unpaid instalments and interest payments.