PCP (Personal Contract Purchase) explained: How to get it right
Personal Contract Purchases are becoming increasingly popular in the UK
British buyers are increasingly turning to PCP deals when buying a new car; we run through seven ways to make sure you maximise an agreement
PCP or Personal Contract Purchase deals are becoming an increasingly popular way for British motorists to run brand new cars.
With attractive down payment and monthly rates, PCP deals can often work out as the most cost effect way to land yourself with the latest model.
We run through seven key pointers you should follow to make sure you get the most from a PCP agreement.
1. Always work out the entire cost of the plan, including not just what you’ll be paying each month but also the deposit. Remember also that PCPs frequently last for as little as two years or as long as four.
2. The size of the initial deposit and amount paid each month are inextricably linked; the less you pay for one, the more you’ll pay for the other. Make sure that the plan you choose is the right one for you.
3. Companies offering PCPs must also allow you to buy the car outright at the end of the contract period and for a sum agreed at the time of the contract guaranteeing its future value. However, this has the effect of turning the PCP into a hire purchase (HP) agreement and, in such cases, it may be cheaper and better to take out an HP plan instead.
4. Beware excess mileage charges. Have a good idea about how many miles you’re likely to drive each year, and if the plan doesn’t cover that with space to spare, take care. PCP companies make a huge amount of money from people who don’t have a realistic approach to mileage and then get clobbered for every additional one they cover.
5. Check what is and isn’t covered. Most include road tax and some include servicing. Few include wear and tear. How much will it cost you if you return the car with scratched paint or damaged alloy wheels.
6. Remember that if you plan to keep the car, or even want to retain that option, it may still make more sense to buy it outright if you can afford to, especially with lending rates at their current historic lows.
7. As in all important deals, don’t be seduced by the idea of a shiny new car wearing the latest plate until you have done all the maths, checked the small print and made sure the deal makes sense for you.