What is PCP?

Finding the perfect family car is one thing, but choosing the best way to pay for it is another aspect you’ll need to think about. Thankfully, if buying a car outright is not an option, there are a few finance options that could suit you perfectly. One of the most popular is a Personal Contract Purchase (PCP).

But what does it all mean? This guide will break down what PCP is, how it works, and the benefits it offers, so you can decide if it's the right choice for your family. 

How Does a Personal Contract Purchase (PCP) Work?

PCP is a type of car finance that lets you spread the cost of a new or used car over a fixed period. Unlike a traditional loan, PCP gives you flexibility at the end of the agreement, offering the choice to keep the car, return it, or trade it in for a new one.

How Does PCP Work?

Here's a step-by-step breakdown of how PCP works:

1. Choose a Car: Select a family car that suits you, whether that’s an SUV to fit the whole family and your dog, or a compact, hatchback run-around.

2. Deposit: Pay an initial deposit to your dealership to secure the model of your choice, it’s usually around 10% of the car's total value.

3. Monthly Payments: Make fixed monthly payments over a set period, typically between 24 to 48 months. These payments cover the car's depreciation rather than its full value. A shorter term typically means more expensive monthly payments and longer term agreements mean paying less each month.

4. Own the Car: If you’re wondering ‘what happens at the end of my PCP agreement?’, you have a few options:

• Pay the Balloon Payment: If you love the car, pay a lump sum to keep it. 
• Return the Car: Hand the car back with no further payments, provided it meets the mileage and condition terms agreed when you took out the agreement. 
• Trade-In: Use any equity in the car as a deposit for a new PCP deal — perfect if you like having access to the latest models and tech. 

Benefits of a PCP agreement

So, why should you choose a PCP agreement? Let’s look at the benefits: 

• Flexibility: A PCP agreement is flexible. At the end of the term, you can choose to keep the car, return it, or upgrade. You won’t be stuck paying the total value of the car and you can give it back and choose a new one in a few years. 
• Lower Monthly Payments: Since you're only paying for the car's depreciation, your monthly payments are generally lower than with traditional finance. Your monthly payments tend to be determined based on your deposit, so the more you can save to put towards this, the less your monthly payments could be. 
• Upgrading: Don’t want to be stuck with the same model for what feels like forever? Enjoy the option of regularly switching to a new car, for the latest models with the most advanced tech.

Considerations When Choosing PCP 

While there are a range of benefits that come with this type of finance, there are a few things to think about too: 

• Mileage Limits: There may be mileage limits in your PCP agreement, which you’ll need to stick to whether you’re using the car to commute or on regular family holidays. Check the mileage allowance to match your driving habits and avoid charges.
• Condition of the Car: Keep the car in good condition to avoid extra charges if you decide to return it. 
• Balloon Payment: While monthly payments will be more affordable, be mindful of the final payment amount if you plan to keep the car.

Is PCP Right for Your Family?

So, would a PCP agreement suit your family? PCP is great if you want lower monthly payments and the flexibility to change cars frequently — perfect if you love new models and best of the best tech. If you don’t want to commit to keeping your car long-term, simply hand it back with a PCP agreement. 

Still not sure? Weigh up your options with our guides on car leasing and hire purchase agreements. Find out more about what to look for in the best family cars with our handy guides. 

For more information on PCP and to explore our range of family-friendly cars, contact our team of experts today here.