Compare PCP finance deals
A personal contract purchase agreement or PCP deal is a popular way of financing both new and used cars. More than half of vehicles financed through a dealership in 2020 used a PCP* agreement.
More drivers are choosing PCP plans because they can offer lower monthly payments compared to some other types of finance. This can make newer and expensive cars more affordable.
Monthly payments are lower as they cover just the fall in value of the car over time (the depreciation). At the end of the deal you can either make a big final payment to keep the car or you hand it back to the finance company.
Your car acts as security, which means if you have a problem with repayments they can take it away.
*Source Finance & Leasing association - https://www.fla.org.uk/research/motor-finance-key-statistics/
With a PCP deal you may have to pay an up-front deposit (more common for new cars) then you’ll borrow the rest of the value of the car from the finance company. You’ll pay monthly repayments on this loan.
Your monthly repayments will be affected by the ‘guaranteed minimum future value’ of the car – or GMFV. This is based on how much the vehicle is expected to fall in value during the PCP term, which varies by make and model of the car and your expected mileage. The PCP agreement provider will also look at the interest rate and length or term of the PCP deal to work out your repayments.
At the end of the agreement, you’ll typically have three options: Keep the car, trade it in for a new vehicle or hand back the keys and walk away.
How much the PCP agreement will cost in total will depend on what you decide to do at the end of the deal – keep the car or trade in, for example.
Keep the car
Although PCP deals can work out as a lower cost option on a monthly basis compared to hire purchase or a personal loan, if you want to own the car at the end you will usually have to make a large ‘balloon’ payment to settle the total debt.
Hand back the keys
If you choose to hand the car back you won’t pay the large final payment to own the car. But be aware additional costs could still apply. There could be charges if you’ve gone over your ‘pre-agreed mileage’ or the car is damaged beyond fair wear and tear.
36 Month Example |
|
|---|---|
Car Price |
£15,000 |
Deposit |
£1,000 |
Representative APR |
7.9% |
Option to purchase fee |
£10 |
GMFV / Final payment |
£6,750 |
Total payable |
£17,438.62 |
Total cost of credit |
£2,438.62 |
Source: Motiv Finance. Representative 7.9% APR.
When it comes to financing a car purchase – whether new or used – there are a range of options and it can feel a bit overwhelming. As well as PCP agreements you could consider a car loan or hire purchase. But think carefully about your financial situation, how you want to use the car – and for how long – to work out which route is best for you.
If you’re approved for a car loan you’ll get the cash paid straight into your bank account. You’re then free to shop around for the car you want – either privately or through a dealership. Car loans aren’t secured on the vehicle so if you got into difficulties and fell behind on repayments the lender couldn’t repossess your car. But this does mean interest rates are likely to be high, particularly if you don’t have a perfect credit score, so the purchase will be more expensive.
With this arrangement the finance company pays the dealership for the car directly. You then make monthly payments under the hire purchase plan. These deals are secured against the vehicle so if you fall behind on repayments the finance company could take it away. But this security means the lender can typically offer lower interest rates – so these products are likely to work out as a cheaper option. This could be valuable if you know you have a less than perfect credit score.
As with any choice of finance there are pros and cons to consider with a PCP deal before you take the plunge:
When you take out a PCP deal the finance provider will do a credit check on you to assess your credit history and credit rating. It means that if you have missed debt payments in the past or you’ve got CCJs against you this could affect your ability to get the finance.
However, because PCP finance is secured – this means the car itself acts as security (it can be taken back by the lender if you default on your payments), then you may still be able to get the finance even if you have a poor credit history.
So, while it could be more difficult, it may be possible to get a PCP deal with bad credit. That said, if you are accepted for a PCP deal, expect the interest rate you're offered to be higher than someone with a flawless credit history.
You can use our free service to find out if you might be eligible for a PCP deal with no impact on your credit score.
Representative 7.9% APR
Let us take the strain out of finding a PCP deal. With Motiv’s free service it takes just a few minutes and you can see your results and decide which plan suits your needs.
If you’ve already found your ideal car enter the details. If not, you can still use the service to see available offers
These are required to check your eligibility for offers, but don’t worry there’ll be no impact on your credit score
If a PCP deal matches your needs you can apply online with your chosen finance company
No, PCP is a popular way of financing both new and used cars.
Yes, you can usually settle PCP deals early. If you wish to do this you should contact the finance company (ideally in writing) and ask them to tell you the total amount you must pay to clear the loan in full. This amount is called an ‘early settlement figure’ and once you have this to hand you’ll have 28 days from when they received your request to pay the amount off in full.
Assuming your finance deal is a regulated agreement the lender is required by law to include a rebate for a portion of the interest charges that are yet to be incurred (the exact portion depending on how close to the end of the agreement you are when you choose to settle the balance).
Sometimes a PCP deal may not be a regulated agreement, for example if you’ve bought a very expensive car or a classic car. In this case you may not automatically be given the same flexibility for early settlement. You should ensure you understand this before signing up to such an agreement.
If you wish to make any modifications to a car that is currently financed with PCP then you’ll usually need to obtain permission from the finance company. This is because although you may be the registered keeper of the car, the finance company will be the owner until the finance is paid off in full.
If the amount you have borrowed is under £25,000, you can usually cancel within 14 days of the agreement being signed. This period is often called a "cooling off period" and the finance company will provide you with details of the specific process you would need to follow. If you’ve borrowed £25,000 or more, speak to your finance company to understand your options.
If the finance cancellation request is accepted it will need to be repaid in full. This will involve the lender reversing the payment with the car dealership and arranging for the car to be returned to them. However, you should not assume the dealership will automatically be willing to take the car back. If you bought the car on the premises of a car dealership and signed a ‘vehicle order form’ at the location, you may be legally required to pay for the vehicle in full which will require you to have funds available or alternative finance agreed. Also, if you paid an initial cash deposit, this may not be refundable – even if the dealer does take the car back.
Beyond 14 days, your options to cancel the agreement are likely to be more restricted. If your agreement is a ‘regulated agreement’ you’ll usually have a right under UK Law to voluntarily terminate your agreement once you have paid more than 50% of the total amount payable. Check your agreement or speak to your finance company to find out your options.
In nearly all cases, you will need to insure the car you buy with a PCP agreement yourself - just as if you had paid for that car in cash. Some dealerships may offer insurance as part of their overall deal, but you should never assume this is the case.
The finance company will usually require you to take out a “fully comprehensive” insurance policy. If the car is damaged or written off, this provides the finance company assurance that the loan can be repaid.
With so many finance choices available, thinking about how you’ll pay for that new set of wheels can be confusing. Our guide explains car finance so you can decide which option is right for you...
Zero per cent car finance could save you money on your next car – new or used. Our guide explains more with handy tips on securing a great deal
Personal contract plans and hire purchase have similarities but there are also key differences. Our guide can help you decide which route may suit you best for your new car
Personal contract hire is a type of long-term vehicle renting. Our guide explains how it works, the pros and cons and whether it’s the right car finance option for you.
Financing a used car can feel overwhelming. There are lots of option - but which one is most suitable for you? Our guide explains all you need to know
Hire purchase and leasing are different ways to fund a car purchase. Understand which might better suit your needs
Our guide compares car finance to using a personal loan - to help you decide which option is best to fund your new car
Can't find what you're looking for? Try looking at our news, views and in-depth savings guides
Personal loans - Bad credit loans - Car finance - Secured loans - Debt consolidation - Home improvement loans - Loan calculator - Wedding loans - Holiday loans - Business loans - Instant decision loans - Secured bad credit loans - Bad credit debt consolidation loans
Loan guides - Credit reporting services - 0% purchase credit cards - Payment protection insurance - Loans jargon buster
Admiral Bank - Barclays Bank - Hitachi Bank - M&S Bank - Sainsbury's Bank - Santander Bank - Tesco Bank - Yorkshire Bank - Zopa Bank
MoneySuperMarket gives you lots of clever ways to save a lot, by doing very little.
So how do we make our money? In a nutshell, when you use us to buy a product, we get a reward from the company you’re buying from.
But you might have other questions. Do we provide access to all the companies operating in a given market? Do we have commercial relationships or ownership ties that might make us feature one company above another?
We commit to providing you with clear and informative answers on all points such as this, so we have gathered the relevant information on this page.
