Personal Contract Purchase

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.