Personal contract plans

Personal contract plans

22 December 2011
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PCP is somewhat of a mixture of HP and leasing.

With PCP you pay a reduced monthly payment by rolling a large portion of the financing into an inflated payment that is payable at the end of the contract. Ownership of the car does not pass to the driver until these balloon payments are made. 

There are other alternatives at the end of the PCP contract. Drivers can return their car at the end of the deal or they can refinance the deal and hold onto the car in return for a renegotiated monthly repayment. 

The real purpose of PCP is to encourage regular trade-ups to a newer model every 2-3 years, which will allow you to skip the inflated payments, and therefore never actually own your cars but drive the latest model. 

The difficulty is people only see the reduced monthly repayments and may forget the balloon payment, or don't understand the contract they have entered into. Understand all the repayments, both regular and inflated, and read the small print carefully.

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