Personal Contract Purchase (PCP) is similar to a Hire Purchase agreement as you will usually pay an initial deposit, followed by monthly instalments.
PCP, How does it work?
At the start of your PCP contract, a Guaranteed Future Value (GFV) of the car is set by the finance Provider. This is the car's expected value when your contract ends. This means that the repayments are the difference between what the car is worth now and what it will be worth at the end of your contract plus interest, which is calculated on the full value of the vehicle.
It is important to remember that YOU are still liable for the full amount of the vehicle (including Interest on the finance) if anything happens to the car or if you settle early.
If you wish to keep the vehicle at the end of the contract you will need to pay the GFV (also known as a balloon).
At the end of the contract you have a few options. You can either:
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