PCP Finance

Personal Contract Purchase plan provides the benefits of driving a higher specification vehicle for a lower monthly payment. Unlike the traditional purchase plan, this is achieved by deferring a percentage of the total cost of the vehicle to the end of
the contract.

This percentage is known as the Minimum Guaranteed Future Value (MGFV) and is the key difference between PCP and traditional forms of financing.

The MGFV plus your deposit is subtracted from the selling price of the vehicle and your monthly payments are based on the balance (plus interest on the balance and the MGFV). Effectively, you will make lower payments than traditional financing simply because you are only funding the depreciation.

Option 1
.If you think the vehicle is worth less than the MGFV you can simply return it to the finance company. As long as the vehicle is in good condition and has not exceeded the agreed mileage, you have nothing more to pay. The finance company Guaranteed this future value and they will absorb the loss.

Option 2
If you want to keep the vehicle, you simply pay off the outstanding MGFV to the finance company.

Option 3
Thirdly, you can part exchange the vehicle with a motor dealer for your next new vehicle. If the trade-in value is greater than the MGFV, this sum can be used towards a deposit on the new agreement. Alternatively, you can sell the vehicle privately and keep any profit over and above the MGFV.

Excess Mileage
At the beginning of the agreement, you decide on the total mileage you expect to do. If, at the end of the agreement, having chosen to hand your vehicle back to the finance company, your mileage exceeds the agreed level, you simply pay a fixed amount for every extra mile.

Wear & Tear
It is in your interest to minimize the vehicle's 'wear and tear' and not exceed the agreed mileage. When the agreement has finished, the vehicle may well be worth more than the MGFV, providing you with extra value. In simple terms 'normal wear and tear' means that for its age and mileage, the vehicle is in fair working order, condition and repair. A detailed guide will be provided to you by the finance company at the start of
your agreement.

Hire Purchase

Hire purchase is very similar to a bank loan, where you choose how much deposit to put forward or use your part exchange and make monthly repayments over a 2, 3, 4 or 5 year agreement. And at the end of the agreement the vehicle is yours.

Lease Purchase

Lease Purchase has the same benefit as Hire Purchase and is often referred to as Hire Purchase with a balloon it offers additional flexibility for the customer and is structured in a similar way to Personal Contract Purchase (PCP).

The customer will normally benefit from a slightly lower rate with a Lease Purchase product and also have the ability to defer a capital lump sum amount, known as the Residual Value (RV), until the end of the agreement.

The Residual Value (RV) (sometimes called the balloon) at the end of the agreement reduces the regular monthly payments accordingly, thus making vehicles that traditionally have a strong Residual Value (RV) more suitable for this type of product as they make repayments far more affordable.

The Residual Values (RV) is calculated and set at the beginning of the agreement and although this is not payable until the end, it is always the customers risk and liability to dispose of the vehicle.

Deposits for Lease Purchase are flexible and are normally a minimum of 10% and a maximum of 50% of the total vehicle price, repayment periods are taken over 3 or 4 years typically.

At the end of the agreement, there is realistically two options, 1. Pay off the residual value in cash or settlement by part-exchange or 2. Some lenders will allow the residual value to be spread over a secondary period or refinanced again.

Key Benefits

• Lower deposits available.
• Cost effective rentals due to residual values.
• No tie to mileage contract.
• No lock in and settlement can be made at any stage of the agreement.