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At Volvo Shrewsbury our trained specialists will help you find the best finance solution and tailor it to your personal requirements. We have a variety of highly competitive finance packages which enables us to provide you a choice of monthly payment or monthly rental solutions to suit your budget.
What is Personal Contract Purchase (PCP)?
Personal Contract Purchase (PCP) is a finance product that allows you the opportunity to buy a new or a used car.
It is similar to a Hire Purchase agreement as you will usually pay an initial deposit, followed by monthly instalments over a term typically between 24 and 48 months.
PCP differs from Hire Purchase (HP) because your monthly instalments are paying off the depreciation of the car, and not its entire value, over the course of the term, this means you could choose a lower deposit or a lower monthly payment. Also, once you get to the end of your agreement, there is a final payment (often referred to as a minimum guaranteed future value). When you have paid your monthly payments you have three choices, 1. pay the final payment, 2. hand the car back with nothing more to pay (subject to mileage and condition) and 3. by far the most popular choice, part exchange your car where any equity you have is used as a deposit for your next car (or you can take all or part of your equity as lump sum cashback).
Can I settle my PCP agreement early?
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- Monthly payments on a car financed by PCP are usually lower than if your car is financed by a Hire Purchase agreement.
- If you decide not to buy the car, you can simply walk away when you've made all the payments.
- PCP is designed to help you drive away a new or used car once you come to the end of the agreement.
- If your car is worth more than the Guaranteed Future Value then you can use that equity towards a deposit on a new car.
What should you consider when option for a PCP?
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- If you want to buy the car you will need to pay your final balloon payment (the Guaranteed Future Value).
- You will need to agree your mileage e g if you do 12,000 miles per year for a three year agreement your mileage allowance is 36,000 miles. If you exceed your allowance there will be an excess mileage charge. E G if your allowance is agreed at 36,000 miles and you do 36,500 miles where the charge is 14.9p per mile you will be charged £74.50
- As with most finance agreements you won’t be able to sell the car without settling the finance.
- If you decide to keep the car you will need to settle the final payment, once that's done you own the car.
- You’ll need to keep the car properly insured, maintained and in your possession until the credit is paid off or you change the car.
What is Hire Purchase (HP)?
Hire
Purchase is a way to finance buying a new or used car where there are fixed monthly payments, once these are paid in full you will own the car. If you wish to change the car before paying all the monthly payments you will need to settle the finance as part of your new deal. Alternatively you can choose to settle the outstanding finance on your car at any time.
What are the advantages of HP?
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- You’ll be able to drive away a car that you may not have managed to buy outright.
- Unlike a PCP or PCH contract, you won't need to estimate your mileage at the start of your Hire Purchase agreement, so you'll avoid excess mileage charges.
- Once you’ve made your final monthly payment, including the option to purchase fee, you'll have full ownership of the car.
What should you consider when opting for HP?
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- Monthly payments may be higher than some other finance options, such as PCP, as you're paying off the full value of the car.
- You won’t be able to sell the car without settling the finance.
- You won’t own the car until you have made all of your repayments.
- You’ll need to keep the car properly insured, maintained and in your possession until the full value is paid off.
Can I settle my HP agreement early?
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Yes, you can end your finance early simply pay off the outstanding balance, or "finance settlement "as it is usually called, as provided from your finance company. There are different provisions within each finance agreement that allows you to do just that. If you have got through two-thirds of the way through your finance agreement, the options to end the finance agreement early open up.
Under a Personal Contract Purchase agreement, you can also pay the finance settlement bringing the agreement to an end early. After that,
you can choose to hand the car back or you have a second option.