Personal Contract Purchase
Personal Contract Purchase - Suitability Explanation
Personal Contract Purchase (PCP) is a fixed term and mileage-based agreement which gives you the option to purchase the vehicle. The vehicle will not belong to you until you have made all payments due under the contract. With PCP you will pay an initial payment followed by an agreed number of fixed monthly payments which is followed by an optional final payment know as a GMEV (guaranteed minimum end value). This optional final payment is set at the start of the agreement and is based on anticipated value of the vehicle taking in to account its age and mileage. When you reach this point, you have the option to pay the GMEV and obtain ownership of the vehicle or return the vehicle to the finance company.
Personal Contract Purchase may not be suitable for you in certain circumstances, for example:
If you do not know what your predicted mileage will be
Business type restrictions, e.g. vehicles to be used as Taxis or for Driving Schools
If you plan to export the vehicle or use abroad for extended periods
Benefits of Personal Contract Purchase
Low initial payment and fixed monthly payments
Road fund licence is only included for the first year
Ability to own the vehicle by making all payments due under the contract or by early settlement
For peace of mind motoring optional maintenance plans are available, for an additional fixed monthly fee
Option to simply return the vehicle at the end of agreement, removing concerns about disposal values and depreciation or pay the end value and keep the vehicle
Your contract will be regulated by the Consumer Credit Act 1974
Taking care of the vehicle
You must ensure that the vehicle is always comprehensively insured.
You must pay any additional charges that you incur for example a parking fine or congestion charge on time. If you don’t, the cost and/or fine will be issued to the finance company who will invoice this to you together with an administration charge that they will levy.
You must have the vehicle serviced and maintained by a main franchised dealer in accordance with the manufacturer’s recommendations and keep it roadworthy. If you do not service and maintain the vehicle, the funder will make a charge when the vehicle is returned as this will affect its value. You may add a cost-effective maintenance package which will cover routine servicing, maintenance costs and tyres, subject to fair wear and tear plus breakdown assistance to enable easy budgeting and give you fixed cost motoring. If you include a maintenance package please note the funder may decline to settle any charges if the total mileage on the agreement is exceeded.
If at the end of the agreement you return the vehicle to the finance company, they will assess the vehicle condition based on the standards set down in the British Vehicle Rental and Leasing Association’s fair wear and tear guide. Refurbishment charges may apply if the condition is not satisfactory.
If at the end of the agreement you return the vehicle to the finance company and have exceeded the total contract mileage you will be charged at the pence per mile as detailed in your agreement for the over mileage.
If at the end of the agreement you return the vehicle to the finance company, it must have all items that were present when it was delivered for example, all keys, the locking wheelnuts. If any items are missing, you will be charged for the replacement
Failure to make payments in full and on time may result in the contract being terminated and the vehicle repossesed. Only enter in to an agreement if you are comfortable with the financial commitment and terms.