Personal Contract Purchase

Hire Purchase with Balloon

Increasingly popular, especially where people are opting out of company car schemes, Personal Contract Purchase (PCP) is one of the best ways you can purchase a new or used car. The initial deposit and monthly payments are lower than conventional Hire Purchase. Based on mileage and age, your car's guaranteed future value is calculated and then deferred as a 'balloon' payment at the end of the agreement. Your payments are spread over the agreed period, between 24 and 48 months, and at the end of the agreement you have much greater flexibility with a final 'balloon' payment of the residual value and a choice of four options:

  • You buy the car by paying the 'balloon' payment, the residual value
  • You can part-exchange the car for another vehicle
  • Sell the car privately and pay the final 'balloon' payment
  • Return the car with, subject to mileage and condition, nothing more to pay (subject to terms and conditions)

What to do first?

Determine your annual mileage. The estimated future value and final guaranteed 'balloon' payment is then calculated, together with your monthly payments. You can then decide if the PCP is best for you.

What are the benefits?

  • Low risk with the minimum future value guaranteed (subject to terms and conditiona)
  • Low deposit keeps your valuable personal or business cash available
  • Low fixed monthly payments, perfect for budgeting
  • Fixed interest protects you from interest rate fluctuations
  • A better car with lower payments allowing you to choose a higher specification car
  • Greater flexibility at the start and end of the agreement
  • Tax benefits for business users when you opt out of a company car scheme
  • No VAT to pay

What about excess mileage?

At the beginning of the agreement you determine your annual mileage for the contract period. If you decide to return your car to the finance company, when you hand your vehicle back, and the mileage exceeds that agreed, you simply pay a fixed amount per extra mile.

What about 'wear and tear'?

At the end of the agreement the vehicle may be worth more than the agreed residual value if it is well maintained, so it is in your own interest to minimise the vehicle's 'wear and tear'.

Finance packages are subject to status and finance company acceptance. UK residents only.