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Looking to get a car through Personal Contract Purchase (PCP)? PCP is one of the most popular forms of finance in the UK! UK Car Finance can offer you PCP car finance deals with low-rate finance and the car you want from a trusted dealer! If you’ve never taken out PCP car finance before, there are a few things you should consider before you apply. Our extensive guide below will walk you through everything you need to know about PCP loans UK.

What is PCP Car Finance?

Personal Contract Purchase is a form of online car finance that allows you to spread the cost of your chosen car into monthly repayments. You use your PCP loan to cover a portion of the vehicle’s sale price and pay it back with added interest. You will usually be asked to put down a deposit for PCP car finance deals, but there are also many no deposit options available with UK Car Finance. Personal Contract Purchase can be used on both new and used cars. You won’t own the car until the end of the agreement and if you pay the final balloon payment, but PCP finance gives the customer more flexibility at the end of the agreement.

Benefits of PCP cars on finance with UK Car Finance:

  • Low monthly payments
  • Low-interest rates
  • Good credit and low credit accepted
  • You don’t have to own the car
  • More flexibility at the end of the agreement
  • Fixed monthly payments
  • Can be used on new or used cars
  • Trade in the car for a newer model

How does PCP finance work?

When applying for PCP car finance, you may be asked to put down a deposit for your chosen car, but it isn’t required in many cases. You then agree to make your repayments on time and in full usually over 1-5 years. You will make monthly payments with added interest till the end of the PCP agreement.

PCP car finance deals only cover part of your chosen car. This means at the end of the agreement you have 3 options. You can either:

dealer building

1. Hand the car back to the dealer. Provided that the car is in good condition and within the agreed mileage, you can hand the car back to the dealer with nothing to pay and the agreement has ended.

pay for your car

2. Pay the final payment and keep the car. At the end of a PCP deal, you have the option to pay the large ‘balloon payment’ and keep the car. You will then become the legal owner of the car.

keep the car

3. Part exchange the vehicle for a new one. You can use the value of your current car as a deposit for a new PCP deal with a different car.

Things to consider before taking out a Personal Contract Purchase agreement:

Cheap PCP car finance is one of the biggest selling points for many buyers. But what are the things you should consider before entering into an agreement?

  1. Mileage and damage charges. It’s a common PCP car finance myth that mileage doesn’t matter. However, at the beginning of your PCP agreement, you will be required to set an annual mileage limit and also agree to keep the car in good condition. If you don’t still to the rules of the agreement, you can end up paying mileage and damage charges if you hand the car back to the dealer.
  2. Optional ‘balloon payment’. If you wish to keep the car, the final balloon payment can be expensive. However, car finance brokers like us can refinance balloon payments on your behalf. Find out more about how to refinance a balloon payment.
  3. Creditworthiness. Before you’re accepted for PCP car finance, you will need to pass a credit check to check your creditworthiness. If you’re unsure where you fall on the credit scale, you can use our soft search credit checker to find out!
  4. Ownership of the car. PCP may not be for you if you’re looking to own a car. You won’t own a car bought on PCP unless you pay the final balloon payment.

Car finance — PCP vs. HP

Personal Contract Purchase and Hire Purchase (HP) are similar in the aspect that you take out finance on your chosen car and pay it back in monthly instalments with added interest. Both agreements are a type of secured loan, which means the loan is secured against the car, and you won’t own the car until the end of the agreement. With HP, there is usually an option to purchase fee to keep the car, but this is usually similar to the monthly payments. However, the final payment on PCP deals or ‘balloon payment’ tends to be quite large.

Hire-purchase monthly payments tend to be higher when compared to cheap PCP car finance. HP car finance spreads the total cost of your chosen car into monthly payments, whereas PCP only covers part of the car cost.

Unlike Personal Contract Purchase, there are no mileage limits or damages charges associated with Hire Purchase. Hire-purchase has fixed monthly payments with a fixed interest rate till the end of your agreed term.


Can you finance a used car with PCP?
What does PCP stand for?

PCP stands for Personal Contract Purchase.

What is a 'balloon payment'?

Balloon payment can also be referred to as ‘option to purchase fee’ or ‘Guaranteed Future Value’. A balloon payment is the final lump sum you will be required to pay if you want to keep your car after your PCP deal has ended. 

What is a guaranteed future value?

In relation to PCP car finance, the Guaranteed Future Value (GFV) is the amount the finance company guarantees your car will be worth at the end of your finance agreement. This figure is an estimate of your outstanding balance at the end and can be referred o as the ‘balloon payment’.

Can you settle PCP car finance early?

The first step in settling your PCP deal early is to ask your finance lender for a settlement figure. You will be required to pay this amount and then the car is yours. This figure will include the balloon payment, any outstanding finance, and any fees included. 

Car finance jargon explained!

If you’re unsure of any of the terminology used on our PCP car finance page, please see our car finance jargon page for more information.