What is Personal Contract Purchase?

At Caledonia Vehicle Solutions, we offer tailored car finance packages to make your vehicle purchase more manageable. One type of finance agreement that we offer is personal contract purchase (PCP).

PCP finance is ideal for drivers looking for a flexible agreement. This article explains what a PCP agreement is and how it works.


What is PCP Finance?

Unlike a HP deal, where the vehicle will legally become yours at the end of your contract term, you will not necessarily keep the vehicle at the end of a PCP agreement, and rather than covering the entire cost of the vehicle, your monthly payments will instead essentially cover the value that the vehicle loses while you are using it.


How Does PCP Finance Work?

Before you even enter the car finance agreement, an estimate of how much the car will be worth at the end of the contract will be made by your dealer. This is known as the guaranteed future value (GFV) and will be determined by factors such as age and mileage; for this reason, a mileage cap will be set. You will pay the difference between the car’s current value and its GFV in monthly instalments.


What Happens at the End of a PCP Contract?

When you have made your final instalment, you will have a choice: you can either return the car, or you can pay the remaining future value and keep the vehicle. If you want to trade in the car and its GFV is lower than predicted at the end of your agreement, you can use the equity as a deposit for a new finance agreement.

If you have exceeded the mileage limit agreed at the start of the agreement and wish to return the vehicle, you will be charged for the additional miles covered.


To find out more about personal contract purchase finance, get in touch with Caledonia Vehicle Solutions today and speak to one of our experts, or apply for car finance online!