What is Personal Contract Purchase?

Personal Contract Purchase (or PCP, for short) is a flexible finance option designed to help you purchase a car for a fixed period of time. You will pay for the car via monthly repayments and at the end of your term, you can swap the car for a new one, pay what’s left and keep it, or give it back and walk away.

How does PCP work?

When you enter into a PCP deal, you'll pay an initial deposit for the car followed by monthly payments across over a number of months (usually between 12 and 48) agreed by you and one of our trusted lenders. You won’t own the car during your initial agreement as you are just paying for its depreciation, not to purchase it.

What happens at the end of my PCP agreement?

After your Personal Contract Purchase agreement comes to an end, you will be left with a few options. You can:

  • Part exchange or swap the car for a new one and take out a new Personal Contract Purchase agreement.
  • Buy the car and become its legal owner. You can do this by paying the Optional Purchase Payment (sometimes known as a ‘balloon payment’ or 'Guaranteed Minimum Future Value') outlined at the start of your agreement.
  • Give the car back and end the agreement. Be aware that the lender may charge you for any unreasonable damage to the car, or if you’ve exceeded the agreed annual mileage.

Pros and cons

PCP is a great way of financing a used car if you don’t want to be tied down to owning the car at the end of your agreement. You can keep your options open and choose the best option to suit your needs when the time comes.

When you take out a PCP plan you will need to be aware that, if you don’t want to own the car after your last monthly payment, you’ll need to return it in a condition agreed by you and the finance lender. If you exceed your annual mileage cap, then you could be charged per mile over your allowance. If you return the car in an unsatisfactory condition, you may also be penalised.

Here’s a few quick pros and cons to help you choose if PCP is right for you:

Personal Contract Purchase



You have the freedom to return the car at the end of your agreement.

You have the option to purchase the car or take out a new PCP deal.

You may only have to pay a small deposit to start your PCP plan, unlike on an HP plan.

You will need to stick to agreed wear and tear limits or face penalty charges.

You will need to stick to an agreed annual mileage cap or risk being charged.

You won’t own the car at the end of your deal. If you wish to, you’ll need to make a large payment in one go.

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