PCP puts you in the driving seat

A personal contract purchase (PCP) is a flexible way to finance a car. It’s a loan that typically offers lower monthly payments than other financing options like personal loans or hire purchases. This is because you don’t have to pay the full value of the car unless you’d like to own it. At the end of the agreement, you’ll only own the car if you make an optional final payment, also often called a balloon payment. Similar to hire purchases, even if you choose to return the car, you’ll pay interest on the full value of the car minus your deposit.

We'll agree a mileage limit with you based on how many miles you expect to drive for the duration of the PCP agreement. If you go over the limit, you’ll need to pay an excess mileage fee when the agreement ends.

You’ll have three options to consider at the end of the agreement, which is helpful if your circumstances change:

• Pay the final payment to own the car outright

• Part exchange the car for a new one with a new PCP agreement

• Hand the car back to us

Example

1. You’d like to finance a £10,000 car over three years with PCP. You plan to drive a total of 30,000 miles over the course of the agreement, so Zopa guarantees that the car will be worth at least £4,000 after 3 years and sets this as the optional final payment.

2. You decide to put down a 10% deposit (£1,000) and finance the rest (£9,000).

3. Since it's been agreed that the car will be worth £4,000 at the end, you’re only required to repay £5,000 (plus the interest on the entire £9,000) over the 3-year period.

4. At the end of the agreement, if you’d like to keep the car you can pay the optional final payment of £4,000. If you don’t want to keep the car, you can hand it back and take out a new PCP agreement, or just hand it back and take no further action.

At the end of your personal contract purchase (PCP) agreement with Zopa, you’ll have three options to choose from:

1. Buy the car – If you want to keep the car and become its owner, you’ll need to pay the optional final payment.

2. Return the car to us – If you no longer need a car, simply hand it back to us after you’ve made all your monthly payments. You’ll need to make sure that the car doesn’t have any damage beyond normal wear and tear, and that you’ve stuck to your agreed mileage limit. Otherwise, you’ll likely face additional charges.

3. Part exchange the car for a new one – If you want a fresh set of wheels, you can return the car and start a new PCP agreement with another car. If the car’s worth more than the optional final payment, you’ll have some extra money that you can put towards the deposit on your next car.

The optional final payment is made at the end of a personal contract purchase (PCP) finance agreement in order to own the car. It's sometimes referred to as the balloon payment or the guaranteed future value (GFV).

At the beginning of your personal contract purchase (PCP) contract, you'll need to agree to a mileage limit over the term of the agreement.

The higher your agreed mileage limit, the higher your monthly payments. This is because a higher-mileage car will likely be worth less when it’s sold, which increases the difference in value between the car’s price at the start of the agreement and its estimated value at the end – a key factor in determining your monthly payments.

On the flip side, if you set your mileage limit too low and go over it, you could end up with excess mileage fees when you hand the car back to us at the end of your agreement. This is why it’s important to work out your annual mileage as it’ll help you pick a reasonable mileage limit and avoid excess mileage charges.

Keep in mind that the mileage is only checked at the end of your agreement and not each year. This means that you can go over the limit in one year if you make up for it by travelling fewer miles in subsequent years.

There are no set-up fees when taking out your hire purchase car finance with Zopa.

If you took out your loan after 7th September 2022, you will be subject to an early repayment charge if you pay off your car finance before the end of your term. If you took your loan on or before 7th September 2022, there won’t be a charge. Find out more about early repayment charges here

There are no charges if you miss a repayment on your hire purchase. Although if you do miss a repayment, it’ll be marked on your credit file which may affect your ability to obtain credit in the future.