What's a personal contract purchase (PCP)?

scheduleUpdated 12 days ago

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.

What cars can I get with PCP finance?

We accept most cars, as long as it’s:

  • A used car

  • Bought through an approved dealership

  • No more than 5 years old

  • Has under 70,000 miles at the start of the agreement

  • Done no more than 150,000 miles at the end of the agreement (To work this out, take the mileage on the car at the start of the agreement and add on your agreed total mileage)

  • Not a commercial vehicle

If you’re unsure whether your car fits our criteria, you can share the car’s registration number and we’ll check for you during the application.

Do I own the car?

We’ll own the car unless you choose to make the optional final payment at the end of your agreement. After that point, you’d own the car. If you don’t make the optional final payment and want to return the car to us at the end of your agreement, charges might be applied if you’ve gone over your agreed mileage limit and/or the car has been damaged beyond normal wear and tear.

Who pays the dealership?

Once you’ve signed your agreement online, we’ll pay the dealership, so you’re free to hit the road. You’ll need to pay the car’s deposit and any extras to the dealership directly.

Why does my PCP contract refer to hire purchase?

Don’t worry, this is to be expected. Personal contract purchase (PCP) car finance is technically a different form of hire purchase car finance. That’s why you’ll see hire purchase referred to in some legal documents.  

You can find out more about the different types of car finance here.

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