Are you trying to purchase a car? Then you most likely want to opt for the best PCP finance deals on the market, as this will make your new car’s purchase fast, affordable and easier than you would expect it to be. Simply put, opting for a personal contract purchase just makes it a lot easier for you to purchase a new car via monthly payments, and in the end, you never have to worry about any additional charges or anything like that. With the right approach and the best PCP finance options, you can spend less than 100 pounds per month on your new car.
That doesn’t mean PCP deals are suitable for all customers. There are many PCP finance pros and cons that you need to consider when you want to opt for this type of financing. We will discuss all of that and everything else you need to know about PCP financing right away!
What is PCP finance?
Simply put, the idea of PCP finance is easy to understand. The concept was created by Ford Options back in 1992, and it comes with a very simple idea. Instead of having equal monthly payments that spread over multiple months, PCP financing will require a larger deposit in the beginning and the addition of a balloon payment towards the end.
This helps PCP financing professionals to provide customers with some magnificent deals, most of which are shared by the manufacturer’s financial arm. There are situations where third parties can also get involved, by most providers tend to work directly with the manufacturer.
Plus, you can use the PCP finance for both used and new cars. The costs will vary based on what model you need, if it’s new or used and other criteria. While this type of financing is suitable for those that want to buy a new car, it can also make used car monthly payments smaller, so you may want to opt for that.
How does the PCP finance system work?
The primary benefit of using the PCP finance system is that it’s very simple. The idea here is that you need first to find an online retailer or a dealer. Once that is done, you just have to pick up the desired car and pay the deposit
Once you pay the deposit, you will have to agree to an interest rate and monthly payment. Once that is done, you will sign the papers, and the car is yours. This is why a lot of customers opt for PCP finance because it’s incredibly easy to do and it can bring in front a great set of benefits. It’s important to note that with PCP agreements you aren’t covering the entire cost of the car, instead you just include the depreciation that appears during the agreement.
Your dealer knows what the value will your car have in around 3-5 years for example. The dealer will then compare this Guaranteed Minimum Future Value to the new price. It’s nice to see that you just have to cover the difference between the GMFV and new car value. This way you will get to spend less, and your monthly purchases will be a lot easier.
How to pick the right PCP finance option?
Once you check the PCP finance pros and cons then figure out that you need this type of financing, you need to find the right PCP scheme for you. The idea when you opt for this kind of scheme is that you need to figure out the amount of miles you cover per year, the deposit size and the agreement length. These are pivotal things that you need to focus on and which can bring in front some incredible results.
The GMFV value will be affected by mileage and the agreement length. Plus, there will be a mileage limit. If your car goes over it, then you will have to pay for that. When you want to finance your car, the good idea is to think about the future a bit. If you don’t purchase a new car soon, then you can opt for PCP finance, but if you just want to change it anyways in 1-2 years, then you shouldn’t choose PCP finance over 2-3 years.
In addition to that, it’s pivotal to try and make the PCP finance payments as small as possible on a monthly basis. How can you achieve such a goal? The trick in this situation is to have a large deposit, as that will help you cover the costs without any problem.
But there are some other options. It all comes down to how large the initial deposit is because that can have a major influence on the end results. The outcome can be second to none in the end since you have a lot of flexibility and the value on its own can be very rewarding because of that.
Creativity is needed when it comes to splitting the costs. Usually, PCP finance providers tend to bring you lots of flexibility in regards to the payment options. The idea is to pick those that suit your needs, and the overall results can be excellent. If you believe that your financial situation might change soon and it’s rather unstable for the future, it’s important to opt for large monthly payments, as you will get to pay more right from the start.
This makes the entire process a lot better, and the experience on its own can be second to none. Also, you have to note the fact that there will be some additional fees payable if you want to stop the finance agreement right in the midst of it. There will be quite a lot of challenges here, but the idea is that you should consider having a smaller deposit and larger monthly payments. Sometimes, large deposits might even bring in overpayment into the mix, so that’s why you should always pay less initially and then opt for larger monthly payments.
What happens at the end?
When you opt for PCP finance, you do not own the car until the end of the contract. Most of the time, these deals tend to last for up to 3 years. However you will see that at the end of the contract you have three primary options to focus on.
The first thing you can do is to pay the GMFV figure, which is something you should consider doing if you want to own the car. You can also opt for the idea of handing the car back. This can be a good option if you just want to acquire a new vehicle, but keep in mind the fact that you end up owning nothing. However you won’t have to pay for anything else either. In case the car ends up being worth more than what the GMFV said, the difference can be used as a deposit for your new car.
You can start a new PCP finance deal once you finished your previous one if you want. Also, many GMFV values are set to be lower than the normal car value, so in the end, the third option might be one of the best of the bunch in this regard.
What should you do if you opt for PCP finance?
There are a few commitments that you need to focus on if you opt for a PPC agreement. The first thing you need to note here is that you have to service the car according to the manufacturer details. On top of that, you need to have a comprehensive insurance policy, and you have to keep the vehicle in a running condition. There’s also a specified mileage which you can find in the contract, so you have to obey this rule as well.
PCP finance pros and cons
As you can imagine, PCP finance does come with its pros and cons. The disadvantage of a PCP finance deal is that you need to pay on a monthly basis for something that will not be yours in the end. Plus, if you do decide to purchase the car, the balloon payment you have to make at the end can be enormous and not that appealing.
Then you have the fact that some vehicles come with a high GMFV value. As a result, you will see that you get less money to go towards saving for a new car or anything else. Also, if you opt for PCP finance, you can’t switch brands. You will also be on a specific term and you are limited to the initial agreement; you will be unable to make any changes to that agreement even if your financial situation changes. This can make things rather unstable.
But there are many PCP finance pros as well. Maybe the best thing here is that you have a lower monthly pay when compared to purchasing a new car and the deposit is very low as well. Plus, there are many situations when you see that the GMFV value is lower when compared to the regular car value. And since most cars have at least 3 years of warranty, if you get a new car you will always be protected by the warranty system. Of course, there are many great deals from manufacturers due to the intense competition so that you can score some magnificent PCP finance deals.
Finding the right PCP finance option is a stellar idea, and it will help you a lot if you want to get a great car! Keep in mind that investing in a proper PCP finance deal can be great, but you have to study both the pros and cons before you make a decision!