PCP car finance calculator

Good credit
Bad credit
Amount to borrow:
£
To repay over:
5 Years
Car finance rate XX% APR
Cost of credit £ XXX
Total repayment £ XX,XX.XX
48 monthly payments of
£ 245 /mo

Representative example - Borrowing £5,500 over 4 years with a representative APR of 19.8%, and a deposit of £0, the amount payable would be £162 per month, with a total cost of credit of £2,282 and a total amount payable of £7,782.

Carplus will find the best car loan rate from our panel of lenders and will offer you the best possible deal. We don’t charge fees, but we earn a commission. This does not influence the APR you’re offered in any way.

What is PCP finance?

A personal contract purchase (PCP) agreement is one of the many ways to buy a car without paying the total amount all at once. PCP finance deals are ideal for those who cannot afford large monthly payments but still want to drive a new car every 2-3 years. Let us take a closer look at PCP car finance.

Basically, the whole scheme works as follows: you make a deposit, sign a contract for a certain number of months (usually 24 to 36), make monthly payments, and at the end of the agreement, you have three options. You can return the car, keep it, or exchange it for another.

How PCP car finance works

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Find a deal

Submit your details and choose from a fantastic range of car finance deals.

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Final arrangements

If successful we’ll organise everything with the lender.

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Enjoy your new car

All that’s left to do is to enjoy your new car for the duration of your contract.

Car PHP

In order to make a personal contract purchase deal, you need to decide on three main components:

  • Deposit. Typically, the dealer will ask you to deposit 10% of the car's value. But if you can afford a larger deposit, that's even better. The bigger your initial deposit is, the lower your monthly payments will be over the life of the contract.
  • Loan Amount. The finance company's estimate is based on how much the car’s value will depreciate over the life of the transaction (usually 2-3 years). Then, subtract your deposit from this amount. In the end, you get the amount you will pay over the term of the contract with interest. The interest rate can vary from company to company, but in many cases, it is in the range of 4-7%.
  • Final payment (also called a balloon payment). This is the guaranteed minimum future value (GMFV) that you pay only if you want to own the car at the end of the contract. The amount is based on how much the dealer thinks the car will be worth after the contract is completed. This amount is negotiated with you before you sign the contract.

What are the pros and cons of PCP car finance?

Pros:

  • Monthly payments are lower than a loan or instalment plan.
  • You don't have to worry about the future value of the car when you sell or resell it.
  • Several flexible options for what to do with the car are available, including the option to buy the car back.
  • Dealers often add service and maintenance packages, warranties, and insurance.
  • You have the ability to buy a more expensive car than you could afford but with monthly payments that fit your budget.

Cons:

  • You won't own the car - and you won't own it until the end, and even then only if you pay the weighted payment.
  • Interest rates on PCPs are usually higher than on personal loans.
  • If the projected future value is set very close to the actual value of the car, you will have little money to carry over to another deal.
  • You’ll have to pay additional fees if you exceed the agreed-upon mileage.
  • The future value is based on keeping the car in good condition. You may have to pay extra for repairs that are not due to normal wear and tear.

Personal contract purchase example

Let's look at an example of how the scheme works if you apply for PCP car finance. So, you have signed a contract for three years for a car that costs £20,000. The finance company predicts that the vehicle will be worth £8,000 by the end of the contract period. Your next steps are as follows:

1.

First, you make a 10% deposit - in our case, that would be £2,000. For the remaining £18,000, you take out a loan.

2.

At the end of the contract, you can either return the car to the dealer or own it outright by paying £8,000 to the dealer.

3.

Whether you return to the UK or not, you must pay interest on the entire loan.

What are your full options at the end of the PCP contract?

We've talked about this before, but now let's look at all the options in more detail. So, you have three options for after your contract ends:

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Become the owner of the car by paying the balloon payment. You may also have to pay an additional fee to the finance company, aka your PCP broker.

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Return the car. If there is no damage or excessive mileage on the vehicle, you can return the car to the dealer without hindrance.

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Choose a new car: By the end of the contract period, the vehicle will probably be worth a little more than the balloon payment. In that case, you can use that amount as a deposit for the new contract. This amount cannot be "cashed out" - it can only be used as part of the deposit for the new car. If the value of the vehicle is less than the balloon payment at the end of the contract, your best option is to return the car.

Are there any additional charges involved in a Personal Contract Purchase?

Mileage. When putting together your deal, be sure to specify how many miles you expect to drive. Cars that are driven frequently will naturally be worth less than those that are rarely used. It's essential to specify the exact figure, as the mileage on the clock will be checked at the end of the contract. If you exceed the set limit, you may be charged extra for each mile driven.

Damage. Any scratches, missing parts, body issues, or damage of any other kind will likely be charged to you. However, normal wear and tear on the vehicle are not considered damage.

Bad credit history. You won't necessarily get a rejected deal. But the interest on your deal could be substantially higher, and the monthly payment will also be high.

Compare pcp finance with other option

Finance features: Hire purchase (HP) Personal contract purchase (PCP) Personal loan
Requires initial deposit Optional Optional
Car is yours at the end of the agreement Optional
Fixed monthly payments
Optional balloon (final) payment
Avoid excess mileage charge
Secured againts an asset (e.g. a car)
Support with vehicle issues

Can I get PCP with bad credit?

Even if you have bad credit, you can still get a PCP deal. However, before you sign a contract, you will have to pass a credit check. The Carplus team will try to find you the perfect car deal. To apply for car financing with a bad credit score, you will need:

  • Fill out and submit our online application form.
  • Wait for us to perform a soft credit check that will not affect your credit history or be noted on your credit report.
  • Discuss your options with us in more detail. We'll take care of everything else and get the money to you as soon as possible.

Is PCP car loan the right option for me?

PCPs are best for you if you want to change cars in a few years. But if you plan to drive the same car for years on end, you might want to consider another form of a loan. After all, if you decide to keep the vehicle, a PCP will cost more than an instalment plan.

Carplus is a reliable PCP broker

Carplus is a team of expert brokers who make financing a new car as easy as possible. Here we strive to give you the best possible deal, regardless of your credit history or financial situation.

Working closely with our lender partners, we've compiled and compared over 100+ products to offer you only the best deals for your budget. Carplus is your trusted PCP broker in the UK. Get a PCP car finance quote now!

PCP car finance FAQ

Is PCP only available for new cars?

No, cars that are only a couple of years old can also be financed with PCP. However, you may find that interest rates on these deals are much higher than PCP deals on new cars. This is because the value of the car is much lower, so the inflated interest rate is the only way the dealer is able to make money on the contract.

What is the total cost of a PCP deal?

A PCP deal consists of an initial deposit (about 10%), monthly instalments (plus interest) and any additional fees for insurance, service and maintenance that may be required.

Be sure to look at the APR percentage on the deal, rather than any fixed-rate of interest offered, as this will show the true additional amount to be paid. By law this has to be stated on each deal and if you cannot see it you should ask for it in writing.

Depending on the car you purchase, the finance company may also charge additional purchase and arrangement fees ranging anywhere between £100 and £500.

What is the best way to lower PCP payments?

If you want to pay a lower amount each month on your PCP deal, the best option is to put down a large deposit upfront.

You should be realistic about the mileage limit you set at the start of the contract – the mileage amount will also impact your monthly payment. However, also be aware that exceeding the level by the end of the contract is likely to lead to additional mileage charges.

It is worth remembering that the lower the value of the car you want to drive, the less you will have to pay each month.

Am I able to pay off the PCP deal early?

You usually have the choice to pay off the full contract early, although this may cost you more.

The finance company make their money over the full course of the contract, so even if you want to finish early you’ll still have to pay the remaining amount left on the deal.

This means paying for the value of the car at the point you want to end the contract. For example, if you are mid-way through the deal and it is worth £13,000 and your settlement figure is £15,000 – the extra £2,000 is due to clear away any ‘negative equity’ to free you from the deal.

You may also be charged an additional fee for choosing this option, although that will depend on the finance company.

Are there any other costs involved?

If you get to the end of the contract and decide to buy the car there is also likely to be an ‘option to purchase’ fee, which could be anywhere between £100 and £200. This fee is to transfer the vehicle into your ownership and is payable in addition to the balloon payment.

You cannot be asked to pay more than the GMFV figure (discussed earlier on this page) by the dealer. This also applies to you returning the car and asking for more than its original valuation.

How will it affect my credit score?

A soft credit check will be carried out, followed by a hard credit check, if you wish to proceed with an application. Only a hard credit check will be recorded on your file.

Because all car finance is secured on the car the check may not be as strict as those used for personal loans. As a result, if a customer defaults on a PCP deal the finance company can simply repossess the car to take back ownership of the asset loaned to you.

As long as you pay the monthly instalments on time, you will not experience any diverse effect on your credit file as a result of a PCP deal. Defaulting on a contract could have a negative effect on your credit file and could affect your chances of securing credit elsewhere.

What happens if you miss a PCP payment?

In the first instance the lender will follow up to see if you have simply forgotten to pay. As long as this is only a one-off and can be rectified straight away, there should not be a problem. If you continually fail to maintain payments they could cancel the contract and repossess the car.

Do I also need gap insurance?

Gap insurance is an additional policy you can take out while on a PCP deal to protect you from having to pay the car’s current value should it be stolen or written off due to a crash.

This type of policy will either pay out the original sale price of the vehicle, the remaining amount outstanding on the PCP contract, or the amount it would cost to purchase the same car as new.

Cars generally depreciate very quickly, with the AA estimating that within the first 3 years the value can drop by up to 60%.

Also be aware that since September 2015, dealers are not able to offer you gap insurance at the same time as selling you a finance deal. They can offer it at a later date (they must wait at least a week) but in general buying gap insurance from same dealer is not a good idea. This is because you can usually find cheaper alternatives elsewhere.

Gap insurance is not a necessity and you are under no obligation to take this type of policy out while on a PCP deal.

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