Personal Contract Purchase or PCP is arguably the most popular form of funding for Cars and Vans today.

Pro’s:

• Lower and Flexible repayments.

• Guaranteed minimum future value - increased end of term options.

• Loan security is against the asset.

• Lower upfront costs to purchase higher spec/ higher costs models.

Cons:

• Limited flexibility to liquidate vehicle mid and early into term.

• Mileage restrictions.

• Larger final payment to own vehicle than other funding options.

This type of finance is perfect for clients whom wish to own a car between 24-49months; with guaranteed payments over term and flexible ownership or trade in options at the end and near end of term.

Traditionally the most common form of finance on used vehicles or those whom wish to own come final payment received.

Pro’s:

• Flexible payments.

• Guaranteed cost to ownership.

• Slightly longer terms available.

• Loan security against asset.

Con’s:

• Higher monthly cost.

• Less flexible at the end of agreement.

• Negative equity risk

If you favour owning the asset outright at the end of the agreement or your buying cycle is longer than 49 months - this funding option is likely to be beneficial to you.

This funding option is very similar to PCP but has a few key differences:

Pro’s:

• Lower monthly payments than Hire Purchase
  A large final (balloon) payment reduces monthly instalments while still financing the vehicle.

• Clear path to ownership
  Lease Purchase is designed for customers who intend to own the vehicle at the end of the agreement.

• No mileage restrictions
  Unlike PCP, there are typically no mileage limits or excess mileage charges.

• Freedom to customise the vehicle
  As the intention is ownership, modifications are usually allowed (subject to lender terms).

• Predictable payments
  Fixed monthly instalments make budgeting straightforward.

• Good for higher-mileage drivers
  Ideal for those who drive a lot and don’t want to worry about mileage penalties.

Con’s:

• Large final balloon payment
  You must pay the final payment to own the vehicle, which requires planning or refinancing.

• No guaranteed future value (GFV)
  Unlike PCP, the vehicle’s future value is not guaranteed — you carry the depreciation risk.

• Not designed for handing the car back
  There’s usually no option to simply return the vehicle at the end without settling the balance.

• Negative equity risk
  If the vehicle depreciates faster than expected, its value may be less than the outstanding balance.

• Higher total cost than PCP
  Overall costs are often higher if compared purely on monthly affordability.

• Less flexibility if circumstances change
  Early termination can be expensive, particularly in the early stages of the agreement.

This type of funding can be a superior option to those in the market for high-end luxury vehicles. Other purchase agreements can unrealistcally increase the depreciation resulting in high monthly costs comparatively.