Personal Contract Purchase (PCP) cars are everywhere in the news these days. They are certainly attractive to many people, with monthly prices that look too good to be true. However, they are often hard to understand for many people. They tend to come with terminology of their own, and a complicated list of payments and potential payments. To find out if a PCP car is right for you, you need to understand a little more of how they work.

What is PCP?

A Personal Contract Purchase is a kind of finance agreement. It means that you pay for your car in monthly instalments, after an initial down-payment. With a PCP, your price is determined by the predicted value of the car at the end of the rental period, rather than the start.  When you reach the end of the rental period, if you have not paid off the value of your car then you can either pay it off in one lump, or return it to the dealer.

What is Personal Contract Hire?

A Personal Contract Hire (PHC) is another way of paying for a car in monthly instalments. However, a PCH means that you will never own the car at the end of the period. A PCH is essentially a lease – it might be more lenient in terms than a PCP, but you will not have the option of purchasing the car.

Is PCP right for me?

To decide if a PCP deal is right for you, you need to understand how the payment model really works. You need to be able to afford the initial deposit. Many garages will make a contribution to the deposit to make it more affordable. You will also have to be able to afford the added price of the interest. There is no need to purchase the car at the end of the period. You could just return it and get another PCP.

Is PCP wrong for me?

Personal Contract Purchases are not always right for everyone. You might get used to the monthly price you pay, only to be surprised by a high final value. Equally, many PCP plans have low mileage restrictions or stingy wear and tear conditions.

GAP Insurance Today can help you get GAP cover on your new car. We can still cover you whether you use PCP or PCH. Protect the value of your car in case it is written off with GAP insurance today.