We are Car Buyer” brings you UK's most comprehensive reference to buying personal contracts (PCP). Several imitation articles have appeared on different auto sites. As a result, we've entirely overhauled this guide from beginning to end to guarantee that it remains the most comprehensive and objective guide on PCP auto financing.

By far, the most common vehicle finance product on the UK market for new and used cars is the PCP (Personal Contract Purchase, often known as a Personal Contract Plan).

We'll go through how a PCP works, why it's so popular, the benefits and drawbacks, and what to look for in this guide. Many FAQs concerning auto finance are also addressed.


Automakers and dealerships are pushing PCP financing. A vehicle salesman is more concerned with your monthly budget than with the car you want. Many of us sell our old cars by getting free online car valuation and switching to new cars on finance. It’s very important to understand the financial terms. 

A PCP accounts for over 80% of all private new automobile purchases in the UK, making it far more popular than an installment purchase, a personal rental agreement, a bank loan, or any other sort of financing.

PCP vehicle finance is also becoming more popular for used car financing, particularly for large car dealer "registered used car" agreements. PCP financing currently accounts for up to half of all used automobiles sold by dealers, and the tendency is growing compared to the previous year?

Why is PCP auto financing so tricky to understand?

Personal contracts are likely the most popular kind of auto finance in the United Kingdom, yet they are a complex financing product that most car buyers find difficult.

Despite having signed a thousand-of-pound PCP contract to buy a car, millions of car buyers in the UK have no idea how a PCP works. The good news is that you're not alone if you don't understand how a PCP works.

Even the media has a hard time reporting auto financing subjects, such as how PCPs work and how they differ from leasing or other types of financing, which doesn't assist customers in comprehending what's going on.

What is a personal contract buy, exactly?

A personal purchase agreement (PCP) is an installment purchase (HP) financing agreement that is sometimes referred to as an installment purchase in a financing agreement. It's commonly referred to as a personal contract (instead of buying ).

A PCP is a guaranteed financing contract, similar to a regular installment purchase or a home mortgage. This means that your obligations are secured against the car, and the lending company effectively owns it until the last penny is paid. This is a crucial fact that many people are unaware of.

The critical distinction between a PCP and an HP is the structure of the monthly payments.

You repay all of your loans in equal monthly installments under a formal installment purchase agreement. A PCP varies in that the monthly payments are substantially lower, followed by a hefty final amount. Although it isn't, this final payment is commonly referred to as a balloon (also known as a guaranteed future value (GFV).

To demonstrate how this works in different situations, we'll use some basic examples * below.

You'll have 48 monthly payments of £ 500 if you borrow £ 24,000 for an installment purchase over four years. If you financed the same amount on a PCP for the same period, you would have paid £ 340 in 47 monthly payments, saving £ 160 per month. Your ultimate payment will be roughly £ 8,000, which is an issue. The first example below demonstrates this:

Purchase of a rental property

Rental Purchase
Lend: £ 24,000
Monthly Payments:  48 months x £ 500

Personal Contract Purchase
Lend: £ 24,000
Monthly Payments: 47months x £ 340
Final Payment: £ 8,000

In any case, the car will not truly be yours until the final payment is made and all debts are paid. This includes the £8,000 final balloon payment on a PCP.

The average person replaces their car every three to four years. The majority of purchasers also have a small amount of cash on hand to put down as a deposit. With a PCP, you can acquire a substantially lower monthly payment than with an HP in this circumstance. However, there is one key stipulation: after the conclusion of the agreement, you will be required to make efforts to repay the outstanding amount (the balloon). They will sting you if you do not.

What are the benefits of a PCP?

When comparing PCP and HP financing for the same car, you often borrow the same amount of money. As illustrated in the example above, the main distinction is that you pay back a much lower amount each month and defer a considerable sum (the balloon) until the deal is completed.

What this means for a car buyer:

Your monthly payments could be significantly reduced.

Your initial deposit might be as little as and as much as you choose.

It's possible that your payback period will be shortened.

In truth, instead of obtaining cheaper monthly payments when transferring from an HP to a PCP, customers in the UK have been paying the same monthly amount but using a PCP to get in for the previous decade. able to buy a car that is far more expensive, as demonstrated below:

Rental Purchase
Lend: £ 24,000
Monthly Payments: £ 48 x £ 500                    

Purchase of a personal contract

Personal contract purchase
Lend: £ 36,000
Monthly payments: £ 47 x £ 500
Final payment: £ 12,500

The monthly payment for both PCP and HP is the same in this case, which implies you may borrow a lot more money with a PCP because you end up with a significant lump sum.

As a result of PCP auto finance, a rising number of consumers are choosing more expensive cars while keeping their monthly payments the same. Mercedes-Benz is now the third-largest brand in the United Kingdom, trailing only Ford and Volkswagen. BMW and Audi sell more automobiles than Vauxhall, Toyota, Nissan, Renault, and other brands combined.

Purchasing a car through a personal contract offers significant advantages for a car dealer or manufacturer.