Personal Contract Purchase (PCP) car finance is becoming and increasingly popular way to buy a car in the UK. PCP can essentially be broken into Three key parts.

The Deposit

This is usually for around 10% of the car’s price.

The Amount You Borrow

With PCP the amount you’ll borrow is decided by the finance company’s prediction of how much the value of the car will drop over the term of the deal (usually 24 or 36 months), they also subtract the deposit from this to give them the total amount you’ll owe. You’ll then make monthly payments including interest.

The Balloon Payment

Agreed at the start of your deal, this is how much the dealer estimates your car will be worth when your finance deal ends. It’s also referred to as the Guaranteed Minimum Future Value (GMFV).

At the end of the agreement, you can either choose to pay it off and keep the car, trade your car in for a replacement and start a new PCP contract, or give the car back and there won’t be anything to pay, providing you’ve honoured the terms of the agreement and the car isn’t damaged.

Many of our policy holders have bought their vehicles through PCP finance and our expert Northampton based team of advisors are on hand to help should you require further assistance. Give us a call on 0800 138 8333 or email info@gapinsure.com