PCP Finance Made Easy
Rates from 9.9% APR. Representative APR 19.2%. Smooth Car Finance is a credit broker, not a lender.
Flexible terms and low monthly payments
What is PCP finance?
Personal contract purchase (PCP) is a popular car financing option that lets you drive a new or used car with lower monthly payments compared to other finance plans like HP.
PCP differs from a normal personal loan because you don’t have to pay off the full value of the car upfront. At the end of the agreement, you’ll have three choices: keep the car, return it, or trade it in for a new one. This flexibility makes PCP an ideal choice for those who want an affordable way to enjoy driving newer models.
How does PCP finance work?
1. Deposit: To get started, you’ll pay a deposit—often around 10% of the car’s price.
2. Monthly payments: Next, you’ll make fixed monthly payments over the agreed term, typically between 12 to 60 months. These payments cover only part of the car’s value, helping to keep them affordable.
3. Guaranteed minimum future value (GMFV): The lender estimates the car’s future value at the end of the contract, called the GMFV (or “balloon payment”). This amount reflects the predicted resale value after depreciation.
What happens at the end of my PCP agreement?
When your PCP term ends, you will have three flexible options:
1. Buy the car: If you’d like to keep the car, you can pay the GMFV or balloon payment and make the car officially yours.
2. Return the car: If you’re ready for something different, you can return the car without any further payments, provided it’s in good condition and within the agreed mileage.
3. Trade in the car: If the car is worth more than the GMFV, you can use that equity as a deposit towards a new Personal contract purchase agreement for another car.
What is a balloon payment?
A PCP balloon payment is the final amount you’ll need to pay to own the car at the end of your finance agreement. It’s calculated based on the car’s estimated future value.
If you can’t afford the full balloon payment, don’t worry. At Smooth Car Finance, we work with lenders who offer refinance loans. These loans can help you spread the cost into smaller, more manageable monthly payments.
Can I change my car on PCP early?
PCP agreements offer helpful flexibility if your situation changes and you’d like to end the agreement early:
- Request a settlement figure: You can reach out to your lender to request a settlement figure, which is the amount needed to fully pay off the remaining balance on your agreement.
- Sell or trade-In: If you decide to sell or trade in the vehicle, any value above the settlement figure can either go toward the deposit for your next vehicle or be received as cashback.
- Voluntary termination: If you’ve paid at least 50% of the total amount owed, including interest and fees, you may be eligible to voluntarily terminate the agreement and return the car without further payments. This option is helpful if you’re facing challenges with payments but want to avoid future financial obligations.
This flexibility makes PCP a great option that can adapt to your changing needs, helping you make choices that work best for you.
What is the difference between PCP and HP finance?
Personal contract purchase (PCP) and Hire purchase (HP) are two popular car finance options. While they share similarities, they have key differences that can impact your monthly payments, ownership options, and overall cost.
Personal contract purchase (PCP)
- Monthly payments: Lower monthly payments compared to HP.
- Ownership: You don't own the car until the final payment is made.
- End-of-term options:
- Optional final payment (balloon payment): Pay the final payment to own the car outright.
- Part-exchange: Trade in the car for a new one.
- Return the car: Simply return the car to the finance provider.
Hire purchase (HP)
- Monthly payments: Higher monthly payments compared to PCP.
- Ownership: You gradually own the car with each monthly payment.
- End-of-term options:
- Final payment: Pay the final payment to own the car outright.
Which is right for you?
The best option for you depends on your financial situation and long-term plans. Consider the following:
- Budget: If you're looking for lower monthly payments, PCP might be a better choice.
- Ownership: If you want to own the car outright, HP might be more suitable.
- Flexibility: PCP offers more flexibility at the end of the term.
Still unsure? Our friendly team at Smooth Car Finance can help you understand the differences and find the best finance option for your needs.
Contact us today to discuss your car finance options.
What do I need to apply for car financing?
To make an application for car finance, we need very little data:
- Full name and driving licence
- Employment details
- Residential status and address
- Mobile number and email address
You have to be between 18 and 75 years old, be a UK resident for at least 12 months, and receive a monthly income of at least £1,000.
Why should I use Smooth Car Finance?
Make everyday life easier with affordable car finance
At Smooth Car Finance, we believe a car shouldn't just be a purchase, it should improve your life. Need a reliable ride for the school run? A spacious car for grocery shopping? Or simply a vehicle you're proud of?
We work hard to find you an affordable car finance deal from our trusted lenders, regardless of your situation. Good credit, bad credit, self-employed, on benefits, or even declined elsewhere – we consider all circumstances.
Plus, you'll get a dedicated account manager to guide you through the process and help you find the perfect car to fit your needs.
Have you got approved?
A dedicated account manager will guide you through the next steps, answer your questions, and help you find the perfect car to fit your needs.
Already have a car in mind?
No problem. Let us know and we'll aim to expedite the loan application.
Need more info before you get started?
We're here to help! Just contact us today.
Car finance loan calculator
*Please note that if you proceed with your quote, a hard credit check will be performed, which may affect your credit score.
Representative example: borrowing £6,500 over 5 years with a representative APR of 19.9%, an annual interest rate of 19.9% (Fixed) and a deposit of £0.00, the amount payable would be £166.07 per month, with a total cost of credit of £3,464.37 and a total amount payable of £9,964.37. We compare multiple lenders to help find the best rate available from our panel and offer you the best deal you're eligible for. We earn a fixed or percentage-based commission on the finance agreement, which will not affect your interest rate or total repayment amount. The full commission details will be provided in the commission disclosure document before proceeding with the finance agreement.
HOW IT WORKS
Our Process Is Simple...
Tired of complicated, time-consuming finance processes? We make it quick and straightforward with our three-step approach:
Apply and get approved
Approval takes just minutes. Complete our simple online application, we’ll instantly compare rates and aim to find the best deal for you.
Choose your car from any dealer
Whether you’ve already found your dream car or need help sourcing it, we’ll manage everything for you, from dealer communication to thorough vehicle checks, ensuring a seamless buying experience.
Hit the road in no time
Once the paperwork is sorted, it’s time to collect (or have delivered) your new car. Getting behind the wheel has never been easier.
Frequently Asked Questions
What is the main benefit of PCP finance?
The main advantage of PCP finance is the flexibility it offers. With lower monthly payments and the option to keep, return, or trade in your car at the end of the term, it’s an affordable option for those who want to drive newer cars regularly.
Do I have to buy the car at the end of the PCP agreement?
No, you’re not obligated to buy the car at the end of the agreement. You can choose to return it or trade it in for a new model, depending on your preferences.
Can I pay off my PCP agreement early?
You can pay off your PCP agreement early. However, you may have to pay off any remaining balloon payment or settle the remaining value of the car to end the contract early. It’s worth checking with your lender for the exact terms.
How does the GMFV (balloon payment) affect my monthly payments?
The GMFV is the amount you’d need to pay to own the car at the end of your PCP agreement. Because the GMFV is not included in your monthly payments, they tend to be lower than other finance options, making it easier to afford a new or used car.
Can I change my car during the PCP agreement?
PCP agreements offer flexibility. You can request a settlement figure, sell or trade in the vehicle, or, if you've paid at least 50% of the total amount owed, you can voluntarily terminate the agreement and return the car.