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Personal Contract Purchase (PCP)

How does a PCP (Personal Contract Purchase) work when buying a car?

Personal Contract Purchase (PCP) is a way of financing the purchase of a car, with repayments covering the amount of money that the vehicle is expected to lose over the length of the agreement (usually three years).

Around 80% of new cars are now bought using PCPs, because they offer fixed, low, monthly payments and a number of options at the end of the agreement. Buyers can merely hand the vehicle back with nothing else to pay. Alternatively, they can buy the car outright with a one-off payment (called a balloon payment).

A popular option, though, is to sell or part-exchange their PCP car: the vehicle is often worth more than the final payment, so trading it in or selling it raises enough money to settle the finance agreement with some money left over – which can be put towards the deposit on the next car.

Related Jargon

How does buying a car using hire purchase work?

Hire purchase is a way of financing a new or used car and usually involves you putting down a deposit and then paying off the rest of the cost of the car in monthly instalments.

How does part-exchange work?

Part-exchanging a car involves swapping your car for another, more expensive vehicle. You then pay the difference, which will either involve organising some form of financing or just paying in cash.

What is meant by the depreciation of a car?

Depreciation is the difference between the value of a car when you buy it and what it's worth when you come to sell it.

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Cinch Cars Limited is an appointed representative of ITC Compliance Limited which is authorised and regulated by the Financial Conduct Authority (their registration number is 313486). Permitted activities include acting as a credit broker not a lender.

We can introduce you to a limited number of finance providers. We do not charge fees for our Consumer Credit services. We may receive a payment(s) or other benefits from finance providers should you decide to enter into an agreement with them, typically either a fixed fee or a fixed percentage of the amount you borrow. The payment we receive may vary between finance providers and product types. The payment received does not impact the finance rate offered.

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