PCP finance is one of the most popular ways to buy a car. Use our guide to find out if it's right for you or apply now to get a quote in just a few minutes.
Zuto is a credit broker, not a lender. Our rates start from 10.9% APR. The rate you are offered will depend on your individual circumstances. Representative Example: Borrowing £8,000 over 60 months with a representative APR of 19.7% the amount payable would be £204 a month, with a total cost of credit of £4,219 and a total amount payable of £12,219.
PCP car finance is one of the most popular ways to buy a car. Use our guide to find out if it's right for you or apply now to get a PCP quote in just a few minutes.
Personal contract purchase (PCP) is a type of car finance that differs from various other types of finance in that it can act like a long-term car rental agreement if you choose not to make the final balloon payment. This PCP finance option is ideal for those looking for flexibility in car ownership.
PCP lets you loan a car from a finance provider, with you making monthly payments over an agreed period – usually between 24 to 36 months, although some providers offer longer periods. You then decide at the end of the term whether to return the car, pay a ‘balloon payment’ to keep it, or get another car using any equity there might be in your car. This is explained in further detail below.
PCP finance is similar to hire purchase finance, but, instead of payments based on the car’s total value, you pay off its depreciation instead (the difference between what the car is worth now and at the end of the contract).
There are three simple steps:
Your deposit amount will depend on the agreement with your lender. Some of our lenders do offer zero deposit car finance options, but some might ask for, for example, 10% of the vehicle’s value. This goes towards paying off the depreciation, so the more you can pay upfront, the less you’ll need to pay each month, and the less interest you’ll pay overall.
Your monthly repayments will pay off the car’s depreciation. You’ll also need to bear in mind the annual percentage rate (APR) which is the interest you’ll pay on top.
Just let us know your budget and how much you can afford each month, and we’ll do our best to find you a deal from our panel of lenders which suits your requirements.
At the end of your PCP contract, you’ll have three choices:
When considering car finance options, a Personal Contract Purchase plan can offer a range of benefits and potential drawbacks. Understanding these can help you make an informed decision about whether PCP is the right choice for you.
Compare the differences between personal contract purchase and hire purchase finance:
| Finance features: | Hire purchase (HP) | Personal contract purchase (PCP) | Personal loan | |
|---|---|---|---|---|
| Requires initial deposit | Optional | Optional | ||
| Car is yours at the end of the agreement | Optional | |||
| Fixed monthly payments | ||||
| Avoid (final) balloon payment | ||||
| Avoid excess mileage charge | ||||
| Secured against an asset (e.g. a car) | ||||
| Support with vehicle issues | ||||
To help put PCP into perspective, here’s a quick example.
Let’s say you’re looking for a two-year deal.
The car is priced at £15,000 and is expected to be worth £8,000 at the end of the agreement, so its value will have dropped (depreciated) by £7,000.
You can afford a 10% deposit (£1,500), which means you need to finance £5,500.
Here’s what you’d pay, based on 12.9% APR:
The total without buying the car will be £9,828, or £17,828 if you make the final balloon payment.
If you’re wondering if PCP car finance is worth it, or if it’s the right decision for you, Here are some key factors to consider before applying for PCP car finance, including your budget, credit rating, and understanding of PCP finance options.
The better your credit score, the more likely you’ll get a better deal. If you have a poor or bad credit rating, don’t worry, our panel of lenders may still be able to help you get bad credit car finance.
Work out how much you can afford to borrow by using our PCP car finance calculator and consider other costs such as fuel, insurance and tax.
Your deal will probably have a mileage limit. Make sure you know you can keep within it.
The car’s depreciation is based on the vehicle being in a good condition at the end of the agreement. You’ll need to pay for any damage at the end.
The alternative car finance options are HP car finance and a personal loan.
We’ll need to know details like how much you would like to borrow, your address, your employment etc. Our online application form should only take a few minutes to complete.
Our lenders will carry out a soft credit check which allows them to understand if you’ll be approved for the finance.
The call usually takes around 5 to 10 minutes. There’s no pressure to agree to anything and quotes are valid for 30 days.
Our friendly team can help you find a car from our range of verified dealers, or you can tell us about one you’ve seen.
If one of the deals works for you, let us know. We’ll then run a full credit check, which may be marked on your credit history, and get a formal offer from the lender.
If you're considering a new car, our guide will explain the key differences between financing and leasing.
Zuto has a variety of car finance products available so preparing for which is the right one for you is key.
Ever wondered what the differences between HP and PCP finance are? Read our guide to find out.
Discover the questions our customers are asking about PCP car finance.
Yes you can. Zuto helps with used cars and is a trusted AutoTrader partner.
Zuto has a list of approved dealers. When you apply for a quote, you can browse cars from these trusted dealers.
A balloon payment is what you can pay at the end of a PCP agreement to fully buy and own the car. It’s also known as the Guaranteed Minimum Future Value (GMFV). Find out more about on balloon payments here.
Yes, because interest (known as APR) will be added to your monthly repayments. However, the monthly cost means you might be able to drive a better car than you would otherwise be able to afford with cash or other finance types. This is because the loan is based on the difference between what the car is worth now and at the end of the contract, with a larger payment to make at the end of the finance.
If you don’t buy your car outright, you might also be charged for any damage to the car at the end of the agreement.
Early settlement or termination depends on the contract with your lender. When you make an application, one of our team will be able to talk this through with you.
The most important thing is to make sure you only agree to pay what you know you can afford, but circumstances can change. The impact of missed payments depends on your lender; if you fall behind, you may be able to hand the car back (but potentially with something still to pay) or the finance company might repossess your vehicle.
This will depend on when you would like to change and the agreement you have with your lender. Please talk to one of Zuto’s advisers for any support.
Various factors can influence what deposit amount you should put down on a PCP finance deal. These include your own financial situation and what you can afford, the value of the car and the finance provider’s own policies. Typically, a deposit of 10% up to 30% is common. The more you put down as a deposit, the lower your interest costs will be, and therefore the lower the amount you’ll pay overall. There are also many no deposit finance options available.
The age limit of a car on a PCP deal varies from lender to lender. Generally, the car will need to be under 4 years old when the agreement starts, and no more than 7 years at the end of the agreement. This is why PCP deals tend to be for newer cars, as they’re more likely to retain value.
A PCP agreement gives you various options at the end of your finance agreement with the lender. You can return the car, use equity to buy another, or make a balloon payment to own it outright. The only option you have with a lease car is to hand the car back at the end - you have no ability to purchase it. Both involve monthly payments, but you’re paying for different things. With a lease, your regular payment is based on the car’s loss of value during the lease. With PCP, the monthly payments are determined by the depreciation, which is the difference between the initial price and the projected minimum value at the end of the term.
At the end of a PCP agreement, your initial deposit does not get refunded or carried over. Instead, the deposit is used as part of the overall finance arrangement and contributes towards the total cost of the vehicle. When your PCP term concludes, you will need to decide whether to make the final "balloon" payment to purchase the car, return it, or trade it in for a new vehicle. If you choose to return the car, the deposit is not refunded, as it has already been factored into the cost of the car and the financing plan.
If you can, putting a larger deposit on a PCP car finance deal can have several benefits. It typically reduces the amount you need to finance, which can lower your monthly payments and potentially result in a lower overall cost of credit. Additionally, a bigger deposit may help you secure a more favourable interest rate or enhance your chances of approval. However, it's important to balance this with your immediate financial needs and savings goals. Ensure that putting down a large deposit does not strain your budget or deplete your savings unnecessarily.
At Zuto, finding the best PCP car finance deal is simple and hassle-free. Start by completing our quick, online application, where we’ll conduct a soft credit search that won’t affect your credit score. Once submitted, you’ll receive personalised offers from a wide range of trusted lenders. Our panel of lenders allows us to compare options and tailor quotes to your budget, car preferences, and credit profile, ensuring you get the most competitive car finance deal. If you’re unsure which offer to choose, our finance specialists are here to guide you through your options and help you select the best one for you.
When you’re ready to change cars with a PCP (Personal Contract Purchase) agreement, the process is relatively straightforward. As you approach the end of your PCP term, you’ll have the option to either return the current vehicle, pay off the remaining balance to own it, or trade it in for a new car.
If you choose to trade in your car, the value of your current vehicle will be assessed, and any equity (if the car’s value exceeds the balloon payment) can be used as a deposit towards your new PCP agreement. Zuto can assist you in finding the best new PCP deals and managing the transition smoothly, ensuring that you drive away in a new car with ease.
Yes, you may still be able to secure an PCP car finance deal even with bad credit. At Zuto, we collaborate with lenders who specialise in assisting those with less-than-perfect credit. While you might encounter higher interest rates and more limited terms, flexible options are still available. Our team will support you throughout the process to find a PCP deal that fits your financial needs and gets you on the road.
