Personal Contract Purchase (PCP) is available for some used cars. It involves regular payments over an agreed term, with a larger optional final payment if you want to own the car.
Before signing, check the full cost, the conditions for returning the vehicle and how you would fund the final payment if you intend to keep it.
How used car PCP works
A PCP agreement usually has three parts:
- An initial deposit, if required.
- Monthly payments over the agreed term.
- An optional final payment, often called a balloon payment.
The balloon payment is set at the start of the agreement, based on the car’s expected value at the end. Where interest applies, it is charged on the amount financed, including the amount deferred to the balloon payment.
The finance company owns the car during the agreement. You become the owner only after paying everything required to purchase it, including the balloon payment and any applicable purchase fee.
Which used cars and applicants qualify?
Lenders set their own vehicle criteria, including age and mileage limits. Some limits apply to the car’s age at the end of the agreement, so the length of the term matters too.
The lender also assesses the applicant’s creditworthiness, including affordability. A car meeting the vehicle criteria does not mean that an application will be accepted.
The used car PCP loan page linked here belongs to Carmoola, a commercial car finance provider. It explains its PCP product and provides links to its application process. Carmoola states that it lends directly and may act as a credit broker if it cannot offer finance itself. Its finance is subject to status and available to UK residents aged 18 or over.
Compare the full cost
A monthly repayment figure does not show how much it will cost to own the car. Part of the price remains payable at the end.
When reviewing a quotation, check:
- The cash price, deposit and amount borrowed.
- The annual percentage rate (APR) offered to you.
- The number and amount of monthly payments.
- The balloon payment and any additional fees.
- The total payable if you buy the car at the end.
Check whether fees are already included in the quoted total to avoid counting them twice. If comparing quotations, use the same deposit and term where possible, and account for differences in mileage allowances and final payments.
What happens at the end?
Once you have made the scheduled monthly payments, the usual options are:
- Keep the car: pay the balloon payment and any other amounts required to complete the purchase.
- Return the car: follow the agreement’s return process. Excess mileage or damage beyond permitted wear and tear can result in charges.
- Part-exchange the car: arrange for the existing finance to be settled as part of the transaction. Any value above the settlement amount can contribute towards another car, but a surplus is not guaranteed. A shortfall may need to be paid.
Taking finance on another car requires a new agreement and approval. Do not assume you will qualify for a replacement agreement or finance to cover the balloon payment.
Check the mileage, condition and running costs
Choose a mileage allowance that reflects your expected driving. Read the excess-mileage charge and the lender’s return-condition standards before signing.
Review the car’s history, condition and servicing records separately from the finance offer. Finance eligibility does not establish a car’s mechanical reliability. Check what any warranty covers and excludes.
Allow for insurance, fuel or charging, servicing and repairs alongside the repayments. Missing payments can damage your credit record and put the car at risk of repossession.
If you might need to end the agreement early, ask the lender to explain the available routes and how the amount payable would be calculated before you commit.
