PCP (Personal Contract Purchase)
PCP is HP (Hire Purchase) with a larger final payment at the end. This final payment is an estimated value of what the vehicle is likely to be worth at the end of the agreement.
At the end of the agreement you may pay the final payment, or return the vehicle to the finance company*. In reality the majority of customers part exchange the vehicle when making their next purchase and use the part exchange value of the vehicle to settle the final payment.
Monthly payments are significantly lower than on a comparable HP figures due to the residual or “balloon” payment. The final payment is guaranteed by the finance company*.
*(subject to mileage limitations based on your stated annual mileage and returning the vehicle in a reasonable condition for it’s age and mileage)
Finance Lease (For business users)
Finance lease is a very popular alternative to contract hire. This type of finance provides exactly the same VAT benefits and tax benefits as contract hire because the vehicle is not your asset. There are no formal mileage restrictions and it is much easier to dispose of the vehicle during the agreement should staff leave, trading circumstances change, or you simply fancy changing your car. Disposal is made possible as the sale proceeds of the vehicle can be used to settle the outstanding balance with the finance company.
You can also acquire the vehicle at the end of the agreement. This creates a cost saving for the business if there is an additional use for the vehicle rather than buying a newer, more expensive vehicle
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Contract Hire (For business users)
Contract hire is a pure rental agreement, mileage restricted, with no disposal worries. You simply pay your rentals for the period and hand the car back to the finance company. If you exceed the contracted mileage there are excess mileage charges to pay. Maintenance and other add on features can be added.
HP (Hire Purchase)
HP is the traditional method for vehicle purchase. Nowadays with the rise in popularity of PCP, HP tends to suit the buyer who intends keeping the vehicle for longer than the term of the loan.
Your deposit is deducted from the total cash price of the vehicle to give a balance that requires financing. Interest is then added and the total of the balance and interest is then repaid in equal instalments throughout the life of the loan.
Lease Purchase (for business and private users)
Lease purchase is similar to PCP without the guarantee on the future value. The deposit can be almost any amount. The greater the deposit the lower the monthly payments. Title passes once all the payments and the final balloon have been paid. Ideal for used vehicles where finance companies are reluctant to guarantee the future value of the vehicle
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