PCP the Next Big Alternative to Outright Vehicle Purchase?

There’s nothing quite like the feeling of stepping into a new car for the first time and hitting the road. Even if it’s not exactly ‘new’ in the traditional sense of the word, it’s new to you. This once rare pleasure is now being enjoyed by more UK motorists than ever before, as nationwide car finance options become increasingly accessible and affordable.

UK car finance specialists have introduced a wide variety of flexible car finance options over recent years. Some new, some variations of long-standing purchase plans. One of the most popular ways of buying a car on finance in the UK today is PCP – a personal contract purchase plan.

If you’ve ever wondered how so many motorists can afford to upgrade their car to a shiny-new model every three years, chances are they’re driving their cars using a PCP plan.

PCP Car Finance Explained

It’s no secret that while average wages in the UK continue to stagnate, general costs of living are on the up. As a result, a growing contingency of would-be buyers simply cannot afford to purchase a car outright. The desire to drive a safe, reliable and comfortable vehicle remains, but the funds to buy one are simply out of reach.

This is where PCP car finance in the UK can help. With a PCP deal, it’s simply a case of paying the required deposit, followed by a series of comparatively low monthly payments over two to four years. Deposits and monthly payments are determined by the value of the vehicle and the terms of the agreement.

When the agreement comes to an end, the customer has the option to purchase the car outright, by making one final “balloon” payment agreed at the beginning of the term. Alternatively, they can continue paying the same monthly rate for a newer car or walk away from the deal and not pay a penny more.

The accessibility and flexibility of PCP seem to be having an impact on motorists across the UK. According to the Finance & Leasing Association, last year saw a 10% increase in total car finance transaction values – hitting a new all-time record of £40 billion. One of the sharpest climbers of all being PCP agreements.

Boom or Bust?

Unsurprisingly, opinions vary as to whether this newfound interest in nationwide car finance in the UK is a good thing. According to the National Association of Commercial Finance Brokers, there is a growing number of mainstream and specialist finance companies providing misleading or inaccurate advice, in the hope of locking-in more PCP contracts.

Likewise, the FCA has advised customers to be vigilant when considering the car finance options available, along with the respective service providers behind them.

In most instances, PCP can be a uniquely flexible and affordable way to drive a quality car. Many service providers even include early exit clauses, which allow customers to walk away from such contracts at any time, should they become unaffordable. Fees are typically payable, but need not be excessive.

As is the case with all car finance options, therefore, it’s a case of common sense (or otherwise) dictating the outcome.

If you can comfortably afford the monthly repayments and would prefer not to purchase a vehicle outright, a PCP contract could be for you. If you’re happy with the terms of the agreement and the final “balloon” payment agreed, you could be onto a winner.

However, entering into any kind of financial service agreement when you’re not currently in a strong financial position is inadvisable. This is one of the many reasons why it pays to work with an independent broker, rather than approaching a mainstream specialist lender directly.- poorcreditcarfinance.co.uk

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