Personal Contract Purchase (PCP)

Personal Contract Purchase (PCP) is a type of leasehold arrangement that tends to be offered by car dealers on high value new or nearly new cars. You pay a deposit and agree a figure of what the car will be worth at the end of a period - usually three years. This is called the figure guaranteed value (FGV).

Deduct the FGV and the value of your deposit from the price of the vehicle, add on the interest charge and the sum left is what you will have to pay off via monthly instalments during the term of the PCP agreement.

At the end of the PCP you will have the option of either paying off the FGV and taking ownership of the vehicle or handing it back. There may be restrictions on mileage involved with PCP agreements and you are likely to be required to maintain the car to a high standard.

See also: Financial Services