What is PCP finance?

Personal Contract Purchase (PCP) is a popular finance option in the UK as it offers fixed monthly repayments and the ability to change your car every few years.

How does PCP work?

You pay an initial deposit, followed by a series of monthly repayments typically over 2 to 3 years. At the end of the agreement you have three options:

  1. Hand the car back to the dealer and walk away (within agreed mileage limit and within fair wear and tear limits)
  2. Exchange your car for a new model and renew your PCP contract
  3. Buy the car outright by paying off the balloon payment (the depreciated value of the car)


The benefits of PCP finance can include:

  • often lower monthly repayments compared to hire purchase or a personal loan
  • the flexibility to change your car, keep it or walk away at the end of the term
  • the option to bundle maintenance and service costs into your monthly repayments

However, the disadvantages of PCP can include:

  • not actually owning the car unless you pay the optional balloon payment
  • an agreed mileage limit and additional charges if you exceed it
  • an obligation to keep the car in good condition and properly serviced
  • a risk of high costs if you need to leave the contract early, exceed your mileage limit or return the car with excessive wear and tear

Whilst everybody's personal circumstances differ, PCP can be a cost-effective way of financing your car if you plan to change it every few years. However, if you want to own the car outright after the finance agreement, the large balloon payment can mean that hire purchase or personal loans are sometimes a more cost-effective option.

For further information, read our full PCP guide or compare different types of finance here.

Remember: you need to make sure you fully understand any finance agreement before committing to it as terms and conditions will apply. Your carwow dealership will be able to advise you on a number of finance options that may be suitable for your personal circumstances, however other ways of purchasing are available. 

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