Personal Contract Purchase (PCP)

Personal Contract Purchase (PCP) is similar to a Hire Purchase agreement as you will usually pay an initial deposit, followed by monthly instalments.

What's different with PCP, is that your monthly instalments are only paying off the depreciation of the car, rather than the entire value of the car.

How does PCP actually work?

At the start of your PCP contract, a Guaranteed Future Value (GFV) of the car is estimated. This is the car's expected value when your contract ends.

For you, this simply means that the money you're actually borrowing and repaying is the difference between what the car is worth now, and what it will be worth at the end of your contract (the depreciation). You'll pay this difference off in monthly instalments.

This means lower monthly payments for you, but you will need to pay a final payment at the end (the Guaranteed Future Value) if you want to buy the car.

Once your monthly payments are finished, you’ll have three options:

1. Buy the car by paying the final balloon payment (the Guaranteed Future Value)

2. Hand the car back - your finance company has already predicted the Guaranteed Future Value of the car, so handing the car back will settle the deal.

3. Part exchange for a new car

WARNING TO FUTURE PURCHASERS

Clocking is returning to used car market, Rupert Pontin reports

Clocking is becoming a genuine issue for the first time in decades, but this time it is motorists rather than dealers who are illegally reducing mileage.

The practice is occurring where drivers exceed the contracted number of miles on fixed mileage leases, such as a PCP, and want to avoid an excess mileage penalty charge on returning the car, which can run into hundreds or even thousands of pounds.

Drivers are increasingly turning to mileage adjustment companies who use specialist equipment to artificially reduce the number of miles showing on the odometer. Because most of the vehicles involved have been supplied new and are less than three years old, there is no MOT certificate and often only one service stamp. The paper trail doesn’t reveal that the mileage has been altered.

Some drivers facing a PCP returns charge may consider clocking as an easy way of avoiding payment but their actions are illegal.

The issue tends to come to light when the car is prepared for sale either by the original dealer or another who has subsequently bought the car, probably at auction.

When a dealer plugs the vehicle into their diagnostic rig as part of their standard vehicle preparation procedure, an error code will usually show that clocking has occurred.

- See more at: http://www.glass.co.uk/blog/2015/2015-clocking-returns/