Since the recession first struck in 2008, PCP has found itself at the forefront of a whole new wave of optimism and opportunity in the new and used car buying market.

When the recession hit, a large amount of people found themselves unable to afford their ideal cars outright. This caused problems for the garages as sales were down and the whole industry needed a new, viable way of buying and selling cars.

So, What Is PCP?

Personal Contract Purchase (PCP) is a form of car hire, with an option to buy outright at the end.

Similar to Hire Purchase (HP), where you pay the full value of the car in monthly installments, the key difference with PCP is that you aren’t paying towards the full-value of the car, you’re paying off the difference between the car’s value now and at the end of your contract-- usually 4 years, although you can negotiate different lengths of contract.

This is called the Guaranteed Future Value (GFV) and at the end of your contract you can pay it off in a single balloon payment should you wish to keep the car. Alternatively, you can hand it back to the dealer.

The amount you pay will depend on the number of miles you drive each year. This must be agreed at the start of the contract and any mileage above this may be charged on a per mile basis when you return the car.

To summarise, your options at the close of the contract are:

  • Pay the GFV in a balloon payment to buy the car outright.

  • Return the car to the dealer after your last monthly payment has been made. As the GFV has been determined at the start of your contact, no further payment will be needed.

  • You can part-exchange your car and any equity that may be left on your contract can be used against the deposit for the new car.

What Are The Benefits Of PCP?

  • For one, your monthly payments are lower as you’re not paying towards the car’s full price, but rather the price + interest - the GFV payment at the end.

  • If, over the course of your contract, you decide you’re not 100% happy with the car, you can simply trade it in at the end and look for a new car-- it’s become a practice for people to trade cars on short contracts, the same way many do with mobile phones.

  • Some dealers offer breakdown and repair cover during the period of the contract, meaning an extra level of security for you in the event of damage.

  • If, at the end of your contract, the car’s value is still higher than the agreed GFV, you can use the difference against the deposit on your next car.

  • Quite markedly, the other benefit of PCP is the capability to drive a car which would previously be above your budget


In the year between July 2014 and 2015, 705,000 people bought a new car through PCP, accounting for 59% of the purchases in that time, proving they have never been more in demand.

With the option to buy out of your contract at any time not restricting you, it’s a fantastic opportunity to drive a better car whilst keeping the flexibility of options to suit your circumstances.

For more in-depth information on PCP and our other finance options, we encourage you to interact with our finances page, where we’ve made a video detailing how it works.