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Personal Contract Purchase: the PCP explained

What is PCP car finance? Read our comprehensive guide to the Personal Contract Purchase

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Personal Contract Purchase: the PCP explained 1
Personal Contract Purchase: the PCP explained 2
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Personal Contract Purchase: the PCP explained 6

The PCP (personal contract purchase, sometimes called a personal contract plan) is by far the most popular car finance product on the UK market for both new and used cars. 

Most car manufacturers and car dealerships push this type of finance pretty hard. In fact, car sales executives tend to be more interested in your monthly budget than which car you want.

But what exactly is a PCP? How does it work, why is it so popular and what should you be looking out for? This guide will help you understand everything you need to know about PCP car finance. We will cover the following:

About 90% of all private new car buyers finance their purchase at the dealership, and the vast majority of those finance agreements are PCPs – in some cases, it’s basically 100%. PCP car finance is also becoming more and more popular for used car finance, especially ‘approved used car’ offerings from big dealerships.

Discussing car finance, like a hire purchase or PCP, in a car showroom
“Don’t worry about the car, what we really want is to sell you a PCP.”

PCP car finance can seem very confusing

Despite its enormous popularity in recent years, research from 2015 found that a staggering 88% of men and 75% of women could not explain what a PCP was. A more recent study found that nothing has changed, with about 90% of people not understanding the fine print in their finance contracts.


Even the media regularly get tripped up trying to explain how PCPs work when they report on car finance issues, confusing a PCP with a lease or other forms of finance, which certainly doesn’t help consumers understand what’s really going on.

We have millions of car buyers in the UK are unsure how a PCP actually works, despite the fact that they are taking out a PCP agreement for thousands of pounds to buy a car. So the good news is that if this applies to you, you’re certainly not alone!

If you want to brush up on your car finance jargon, we’ve produced this most excellent glossary that explains all the terminology you will come across in a finance quote or contract:

At most new car dealerships, car finance is usually offered by the manufacturer’s own finance company. The offers tend to be much better on new cars than on used cars. That’s because car manufacturers are far more interested in selling you a new car than one they built a few years ago. They also have various different names for their PCP offerings, which can be confusing,

There are other lenders who also offer PCPs, but they are usually aimed at used car finance and are not normally competitive with manufacturer finance on new cars. PCP car finance has become much more popular on used cars in recent years, and the rates are becoming more competitive.

What exactly is a Personal Contract Purchase?

A personal contract purchase (PCP) is a specific type of hire purchase (HP) finance agreement, and it will often be shown on a finance contract as a hire purchase. It’s often incorrectly referred to as a personal contract plan (rather than purchase).

Like a traditional hire purchase or a mortgage on your house, a PCP is a secured finance agreement. That means that the finance company ultimately remains the owner of the vehicle until the last penny has been paid off, which is important.

In comparing a PCP and a traditional HP, you are usually borrowing the same amount of money and paying a similar amount of interest (usually slightly more on a PCP). The fees for both finance products are usually about the same as well. The main difference is how the monthly payments are structured.

In a traditional hire purchase agreement, you pay off your entire borrowing in equal monthly instalments. A PCP is different in that you have much lower monthly instalments followed by a very large final payment at the end. This final payment is often known as the balloon (also known as the Guaranteed Future Value, but that’s actually a slightly different thing).

For example*, If you borrow £20,000 on a hire purchase over four years, you would have 48 monthly payments of about £420. If you borrowed the same amount on a PCP over the same period, your monthly payments would be about £250 but you’d then have a final payment of about £8,000.
*(example for comparison purposes only, excludes interest and fees, etc.)

You have several options as to how to deal with this final amount, depending on whether you want to keep your car or change it.

What is the attraction of a PCP?

If you compare financing the same car on a PCP against an HP, you are generally borrowing the same amount of money. The big difference, as shown in the example above, is that you are paying off a much smaller amount of your debt via your monthly repayments and deferring a large amount (the balloon) to the end of the agreement.

This means:

  • Your monthly payments will be much lower, and/or
  • Your initial deposit will be much lower, and/or
  • Your repayment term will be shorter

Most people tend to change their cars about every three to four years. Most buyers also have a reasonably small amount of cash available to put down as a deposit. For this sort of situation, a PCP gives you a much lower monthly payment than an HP.

Alternatively, you can buy a more expensive car for the same monthly payment (which is what has generally happened over the last decade).

However, there is a large caveat – at the end of the agreement, you have to take action of some sort to settle the outstanding debt (the balloon). If you don’t, you will be stung hard.

For a car dealer or car manufacturer, the personal contract purchase has two main benefits:

  1. Lower monthly payments on a PCP mean more customers can afford more of their cars
  2. Customers can’t usually afford to pay off the balloon amount, so they are effectively forced to buy another car on another PCP. As a result, the dealer/manufacturer has a good opportunity of securing repeat business.

Continued on next page: How a PCP works
Keep reading: What are the disadvantages of a PCP?

For the best independent and impartial car finance advice on the internet, always check with The Car Expert:

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Stuart Masson
Stuart Massonhttps://www.thecarexpert.co.uk/
Stuart is the Editorial Director of our suite of sites: The Car Expert, The Van Expert and The Truck Expert. Originally from Australia, Stuart has had a passion for cars and the automotive industry for over thirty years. He spent a decade in automotive retail, and now works tirelessly to help car buyers by providing independent and impartial advice.

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  1. Hi just reading your interesting article on PCP. I am buying a new car now and can pay cash for it, I have already had a £1000 contribution from the manufacturer. The dealer is suggesting taking out PCP This entitles me to another £1000 contribution from the Finance house who claim it back from the manufacturer then after one or two months of payments to ask for a settlement figure thus picking up £2000 off my car minus the payments. I am assured this is quite above board but am still sceptical. Mainly because the GFV they state at the beginning is based as you know on my estimated mileage 6000 miles and the term of 24 months. Would this be possible to do in your estimation? I would welcome your views. Kind Regards Noel

    • Hi Noel. We have recently covered this in our forum (click here), so check that out. In short, yes you should be able to do this. You can settle the finance at any time during the agreement, but the guaranteed value only applies at the end of the term.

      If you cancel within 14 days, you should be able to avoid paying any interest or fees. If you cancel after a couple of months, your settlement fee could be considerably higher as your interest payments and fees will be added.

    • I have been reading your excellent articles about PCP but can not see any information about it and car insurance. My son took out a PCP agreement about 12 months ago and he was involved in an accident last week when he slid into the back of another car in the snow. It looks as though his car will have to be written off. I am worried that he could end up receiving less from the insurance than he is liable to payunder the PCP agreement. I am so worried and was hoping that you could give some advice?

    • Hi Erin. Yes, that is a distinct possibility. His insurance will cover the market value for the car, which is almost certainly less than the amount owed to the finance company to settle the PCP. If he took out GAP insurance, that would probably cover the difference, but if he didn’t then he would be liable to pay for the shortfall.

      It’s not an unusual situation. The car depreciates faster in its first year than the finance is being repaid, so there is usually a shortfall to be paid if the customer wants to sell the car (or if it is written off). This starts to level out over the course of the agreement, with the idea being that the car’s value is the same as the amount owed when the PCP term ends.

  2. Can I sell my car that is on a PCP agreement to another company and they pay the settlement figure. So that I may buy one of their cars. One of the downsides is you can end up ;coked into a brand and the dealer turns out to be difficult

    • Hi Paul. By “another company”, I assume you mean another dealership? You certainly can, if the value exceeds the settlement figure, and you use the equity for your next car.

      If the value is less than the settlement figure (but you have met all your contract conditions), then you can usually just call your finance company and they will come and collect it.

    • Thanks, thats what I thought. Well I guess Toyota will not miss one loyal customer then!

  3. Hello. I am in the same situation as Noel above and thankyou for the guidance. Can you tell me though, who would be the registered owner of the car? Is it the finance house or the car buyer?

    • Hi Geoffrey. The UK is complicated, in that the finance company is the registered owner but you are the registered keeper on a PCP. On a lease, the finance company is both the owner and the keeper. Once you settle the finance, you become the registered owner. However, most of the time there is no real paperwork to explain this, and in real-world terms it means that the keeper can sell the car as long as they settle the finance outstanding.

    • thanks for explaining that. was wondering if you get any documents of ‘ownership’ this has explained it. thanks

  4. Great article. I currently have a PCP plan and have 17 months left out of a 3 year agreement with the balloon figure on the end. Struggling to keep the payments due to a change in circumstances. Can I give the car up and get out of the agreement?


    • Depending on the nature of your change in circumstances, the best bet is usually to contact the finance company ASAP and discuss it with them. PCPs do have termination rights which you may be eligible for, or it may be that your car is worth more than its settlement figure. Or you may have to pay some money to clear the settlement figure.

  5. Really Helpful article, I have two years left on my PCP Plan, due to excessive travel due to work, I am currently over my agreed mileage by 8000. If I continue with this excess mileage and purchase the vehicle, will I still be charged for going over the agreed mileage plan ?

    • Hi Graham. Short answer = no, you will not be charged.
      The settlement/balloon/GMFV figure set at the beginning of the agreement is the amount you owe to purchase the vehicle outright at the end of the agreement. If that is your plan, then the mileage is irrelevant, as is the vehicle’s condition or servicing history. It only matters if you are asking the finance company to take the car back.
      If you do not want to keep the car, you can probably contact the finance company and ask them to recalculate your remaining payments based on your increased mileage. They should be able to adjust the GMFV and increase your payments to cover the increased depreciation. If so, check to see if there are any charges for doing this.

  6. i am looking to use PCP to finance the purchase of a car. I have done my research and reduced it down to 2 models from the same range of cars. The cheaper car with a manufacture contribution works out to the same monthly repayments as the more expensive car. The final balloon amount for the cheaper car is thousands of pounds less than the more expensive car, making the amount financed greater. Is it financially better to go for the more expensive vehicle or go with the cheaper car? I may what to purchase the car at the end of the agreement-cheers

    • Hi Steven. It depends on whether you really are going to purchase the car at the end. If the monthly payments and initial deposit are the same, then the more expensive car is the better choice (ie – you are getting more car for your money). However, if you are going to pay out the settlement at the end and keep the car, then the cheaper car is thousands of pounds better. Many people say that they plan to buy the car out at the end of the agreement but never do, as they don’t have the money at the time.

    • Hi Sharn. Yes you can, but it will probably cost you quite a bit of money. I am working on an article about settling a PCP early, which should be live tomorrow. Check back for more info then!

  7. Hi Stuart,
    Very clear and concise article thank you.
    My last financed car was a 2006 V8 Vantage which I put 33% deposit down on a HP agreement.
    Having sold the vehicle I am now interested in a 2007 R8 but trying to stick to monthly budget the same or lower than my HP payment was for the Aston.
    I'm very likely to change cars in 3 years and PCP sounds right for me.
    I have been looking at R8s upto around £40k but some are Cat D repairs from dealerships (hence lower prices).
    Is it true that most finance companies will not PCP finance a cat d repaired car or a car over a 3 years old?

    Thank you in advance


    • Hi Steve. Each finance company will have its own policies on things like Category D repairs and vehicle age. With Audi Finance, the age requirement is (well, it used to be, don’t know if it has changed) that the car had to be no more than 6 years old at the end of a PCP agreement (and about 70,000 miles from memory). So you could possibly take a 4-year-old Audi on a 2-year PCP. I don’t know if they will finance a Cat D car, though. Usually, Audi dealers won’t carry Cat D or Cat C stock so it’s not normally an issue.

    • Hi Alan. There is no right or wrong; whichever suits your circumstances better. The car’s starting price and final value are the same either way, so you can either pay more up front and less each month, or less now and more each month. The more money you have under finance, the more interest you will pay in total.
      The dealer will always want you to finance more money, as they get paid a commission on the total amount financed by the finance company.

    • Its been a fight really between the dealership and us. Anyway the outcome is customer services are paying 50% of the cost of the part, leaving us with a bill of £1,000 left to pay. Dealership wont pay unless we decide to do a part exchange for another car. They will give us £11,000 which will pay off the rest of the pcp & pay for the rest of the repair and give us £500 on another car. We have to take that offer as we have no other choice.
      Thanks for your advice and help

    • Check the part-exchange price on another car from another dealership, as you may get a better deal elsewhere which more than covers the cost of the repair. Plenty of deals to be had out there!

  8. I would like some advice regarding PCP. I currently have a Nissan Qashqai on PCP since 2012. The car is currently at the dealership with a problem with the DPF system. It has had one attempt of regeneration under its warranty which failed. We have now been told it will cost £1500 to repair the system. The car did not have the DPF warning light installed so we were unaware of the problem and knowledge on how to rectify it. Does the finance company have any repsonsibility on the cost of repairs for the car? As we are only hiring it as such. We have made a complaints case against Nissan with their customer services. We no longer want the car as it will not suit us with the driving conditions we do. Where do we stand on handing car back? As we owe half the cost on the car which is £10,000.

    Any advice would be great

    • Hi Christine. If your DPF system has clogged and failed with no warning lights, then it is probably an issue with the car that should have been recognised when it was handled under warranty the first time. Is the car still under warranty now? My guess is no, since they are now asking you for £1500.
      A DPF system should give you two warnings as the filter fills up (click here for more info). This should also have been explained to you by the dealer when selling the car. Try again with Nissan UK’s head office to see if they can/will assist.
      A PCP is more than just hiring a car – it’s more like an interest-only mortgage. You have the logbook, not the finance company. A lease (or contract hire) is simply hiring the car. Having had the car for two years, you can’t give it back under the Sale of Goods Act, but you can sell the car and settle the PCP agreement (click here). If you have paid off more than 50% of the total amount owed (which is different to 50% of the amount borrowed) then you should be able to give the car back to the finance company using your voluntary termination rights.

    • Thanks for your reply. The car is still under warranty but the warranty only covers regeneration which they have done but it didnt make a difference. It was just the EML that came on, then went off then came back on a few days later.
      There was no mention of DPF when we were buying the car, if they had said then we would have gone for a petrol version or a different make of car.

      We are hoping for a phone call today from head office to see if they will assist. Its our last hope as we do not have that sort of money to be handing over. We would have had the car two years this august, not sure if this makes a difference to the Sale Of Good Act?

    • You have had the car and full use of it for two years, and it fundamentally won’t be in the same condition it was when you bought it, so the Sale of Goods Act won’t apply for you to be able to give the car as being ‘not fit for purpose’. I’m not sure why Nissan won’t replace the DPF or any other systems if they have failed while the car is under warranty – if no warnings have come up, then as a driver you have no clue that the DPF is full.

    • Dear Stuart
      Your reply to the lady with problems on her Nissan refers to the SoG Act 1979 . This act broadly gives ALL consumers the right to have their goods repaired or replaced for a period of 6 YEARS from the delivery date of the goods. Please advise the lady to approach the RETAILER , quoting this Law with its other proviso of ensuring that the goods do not fail before a reasonable time limit.. Or better still for this lady to contact the Consumers Association where she will be able to avail herself of all the provisos of this little publicised help to all consumers

  9. Hi Stuart,

    I am looking to get my first car. I have seen a Vauxhall Corsa 1.0i Excite 3dr

    35 Monthly Payments of £169
    Customer Deposit: £169
    Vauxhall Deposit Contribution: £1,903
    Term of Agreement: 36 Months
    Option to Purchase Payment: £3,800
    On The Road Cash Price: £11,787.35
    Total Amount of Credit: £9,715.35
    Total Amount Payable: £11,787.35
    Rate of Interest (Fixed) 0%
    Representative 0.0% APR

    It comes with 1 years free insurance and a Lifetime Warranty too.

    Paying for the car, is all i’m doing is paying the deposit and then the monthly payments?

    Also at the end of the term, can i just give back the car to the dealership and pay nothing extra?
    Unless i’ve breached the terms of the contract that was agreed with the sales advisor.

    Obviously i’ll be paying the insurance for the final 2 years and 3 years road tax.


    • Hi Michael. Yes, assuming you have met all of the criteria (mileage, servicing, condition), you can simply give the car back to Vauxhall Finance at the end of the agreement. You will need to make sure that you follow their processes for giving it back, and communicate your intention to do so well before the end of the agreement. Make sure you keep your car in good condition, as they will be able to bill you (at whatever rate they choose) for any repair work – and they will be super-fussy about scratches, chips, kerbed wheels and so on.

  10. We brought a brand new car in july last year, on finance on a agreement I thought was HP and I now discover is PCP. We are 11 mths into agreement & the car had sat at dealership for over 6 wks awaiting parts for a technical issue (we have been given a courtesy car). We are wanting to get out of the PCP is this possible? – we put down a £10k deposit, on a £36k car, on a 48 mth deal. It was not by the way explained to me about the final repayment etc & am actually a)feeling silly for not seeing it before b) cross at dealership for not full explaining it all to me (a large nationwide dealer) What would be are best option? Thanks

    • Hi Mary. Yes, the dealer should be explaining everything fully when they are selling you a finance agreement, but you also have to take responsibility for reading a contract before you sign it. Some basic maths would show that after 48 months of payments and your deposit, you are still well short of paying for the whole car (plus interest). You can settle the PCP early, but that is not really going to help you. Your best bet is to ride out the last three years, save up a deposit for your next car over the next three years and take an HP on your next agreement.

    • Thanks for the reply. Would it be worth waiting another year & looking into voluntary termination? Part of reason for wanting to get out of the HP/PCP is we are going to be buying a new house (not anticipated last year) & want this off!! Cheers

    • Yes, you can voluntarily terminate the agreement once you have repaid 50% of the total amount owed (which is not the same as the total amount financed, as you need to include interest and fees). However, the finance company will probably not want to finance you on another car if you do this, so you will have to look elsewhere for your next car. I am going to do an article on voluntary termination in coming weeks, so keep an eye out for that – it’s not always as easy or attractive as it sounds.

    • Ok thanks, it does sound kind of easy, but reading a little more seems to effect credit etc Husband thinks we should just bite bullet & keep slogging away at it. Think this may well be a case of lesson learnt & not be wanting repeat situation. Out of curiosity, after 4 yrs and you either pay outstanding balance or return car, if it’s worth more (which seems to be general idea) what happens to the excess balance? I know the dealership likes to encourage you to use it as deposit on next car, but if you don’t what is the “deal” thanks

    • Voluntarily terminating your PCP should not affect your credit score/credit rating, as it is a clause built into every HP and PCP agreement by law and you are acting entirely within your agreement. The finance company won’t like it, as it means they don’t get the remaining payments from you and they inherit a car which is probably worth less than your outstanding settlement. They will probably decline to finance you again, as you have just told them that you can’t be relied upon to repay your borrowing, but it may not affect other companies offering you finance (although it will be noted on your credit report, so they will see it).
      Don’t assume your car will be worth more than the settlement after 4 years. The whole principle is that it should be about even with the settlement, and if there is any equity then it is likely to be quite small. You are not obliged to use it to buy another car so you can keep the difference. However, a dealer will usually only take your car on part-exchange and settle your finance if you are buying another car, so you may have to sell it privately to achieve this.

  11. Hi there, i need some advice please. I have taken out HP on my car and have only paid 5 months off. (Its a 5 year loan) i have decided i want to change my car for a more expensive one with the same dealer. Is that possible?

    • Hi Paul. You will need to settle your current Hire Purchase and start again. This is basically the same process as settling a PCP early. Be aware that as you are very early into a 60-month agreement, it is quite likely that your finance settlement will be considerably higher than your car’s value, so you may have to pay quite a bit of money to settle your current car before worrying about another one. Check our guide for what to consider before taking car finance to make sure you’re not going to run into the same issue again.

    • Hi Carl. Yes, the term ‘deposit’ is a bit of a misnomer. It is really an up-front payment, followed by your monthly payments.

  12. Hi Stuart

    We are 12 mths into a PCP agreement & thinking of changing cars, likely to one of a lower value, worth while or hold off for a while longer? Our other thought was to make a overpayment, not likely to be huge but maybe a couple of thousand, is it that is something worth doing if you can? Thank you

    • Hi Mary. You can settle your PCP early, but it will be a question of how much it is going to cost you to do that. The linked article has more detail about it. Paying an overpayment will lower your remaining monthly payments, but won’t change the end date or the balloon value at the end of the agreement. If it suits your needs to do that then fine, but most people don’t find it that beneficial.

    • I thought if you settled up a large part or all the payments in one go for example (not including balloon) of PCP it may alter the amount of interest, as in effect you aren’t having the finance for as long, even if the agreement end date is the same oray alter t&cs of agreement, you could maybe exchange early if wanted etc?! Or does principle stay the same. The thought behind it is whether we use some savings to alter PCP buy paying a large portion off or possibly buy a cheaper car (cash) for the errands/school run etc as current car is not so economical for this (& the mileage clause is something I have in my mind) & use the “good” car for weekends, which sounds little uneconomical to pay for a car you are not using to full potential but still paying a lot for (if that makes sense?)

    • Yes, you are correct. If you settle your finance agreement early, you will save the interest owing on the remaining period of the loan. However, most finance companies will charge you a fee to settle early, so that will take a bite out of your interest savings. If you are making an overpayment, they may or may not charge you a fee so best to check.
      If your plan is to change the car early, then you can either make an overpayment now to reduce the settlement figure in a few months’ time, or settle it all now and have a larger settlement figure. It’s not going to make a massive difference – you either pay more now or pay more later.

  13. Hi Stuart,

    I’m coming to the end of a 3 year PCP. I think the agreement should finish at the end of August. Should I have heard something from the finance company (Santander) or the dealer (Mazda) about my options by now? I want to exchange for a new car but with a different dealer. Should I go straight to the new dealer?

    • Hi Andrea. It is surprising that you haven't heard anything from the finance company, and unusual that the dealer hasn't bothered calling to try and lure you into a new car. You are most welcome to go to any dealer you like to purchase a new car. That dealer will settle your finance (you will need to provide a settlement letter from Santander) as part of the part-exchange process.

    • Thanks for your reply. Could Santander just take the final balloon payment without contacting me first?

    • Quite possibly, yes. Your agreement with the bank is for an initial payment of £X, however many monthly payments of £Y and a final balloon payment of £Z. If you wish to hand the car back rather than paying the balloon, it is your responsibility to notify them oF this. If you are going to part-exchange the car on another vehicle, you will need to give the dealer your settlement figure from Santander and they will settle the balance for you. This needs to be done before your balloon payment is due. If you do not notify Santander, they could assume that you intend to keep the car and so take the final payment. Usually the finance company will try to notify you in advance, as most people don’t have that sort of money in their bank account and they don’t want to put you into default unnecessarily, so I’m surprised that they haven’t written to you.

  14. hi , great article, I just wanted to know the realistic options and consequences if for example you were to lose your job whilst within the first year of a pcp deal, can you hand the car back but pay some penalty, I take credit score would be effected, but what are the actual options available ? thanks

    • Hi Stewart. The best bet is to contact the finance company straight away and talk it through with them. You can settle the PCP early and sell the car, but the ‘penalty’ is that you will almost certainly have a shortfall to cover thanks to your car’s depreciation. Your credit score is only likely to be significantly affected if you start missing payments and default on the loan.

  15. Hi! Just some quick advise please on PCP contracts. I have already taken out one PCP agreement for my son – can I take out another for my daughter too or are you only allowed to take out one agreement under one name? It will be through 2 different dealerships. Also is it difficult to get a PCP contract if you credit rating is average? Any help/advise greatly appreciated.

    • Hi Emma. Have a look at this article about taking out a PCP for someone else. In short, you’re not allowed to do it, so you’re probably lucky that it worked the first time around. It doesn’t matter if it’s the same dealership or not, as all the finance companies have access to the same credit information about you, which is your Experian report or similar.

  16. Great article. A quick question I am coming to the end of a 3 year PCP deal in 2 months. The car is worth less than the GFV. I will have gone over the agreed mileage by around 11k! The GFV is £16,200. I would quite like to buy the car at the end. Is there anyway to negotiate the £16,200 figure down or is this fixed?

    • Hi Hitman. The figure is fixed, as it is simply the amount of the loan that is unpaid and needs to be settled. You can certainly try to make the finance company an offer, but I have never heard of it working before!

  17. Hi Stuart, really interesting article. I've wanted a Qashqai for years so would like to take a new PCP out. I have a car which is 14 months into a 36 month agreement. I have £2k in equity on my existing car after settlement and I would like to take a new PCP at 6,000 mile per year over 48 months to keep the monthly payments down, knowing that I'll do over 14,000 miles per year. I'm very unlikely to hand the car back so does the 6,000 mile per year matter apart from making a nonsense of the GFV? Thank you.

    • Hi tmrinaldi. Bear in mind that if you are planning to pay the car out and keep it, you have to have the funds in place to be able to settle the PCP at the end of the term. If you are going to take out a 48-month PCP with the intention of keeping the car, you might also look at other options like a 5-year HP so there is no balloon to pay at the end of it.
      Intending to run massively over the agreed mileage is a risky strategy. What you are doing is intentionally keeping the GMFV higher than you expect in order to keep your monthly payments low, and banking on having the funds in place in 4 years’ time to settle up. If anything changes during the next 4 years and you suddenly need to settle your PCP early, you will have put yourself into a severe negative equity position. Also, if the finance company finds out that you have knowingly underestimated your mileage, they may decline to finance you or take action against you as it is basically an act of fraud (you are knowingly devaluing the asset by far more than the stated amount).

  18. I bought a car on finance but am three month in and can’t afford to keep paying is there any way I can swap it and get another cheaper car with lower payments ??

  19. I have had my BMW 1 for 9 months now . I took out a pcp of 36 months. But I’m getting bored with the car, is it possible for me to change it now or do I need to keep it for 3 yrs ? Also can I go to any dealer to do this

  20. What recognised guidelines cover the condition of repair / disrepair at the end of the term if I hand back to dealer. The contract with the finance company uses fairly subjective terminology. There are a couple of parking scrapes but the milage is significantly lower than originally agreed ( almost half) so I would expect one to offset the other and me to walk away with no charges?

    • Hi John. Unfortunately no, it doesn’t work that way and the contract is always set out in the finance company’s favour. Your agreement allows for a maximum mileage, but there is no provision for your mileage being less. They are also allowed to charge you for the parking scrapes if they are considered damage rather than normal wear and tear (which they almost certainly will be). You can try and negotiate with them, but it almost certainly won’t work.

  21. Hi Stuart

    First and foremost, thank you for all the amazing advice you provide. I see lots of people asking, but very few thanking all te effort you put in responding back.

    If I may, I have a question too.

    I am about to start a new job where I have a 7.8k car allowance a year. The car I want, has a price around 30k. We have savings to fund up to 10k deposit if required.

    I could get the car as a company car (insured, serviced, etc) which is one option (im a high rate tax payer, base salary 85k) or get into a HP or PCP.

    I fully intend to change the car after 3 years for a newer one.

    I currently drive a company car and find it quite comfortable, i dont have the hassle of worrying about it, nor the net salary ht is noticeable.

    Would you say getting into a PCP be the best of all three options?

    • Hi Sudtai, thank you for your kind words. Bear in mind that any savings you put in up front will be gone, so you may prefer to spend less up front and pay more per month. If you are going to be using the car for business purposes, then you may find that contract hire (lease) is a better option – especially if you can claim any of the VAT. If it is simply personal use and commuting, then often a PCP works out to be a better bet. At the end of your 3 year period, it may be worth more than the settlement value which gives you a bit of equity towards your next car. If you manage your own servicing and insurance, you can often save money over paying for this to be managed for you as part of a company car package.
      If you have a regular accountant, I’d speak to them, as they will know your tax affairs and may recommend a particular path that is best for you.

    • HI Stuart is there a maximum payment i can make with Audi PCP? And is there a minimum i can take it down to per month to make sure i don’t get hit with interest

      I.e. could i pay say £20k on month 2 which would take the payment down to £20 a month or so or are there any restrictions?

      I heard you could only do £3K over the phone at once but thought you might be able to do a BACS transfer for the rest?

    • Hi Steven. There is a maximum deposit you can pay on a PCP up front, and it depends on the car’s GMFV, the term length and how much you are borrowing. An Audi dealer will be able to give you a precise maximum for the car you are considering. Most finance companies have a minimum monthly payment of about £50/month, but it varies.
      If you are making an overpayment, there will be a limit as to how much can be taken over the phone (and £3K seems about right, although some may be lower). The finance company will probably insist on an electronic transfer for anything more.
      You are probably better setting up the PCP to suit you best before you start, rather than trying to adjust it on the fly. Additional overpayments or mileage changes are best for changes in circumstance to allow you to maintain some control over your finances, rather than trying to minimise interest once the agreement has been started. The finance company will always get their money from you, so there’s little point trying to game the system.

    • Hi Stuart, thanks for your speedy reply.

      Yes 50% is the deposit max in this case. I had hoped to bring the min payment down to £20 or so per month as to not pay much interest, being a bank holiday at the moment they cant tell but was hoping it would be less than £50 a month. Thanks will look at the electronic payment option but want to do it as soon as the next payment option is available so i can get rid of the interest. Yes have taken the final payment down to as low as it will go £1K or so as. I didn’t think there was any mileage charges if im looking to own the car and pay for it pretty much outright early on and the small balloon payment at the end to make it easy when the time comes.

      I get what you mean on the finance company element but if i pay nearly the whole car off in month 2 payment wise (by using a 0% interest credit card for some of it) and only have a minimum payment per month then surely that means the interest will reduce from say in total over 4 years from £3400 to around £500 as i am paying it straight away therefore getting access to the deposit contribution they give me?


    • You can settle the outstanding finance at any time, which will save you all of your outstanding interest and of course you still benefit from the deposit contribution. Obviously the sooner you do this, the more you save. Even if you cancel the finance agreement within 14 days of it being activated, you will still get the deposit contribution.

    • Thanks Stuart, i found out today that the minimum payment is £50 a month so they have said that has to stay there, you can reduce the length of the agreement but that monthly payment has to remain there? I was also told that i had to leave a balloon payment which is at its lowest of £1k ish – with all that in mind it suggests on this Audi PCP agreement i need to keep this going and cant pay it off early?

      Wouldn’t want to cancel after 14 days as doing it through a friend.

    • Cancelling within 14 days makes no difference to credit ratings or anything else – it’s your legislative right. However, if you are “doing it through a friend” then you are already courting trouble with Audi Finance, as this is an Accommodation Deal and they would not have allowed it if they had known about it. If they find out about it, then both you and your friend will be hearing from Audi Finance and they won’t be happy.

    • Apologies for the confusion when i said through a friend i meant my friend works there and im not doing it through them in that they are the sales person, it is my finance agreement i just meant they are my sales contact if you like so i didn’t want to cause them any problems by cancelling after 14 days. Thanks

  22. Hi Stuart

    I am almost at the end of my PCP deal and won’t be able to keep my car. Is there ever a situation whereby the car is actually worth more than the GFV and therefore you receive equity back, or do you simply give the car back?
    Thank you.

    • Hi Lolalou. You can possibly sell your car privately, and if you make more than your GMFV then you can keep the difference. Talk to your finance company first, as they may have terms and conditions if you want to sell the car (eg – they may insist that the buyer pays them directly, rather than paying you and you paying them).

      If you are returning the car to the finance company, then you do not benefit if the car is worth more than the GMFV – you just give it back.

    • My understanding was that if your car is worth more than the gfv,upon return,the equity /difference would be returned or you could use it towards another agreement?

    • If you simply return the car to the finance company, you do not benefit from any equity; you are handing back the car in lieu of the balloon payment. If you decide to sell the car otherwise – either privately or by part-exchanging on another vehicle – then you are entitled to keep any equity over and above the GMFV.

  23. Hi stuart i have a car on pcp but im forced into bankcrupcy can they take my car off me? I can still make the payments??
    Regards sam

    • Hi Sam. If you are still making payments then there should be no problem. Once you have repaid more than 1/3 of the total payable, they can’t automatically take your car off you anyway, and have to get a court order to do so. If you find that you are struggling with the payments, then contact the finance company immediately to try and work something out rather than missing payments and forcing them to take action against you.

    • Hi stuart thanks for that info… but ive only been paying for 6 months and its for 3 years i put a £5500 deposit down as thats wot i got for my old car.. wasnt sure if they could take it because ive put a large deposit down…i can keep up with the £160 a month payments thats no problem.. thanks regards sam

  24. Hi. Due to change in circumstances I will go over my contracted milage and be charged 9p a mile! The company wont adjust my contract what do I do as I could end up owing thousands

    • Hi Vicky. I’m surprised that they won’t adjust your milage allowance, as it’s usually in their best interests as well as yours. Are you financed on a PCP through a manufacturer finance company, or through an independent finance company/bank? Also, if you are on a lease rather than a PCP, the finance company may well refuse to adjust your mileage.

  25. Hi, we have a car on PCP and are about to service it, the dealership wants double the cost of a first service at any other garage (I.e Halfords or kwikfit), am I breaching my agreement by going out with the dealership? Thanks

    • Hi Fiona. You will need to check your contract with the finance company about this. Many manufacturer finance companies do insist that the car is serviced by an Approved Service Centre (ie – a dealership). This is because the GMFV at the end of the agreement is based on a full manufacturer service history – if you have had the car serviced by the dealer, it is worth more than if it has been serviced by KwikFit. If you don’t intend to claim the GMFV at the end of the agreement, then it doesn’t matter, but basically you are best served by having it serviced by the dealer. If you fail to have the car serviced by the dealer, the finance company can penalise you for hundreds or even thousands of pounds when you give the car back.
      Warranty-wise, it is a different story. You are not required to have the car serviced by the dealer.

  26. I have a personal contract hire agreement and only had the car for 8 weeks and it is being investigated for a fault which they cannot replicate at the moment, however i lost all faith in the vehicle now so wish to cancel the agreement – do you know if i am able to do this with no charge given that i have had the car for such little time?

    • Hi Imogen. Unfortunately the law is fairly unclear with regard to this. To be able to walk away from the car and your finance agreement, you have to show that the car is not fit for purpose, which is almost impossible. If you want to fight the manufacturer to replace the car with another one, you might have more luck. It will depend on what sort of fault you are talking about, and whether they can repair it properly. Cars develop faults, this is a normal thing. To say that you have lost all faith in the vehicle would mean it would have to be a pretty major fault which can’t be fixed.

  27. Hi. Just reading about PCP and found your blog. Very interesting! I have just recently signed up for a PCP loan and looking over the figures, it seems I am paying a horrific amount of interest on the loan even though it advertises it at just under 15% APR. I had a £4000 deposit on a £12000 car over 3 years with a GFMV of £5000. would I be correct in thinking that I should only be paying interest on the difference (ie £3000 which I am borrowing), or have I got that completely wrong? The interest coincidentally is being quoted at over £2600. Kind Regards. Bill

    • Hi Bill. You are paying interest on the whole borrowing (£8,000). However, instead of paying off the last £5,000 you simply give the car back. 15% APR is not unusual on a used car when you are only borrowing a relatively small amount over three years (basically you are paying £866/year in interest & fees to borrow £8,000). If you were borrowing more money over a longer term (say £20K over 4 years), your APR would be less but the total amount of interest you pay will be higher.

    • Hi Stuart love your blog. Do you pay interest on £8000 at 15% over 3 years giving you a total interest of £4167.(8000x(1.15^3)=12167-8000=4167).
      Seems I am gone wrong somewhere!!! Ta Derek.

    • Hi Derek. Interest can be calculated differently depending on the type of finance agreement (eg – HP vs. PCP). It’s usually best to speak to the finance company to get a breakdown of their quote.

  28. Hi,

    I want to buy a car worth 15000. The GFV is about 6500. If I pay a deposit of 3000 and take a loan of 5500. If in future I pay off the 5500. Can I pay off the 6500 at the end of term. Do I still need to pay the interest on the 6500.

    • Hi Rahul. You are paying interest on £12000 (£15K price of the car minus the £3K deposit), which is the total amount borrowed. Your monthly payments include interest on this full amount. You repay £X per month plus at the end of the agreement you give back the car or pay £6500 instead.

  29. Hi Stuart,

    I have a brand new Toyota Yaris on finance, I put down £3300 as a deposit and am paying monthly instalments for 3 years and at the end of it I can purchase it for another £5000 (total car being about £15,000). However I wont be able to afford this and I would really like to own my car. I really should have looked at getting a car around £10,000 which I could then afford to buy and own it out right myself. I don’t want to own my car at present as it will take 6 years to pay it off but which time I will want to change again.

    Is there anyway of being able to change my car before the 3 year contract is up? For example If I instead go for a Toyota Aygo this could be £10,000 and I could almost own it after the 3 years.

    Sorry I hope this makes sense!


    • Hi Nicola. Yes, you can change the car before the end of your current agreement. You need to settle the current agreement early and then start a new agreement on whatever you want to buy next. It is not unusual for people to want to change down to a cheaper (or cheaper-to-run) car.

    • Thanks Stuart really appreciate the advice and the link is really useful.

      I’ll probably keep it for a year as I do love it then ask them about the option of changing.

      Thanks again.


  30. Hi Stuart.

    I bought a brand new car in Dec 2013. I put down a £250 deposit and I am scheduled to pay £263 P/M for 4 years with the usual ballon payment at the end. However I am in the military and I am about to go away for 6 months. Instead of the car being sat stagnating, burning a hole in my pocket for 6 months (£1578) I am looking to sell it and buy a new car when I get back. I have just spoken to Renault Finance and the settlement figure is £13589.40 however the car is only worth £10500 now.
    Is there any way around this?

    Many thanks in advance.

    • Hi Chris. There’s no real way around it, because PCPs tend to work that way. You have only had the car 9 months out of a 48-month agreement, and you initial depreciation is greater than your monthly payment. After a while your depreciation rate will slow down and you start to reel in your negative equity. Have a read of our article about settling a PCP early for a more detailed explanation.

  31. Hi Stuart, I am planning on taking out a PCP agreement but am trying to find out how this agreement will effect the amount i can borrow on a mortgage. if the car PCP finance is £20k, will this finance be registered like a loan and be deducted from my potential mortgage amount? Or will they just look at the monthly payment and deduct that from my monthly disposable?


    • You’d need to speak to a mortgage advisor or your bank about how they assess your mortgage application. One of the key tests is an affordability, so they are looking at your income against your expenditure. Obviously if your monthly car payments are £300, you have to be earning enough to comfortably cover that plus unexpected costs (which all cars will eventually have) and still have plenty left over to afford your mortgage payments plus unexpected costs (which all houses will eventually have).

  32. Hi Stuart,

    I’m 20 months into a 37 months PCP with Fiat / FGA Capital for a Fiat 500 1.2 Lounge 2013 plate.
    Cash price (inc VAT) £11,810.00
    Fiat contribution £500
    My Deposit £1,500
    Amount to finance £9,810
    Interest charges £766.96
    Balance £10,576.96
    36 monthly payments of £164.86
    Final payment £4,642
    Option fee with final payment £285
    Total amount payable £12,861.96
    APR 4.7%

    However we’ve been very unlucky with damage to the car. Firstly someone reversed into the front of the car causing 2 small scratches by the number plate, then someone punched the passenger door and just yesterday someone hit the car drivers door and side panel. We’ve contacted the Police and insurance company.

    I went to see our local dealer today who offered me an early upgrade to a new Fiat 500 for £186 a month for 4 years at 7.6% APR. They want to use our insurance to fix our present car, with their contribution of £1,500 and me having to pay about £196 cash. This values my car at £6,000 about £1,400 under market value when made good.

    If I use my insurance to get the car back to good condition do you think I would be better off waiting for the end of the PCP and getting the GFV of £4,642? We are well under the 6,000 pa mileage.

    Many thanks,


    • Hi Jim. My advice, despite what car dealers may tell you, is never assume your car will be worth more than its GMFV. If you happen to have equity in the vehicle at the end of the agreement then it’s a bonus, but don’t plan on it happening. In terms of claiming your GMFV, the finance company will be very strict regarding scratches, interior marks and service history. You can’t trade any penalty charges off against lower mileage, so you may still have an outlay even though you are well under the agreed mileage.

  33. Hi there. I have recently taken out a car with motorpoint on their boomerang finance option through black horse. I’ve got a fiat 500 which cost 9000, and total borrowing is 14000. after some thinking I’ve now decided that normal HP finance would have been more suitable. can you switch from the one finance option to the other?

    Also if I was to trade the car in, could I trade the car in for something lower in value and from a different dealer (would this mean my monthly payments or term would reduce?)

    • Hi Rach. You can’t change finance agreements mid-stream, so you would have to settle your current finance agreement before starting a new HP. As for changing the car to something cheaper elsewhere, yes you can but it will cost you a lot of money to do so. You will have to settle your current agreement, which means that you will owe close to the full £14,000 and your car is now worth quite a bit less than £9,000 thanks to its immediate depreciation.
      Your best bet for now would be to keep paying your car off, and if possible save some additional money to put in when you finally need or want to change it.

  34. Hi Stuart, I bought a car on a PCP agreement last May. I have recently found out that the annual mileage the dealer quoted on the agreement is approxiamtely 6000 miles less than i would actually do a year. Is there anyway I can arrange for this to be changed? As I was never made aware of it at the point of sale and never would have agreed if I knew.

    Thank you

    • Hi Jen. Contact the finance company and they should be able to be able to up your mileage allowance to match your driving. Bear in mind that this will increase your monthly payments to cover the increased depreciation and reduced GMFV based on the higher mileage. They will probably be unsympathetic to your suggestion that the dealer did you not make you aware of the mileage, as it is your responsibility to read and understand all the details of the contract before signing it.

  35. Hi Stuart

    I’ve tried several online PCP payment calculators to try and work out likely repayment costs but can’t seem to find one that matches the Dealer’s examples. As a result I’ve tried creating my own spread-sheet to calculate this but again I can’t get the figures to match up. Do you know the exact algorithm used to calculate monthly payments with any given combination of deposit, term, GMFV and APR? I appreciate the only certain way is to request a personalised quote from a dealer but I tend to do a lot of research before buying a new car and it would be helpful to work it out for myself.

    Thanks in advance


    • Hi Mark. There are no decent PCP calculators around because the payments are entirely dependent on the GMFV. The finance company determines the GMFV based on the specific model (and it can be quite different across a given model range depending on engine/gearbox/specification), term length, options and accessories. These GMFV calculations are highly confidential and revised regularly. Usually it’s not an algorithm but more of a specific calculation with some basic standard allowances (eg – having metallic paint improves the GMFV by £X over 36 months). It’s essentially impossible to replicate this in your own research.

  36. Hi Stuart,

    I am looking at a new Audi A3 on PCP and want to really understand the way it works. I currently have and Audi A3 and can put around £5000 down as a deposit for the new one. Over 3 years the payments would be £200 with a final balloon of around £11,000 (havent got the exact details to hand).

    Say after the 3 years I want to part exhange my car with audi for a new one, have I effectively lost the £5000 deposit and then would only get the difference between the cars worth and the GMFV the company have given. For e.g I sell the car for £13000 and the GMFV was £11000, do I only get £2000 to move forward into the next agreement?


    • Hi Charlie. Yes, you are absolutely correct. The word “deposit” is a misnomer; it is more of an up-front payment. You can reduce your deposit and pay a higher monthly amount (over 3 years, reducing your deposit by £1000 will increase your monthly by approx. £30), but consider any money you pay the dealer/finance company to be gone. If you are lucky, you may have a small amount of equity at the end of the agreement, but it’s unlikely to be as much as £2000 (ie – you probably won’t get £13,000 for it at the end of 3 years).

  37. Hello Stuart, really great article. I have a question, I recently sustained some bodywork damage to my PCP car. I am expected to service my car at an approved dealership which is fine but with regards to having bodywork repairs, would I be expected to have that done by an approved dealer also? and what are the consequences of not doing so? My insurers are insisting I use a garage on "their network" and I see no reference to having to use an approved dealer in my PCP paperwork…

    • Hi Davide. You are entitled to have the car repaired wherever you like. As long as the repair work is done to a good standard, there should be nothing preventing you from choosing any repairer.

  38. Hi,

    I received my delivery of my brand new car last Tuesday (9 days ago), but I no longer need it can it still return the car to the dealer?

    My husband has just got a new job with a company car so I do not need it anymore.

    Is there a cooling off period at all?

    Kind Regards,


    • Hi Nicola. No, there is no cooling off period for the car itself. It is now yours and you will need to sell it. There is a cooling off period for the finance if you financed the vehicle, but that is probably not going to help you as you will simply then have to pay the full value of the car before you sell it.

  39. Hi,

    I have VW finance and received a letter recently saying now was the ‘optimal time’ to consider changing my car. I’m 28 months into a 36 month PCP agreement. They have said I can trade my car in for the new model and keep my monthly payments as they are. I’ll need to pay a £500 deposit and I think the balloon payment at the end is slightly larger but as we intend to change cars in 3 years anyway that’s not much of an issue.

    I took my car into the garage and they were happy with the condition etc but I’m just wondering if there is a catch anywhere. Am I likely to be billed after the cars been returned for any damage or excess mileage? Also, financially will trading in at this point of the contract have much of a financial impact when we come to trade in next time?

    • Hi clarolux. There’s no such thing as an ‘optimal time’ – it depends entirely on what works best for you. However, it is certainly ‘optimal’ for Volkswagen to try and sign you up for another 3 years before you really start thinking about how much you’d quite like a new BMW or Peugeot…

      It’s a very common ploy that is used by many manufacturers and finance companies. If it suits you to change now, then by all means listen to what they have to say. However, if you’re not in any hurry then it is highly unlikely you are missing out on the deal of a lifetime.

      The potential upside of part-exchanging your car early is that you could avoid any excess mileage or repair costs. If the dealership has appraised your car and has offered you more than your finance settlement, then it may be a good time to change. Regardless, whether you change now or later should have no bearing on next time – you settle up on this agreement and start afresh on a new one.

  40. Hi Stuart

    Can you please advise, I have recently sourced a car mistakenly thru PCH rather than PCP. I haven’t taken delivery of the car yet nor signed any documents. However, I would prefer to have it on PCP, which I have done twice before in the past. But the dealer says that I cannot now change to PCP as the car would have to be de-registered. I the scheme hasn’t actually kicked off yet, why would the car have to be de-registered. I still want the car.

    • If you haven’t signed any documents, then they have jumped the gun somewhat by registering a car. This is not really your problem, it’s theirs.

      You could simply walk away from the lease and start again at an entirely different dealership on another car and they would lose out completely. I would suggest holding firm, not signing anything, not paying any money or providing any bank details for them to start direct debiting you until you get what you want. If you have already provided your bank details, I would cancel any standing orders which they have set up until it is resolved.

  41. Hi there Stuart, looking at purchasing a new/newish car via PCP at 0% finance. It seems on most occasions it will be around the £3000 mark for the balloon payment at the end. If i wanted to, after the 0% has finished, do you think they would offer the continued 0% for the remainder of the balloon payment, or would it be different then?


    • Hi Nathan. Most finance companies no longer offer to refinance the balloon at all, and if they do then it certainly won't be at 0%. Instead they will be trying to lure you into a new car on another PCP rather than refinancing your existing vehicle. Usually the cheapest way to finance the balloon amount is to take out a personal loan from a bank.

    • That is incorrect Stuart, Nathan already told you he was taking a 0% PCP deal so no interest will have been charged at all….

    • Ah, good point Paul. Well spotted and thank you. I copied and pasted the bit about refinancing the balloon from another comment. I'm surprised that no-one has noticed that before now, since it was nearly a year ago. I will correct my earlier reply, so apologies to anyone else if the rest of this conversation no longer makes sense…

  42. Hello, If I am to exceed my annual agreed mileage will I have to pay anything extra at the end if I opt to buy the car?

    • Hi Rhys,

      If you plan to pay out the balloon at the end of the agreement and keep the car, then your mileage (and condition and service history) are irrelevant. The balloon is simply the amount you still owe the finance company to pay off the loan. It only matters if you want to give the car back.

    • Stuart,

      What about if you are planning on taking out PCP on another car – I want to get a new car at the end of my contract but I am going to be over my agreed mileage so am unsure if it's worth changing this and paying more or if it will matter when part exchanging for a new vehicle anyway? Also does this matter when using a different dealership when they pay off your finance?


    • Hi Abie. it doesn't matter who pays off the settlement figure, all the finance company will want to know is that it is paid.

      If you are part-exchanging the car, it will depend on the offer you get for your car. If it is more than the settlement figure, then the mileage is irrelevant and the dealer will settle the finance. If the part-exchange valuation is less than the settlement figure, you will either have to claim the GMFV and pay the excess mileage, or accept the part-exchange offer and pay the negative equity – whichever is cheaper.

  43. Hello I have recently got a new job which gives me a company car but i also have a car on a finance agreement with Renault i need to cancel this as i have no need for it and its a waste of money each month. I went into to Renault to try and cancel but they didn’t seem interested at all do you have any advice.

  44. Hi my son is going for a new car on pcp but kia say that it’s 4.9% with payments of £194 a month over 3 yrs but when I use a pcp calculator online the calculator says that my payments should be £171 per month the figure of £194 a month works out at 13% how could this be, thanks in advance Karl

    • Don’t trust online PCP calculators; I’ve yet to see one that gets everything right.

      I’d imagine that they’re missing something in the price of the car or any extras. Check the on-road price of the car and the financed amount – dealers are very sneaky about adding extras like GAP insurance in without you asking for them.

    • Thanks for your reply and you were bang on, the calculator I used didn't add two of the figures together which was giving me a false payback figure, thank you for taking the time to reply & for your valuable knowledge keep up the good work!. regards Karl

  45. I have an existing PCP with Citroen but I have changed job and I am now exceeding my mileage limit (18000 miles) significantly. Can I readjust my mileage and therefore payment mid contract or do I need to look at a new deal altogether?

    • Hi Christian. Most manufacturer finance companies will allow you to amend your annual mileage allowance to cover the reduced GMFV at the end of the agreement. Give the finance company a call and they should be able to set it up for you; basically it will mean bumping up your monthly payments for the remainder of the term to cover the increased depareciation.

  46. Hello Stuart,

    Wonderful blog.

    I have an existing PCP with BMW on a X5 for 48 months, I have been on the PCP for 21 moths and after some consideration I decided that I would like to keep the car. my PCP APR is 7.8% and I was thinking of taking a loan with a 4.4% APR and use it as an early repayment. I believe that this will save me some interest.

    Anything else I should consider?

    • Hi Sally. Double check your numbers to make sure – bear in mind that you have already paid a lot of interest on your current agreement (you basically pay back the interest first and then the principal afterwards), and if you take out a loan now, you are paying interest on top of that interest already paid.

      Compare two numbers: 1) the total you will pay on a loan now to cover your current settlement, and 2) the total you would pay from now on if you finish your 48-month PCP and then take a loan (assuming the same 4.4% for simplicity’s sake) for the balloon. It may be that you don’t save as much as you think, so be confident that it is worth the effort to do it.

  47. Hello,
    We intend to purchase a used BMW 4 Series convertible M Sport for circa £32,000 in March 2015 from a main dealer. We plan to trade in our current car(approx £6000 value) and pay the difference in cash -say £26k to £27k.
    Is it possible to secure a better discount on the “new” used car price by using BMW PCP or is this not possible on a used car?
    Also could we pay off all the “finance” in less than 14 days without being hit with any set up/interest charges?

    • Hi Billy. Have a read of this article, as it should answer your questions. Basically, yes you can pay the finance off within 14 days without paying any fees. As for whether it’s a better deal, it will depend what offers BMW are pushing on used 4-series models in March.

  48. Hi, Stuart
    I have been looking to terminate / settle the PCP on my new car after four days of collecting it from the dealership. In contacting the finance company, I was told that there would be a charge of £150 for ‘withdrawing’ the agreement (within the 15 day cooling off period), or £443 in the event of ‘settlement’ of the agreement. Either way, I would be paying off the balance of the finance in full. Whilst I would naturally opt for the cheaper option, I was informed that, as the finance would be deemed to have never existed, I would lose a number of important rights under consumer protection law and it was even suggested that I would lose the warranty cover for the vehicle ! It strikes me that this can’t possibly be the case as in both cases the net financial effect for the finance company is exactly the same. The finance company has been very cagey about how the charges in both cases are justified and have made a very unspecific reference to a provision in the finance agreement, evidence of which I have requested but not received. By way of further background, I received a contribution of £1,000 for taking out the finance. I would appreciate your guidance as to how I might best go about terminating the deal. Many thanks.

    • Hi Chris. There should be absolutely no charge if you cancel your finance agreement within the 14-day cooling-off period as it is your legal right to do so. Have a read of this article, which explains it for you.

      There is also no connection between warranty and finance, unless we are talking about a used car and an aftermarket warranty was provided as part of the finance deal.

      It would appear that the dealership/finance company are giving you quite incorrect advice, to put it politely…

    • Thank you so much, Stuart, for your very speedy and helpful reply. It just so happens that I received the finance agreement in the post today. The only reference to a charge for withdrawal is a daily interest charge of £6.01, which equates to £30.05. There is no clause indicating any loss of consumer rights or warranty cover, so it does rather sounds as though they are trying to pull a fast one. I will call them tomorrow and failing a satisfactory outcome threaten to make a complaint through the Financial Conduct Authority. Hopefully, this won't be necessary, but I'll keep you posted. Many thanks again for your help. With kind regards.

    • My understanding is that they can’t actually charge you any interest charges either. It is your legal right to cancel the agreement within 14 days at no cost to you, end of story.

    • Thank you so much for your help, Stuart. I am pleased to say that, after words with the finance company about issues of suitability, misleading information and complaints to the FOS, they conceded and allowed me to withdraw from the agreement at no charge. Although they admitted that, contrary to previous advice, I would still benefit from warranty protection on the car, they remained adamant that I would still be losing certain rights under the Consumer Credit Act and seemed to be talking about those rights I would have in the event of the car being not fit for purpose (I wonder if this mirrors the same protections as you have in buying goods on a credit card ?) It all seems far-fetched to me and, so long as I have the warranty protection, that is really all I am fussed about.

      You should feel very proud about the amount of valuable guidance and support you have given people like me – you're a true legend !

      Kind regards.

  49. Hi I have very poor credit rating how do I go about getting PCP because I need a car badly and have been turned down finance there last week does the PCP do credit checks

    • Hi Mark. Unfortunately if your credit rating is very poor, you will almost certainly be unable to get finance for a PCP from the major finance companies. Your best bet is to try to borrow a smaller amount on a personal loan from your bank, and buy a cheap used car. Make sure it is easily within your budget, and successfully repaying this loan will help to rebuild your credit rating.

  50. Hi, I am currently about 32 months into a 60 month HP deal on my car…..I have been told I can change my car which would be nice, but means I have to part-ex my current car which will pay off the outstanding finance and then financing the new car on PCP. The monthly costs would be roughly the same….am I better off doing that or waiting to pay off my current car and then using the value of it to then pay into a new car?

    • Hi Ed. There’s no right or wrong answer; it depends on what your overall goal is. A Hire Purchase (as you are currently financing) encourages you to keep your current car, as once it’s paid it’s yours. A PCP encourages you to keep changing your car, as most people won’t have enough money to pay the balloon/GMFV at the end of the agreement and therefore they need to start another PCP or re-finance the balloon.

      Your financial position on your current car will only get better as you pay more and more of the finance off, so there is no urgency to change the car (your net deposit for your next car will only increase as each month goes by), so you should ideally wait until you really want or need to change the car before making your move. If that’s right now then great, but there’s no pressure on you to make a decision.

  51. Hi Stuart, I have today agreed to purchase a new car on pcp over the phone placing a £500 deposit

    Another dealer has come in a couple of hours after this with a better offer.

    I have rang the dealership to see if they would match this and they said they had already ordered car and it was last thing at night and he will have a look in morning.

    I am very worried now that I can not cancel and will lose my money. Also checked bank and they said payment had been made 15mins after I called to try and hold the deal……funny that!!!

    What are my rights.

    • Hi Mark. Have a read of this: .

      You can walk away from the deal but you will probably lose your £500 unless you can get the bank to reverse the transaction. The dealer is not obliged to match the other price, as you have already agreed a price with them.

    • Hi Helen. It will show on your credit record, and its effect on your property borrowing power will depend on how much you are looking to spend. Finance companies look at your total payment commitments compared to your earnings to decide how much they will lend you.

  52. Hi. I have a pcp plan that ends with balloon payment in five months. I want to extend the monthly payments for another year with a balloon payment at end. Will the car finance allow this if my credit fie is damaged since, although my car and priority payments have always been paid on time.

    • Hi Chris. I don’t think you will be able to do this.

      Many manufacturer finance companies will no longer allow you to refinance the PCP balloon, meaning you would have to go to your bank or other financial institution to borrow money to pay off the finance company for the balloon amount. If the finance company does allow you to re-finance the balloon, it is usually to pay the whole balloon off rather than extending the PCP term by another year.

      If the finance company does allow you to refinance in any way, they will probably look at it as a new application and therefore reassess your credit rating. Whether or not they take into consideration your good payment history is probably an individual matter.

  53. Hi Stuart, with my partner now pregnant, we need to find a house and my car PCP is preventing this as the mortgage lenders don’t like it. My car value is currently leaving me with about £3k negative equity and I need to get rid of the PCP. However, I need to have a car for work, so my dad has agreed that he would take on a PCP on my behalf (new or existing). How can I make the most of this situation? I’ve been offered a lower spec car (increased annual mileage allowance by 8k miles PA) and I would need to contribute £1700 as deposit. Doesn’t sound appealing at all.

    Please help.

  54. Hi Stuart
    I have an affordable 36 mth PCP at 0%APR with Toyota started in July 2013. So far I have paid £9088 (inc deposit) and there is a balloon payment of £5800 due in July 2016. I am about 95% happy with the car which is immaculate, has done 8500 miles (contract max 10000pa) and has 5 yr manufacturer’s warranty. According to various internet searches my car is currently worth between £10500 – £11500 and should produce equity of around +£1500 at the end of term. The dealer paid first year insurance, 1 yr roadside breakdown and £0 RFL. I paid for 3 annual services upfront, so still have 2 in credit.
    The dealer has called me to offer an upgrade to the 2014 model which has marginally better spec at the same monthly and final payment. My initial benefit thoughts are; new car with new boots and 2015 plates, new 5 yr warranty and no 3rd yr MOT to consider. I will have an extra 18 mths before the final payment becomes due so my money stays in the bank earning interest. I have an appointment with the dealer on Tuesday 10th Feb to discuss the issue. Could you possibly offer some advice please before I go in.

    • Hi David. Firstly, have a read of this article about part-exchange values, as you want to be sure of its value and 95% of people overvalue their own cars. It is rare to have that much equity in a car at the end of its term.

      Secondly, go to another Toyota dealer and get a quote for the same new vehicle but without mentioning your part-exchange (say you’re going to settle the finance and give it to another family member or something). This will give you an idea of what the actual offer on the new car is, because the original dealer is quite probably factoring your part-exchange into the equation.

      Get a settlement figure from Toyota Finance, and when you go into the dealer on Tuesday make sure you get a clear idea of what they are offering you for the part-exchange (so you understand your exact financial position on your current car). Then have them explain the exact offer on the new car, and compare it to the quote you got from the other dealer.

      Finally, find out whether the services can be transferred over to your new car. If not, then you have paid for two services which you will lose.

      It is very common for dealers to try and convince existing customers to upgrade mid-term. It always sounds great, but in real terms it isn’t always as good as what you already hav. Remember that they are only doing it because it suits them, not because they are remotely interested in whether it’s best for you. Their job is to make it sound like what’s best for them is actually best for you…

  55. Hello, Ive recently bought a car on pcp, only had for a month, I am not happy with the car, can I change it? I would like something more expensive, please help!

  56. I am a chauffeur and I have a 730LD BMW it was bought on a PCP and in April I am half way through the PCP and my circumstances have changed I also claimed back the VAT when I bought it. My dealer has said in April I can hand the car back to the dealer and end the agreement, the car is in excellent condition and less mileage than I opted for. do I have to pay VAT on the car when I hand it back like you would if you sold it, or not?

  57. Hi Stuart, just ordered a car on PCP, £2000 deposit and £450 a month for 48 months. Adding this up 48×450 = £21600 + £2000 deposit = £23600.
    On my order it says amount due from customer is £31000 (this is after the 2k deposit)
    My question is, if I’m able to pay cash and buy the car outright, could I pay this amount? £31000.

    • Hi Geoff. You will need to check your PCP agreement to see if there is a deposit contribution being included by the dealer/manufacturer. If so, then the price to buy the car in cash may be higher. You can take the finance option and cancel within 14 days which will mean you don’t have to pay any fees or interest but can still claim the deposit contribution.

  58. Hi Stuart,

    PCP virgin here with a few questions. My biggest concern with PCP is the risk of dents and scratches as I just know the car will end up getting them where I live. Questions…

    – if I have a car on PCP and it has dents, scratches, etc how will this affect me wanting to part-exchange my car for another car at a NEW dealer (i.e. they will just value my car as it is and there is no need for me to get it repaired)?
    –if so, If I part exchange my finance car at a new dealer and it’s value is less then the GMFV, I will have to settle the oustanding finance?
    -If I hand the car back to the current dealer with scratches and dents, but want to take out a new PCP (i.e. not just hand it back and walk away) will I still be charged for bodywork repairs?

    Many thanks

    • Hi Mir,

      If you have any damage that is considered beyond normal wear and tear, you are normally best getting it repaired before returning the car if you are going to hand it back to the finance company (it doesn’t go back to the dealer, as it belongs to the finance company).

      If you are part-exchanging the car at any dealership, they will value the car based on its age/mileage/condition just as they would with any other car. It is then simply a question of whether the PX value they offer is more than your GMFV. If it is, then happy days. If not, you would give the car back to the finance company as detailed just above.

  59. Hi there, I’ve just signed up to a pcp agreement. Currently my annual mileage on the car is 6000 miles, the sales advisor choose this amount for me, after coming home and thinking it over I may change jobs which may require me to go over my limit but currently it’s okay! As I havent found a suitable job! I was wondering after my 3 years with pcp could I go on to a hp and pay off the remaining balance over so many years? If so should I say o the advisor at the start of the pcp contract?

    • Hi Rachael. Most finance companies will allow you to increase your mileage if necessary, but check before you take delivery of the car.

      You won’t be able to convert the PCP to an HP at the end of the term; you would have to re-finance the balloon figure, which means you are paying interest on that amount again (you already paid interest on it in the PCP), plus the interest rate is likely to be relatively high. If you think you would prefer an HP, you are better off doing that now. If you haven’t commenced your agreement, you can cancel without penalty (there is a 14 day cooling-off period once the contract is activated) and take an HP instead.

  60. Hi there

    Owing to the nature of my ‘training’ on medical rotations, my tax code was mixed up between trusts. I ended up owing HMRC almost 10k which has meant maxing out on my cc. I am now having to repay my cc and an additional 400/month to HMRC over the next 6-8 months. Having looked at my costs, my BMW PCP was the only area I could potentially realistically chip away. Or at least so I thought.

    I have a PCP with BMW on which started July 2010. After reading your article on VT after the 50% mark I thought this would probably be the best way forward but owing to the nature of my job and family set up, I need to have a car. I called BMW todaywho gave me a settlement figure of £14000 which I obviously do not have owing to the recent HMRC shenanigans. I could potentially continue with the PCP but at a tad bit of a stretch. Can I part-exchange the car for a second hand HP car – probably with MB or Volkswagen – and get a favourable deal that would sort out the finance owing and then cover the deposit at a competitor?

    My current car is a used 2010 330D MS which came with some optional extras and still has the warranty. It is in good nick. Mercedes have a few good used E’s in the £teens with reasonable mileage – 50 or less – which I’d be ‘happy’ to pay a deposit on and then pay monthly on HP what is effectively half per month of what I am paying now.

    I say ‘happy’ but what I am actually hoping for is that MB offer me a higher valuation on it than the finance owing with the extra becoming the deposit rather than anything coming out of my pocket. Not that there is anything in my pocket off-course. Would MB view this as a chance to capture from BMW or would the fact that I want an HP deter them? I have attempted to price my current car on BMW’s website but I can’t find a similar one with the same mileage at the price point BMW are quoting for the finance owing or below it.

    What do you think are my chances of success with MB

    • Hi Tindo. Firstly, if you’ve had the car for nearly 4 years, you should be able to VT by now. Unfortunately, if you don’t use very clear and specific terminology when speaking to a finance company then they will tend to give you the answer which suits them best. So instead of “Yes, you can hand your car back”, you’ve been told “Yes, you can settle your agreement and it will cost your £14,000”. Check your contract for the VT amount and add up how much you have paid off so far – if you’ve paid at least that much then you can VT the car. If not, you can pay the difference to bring you up to the VT amount and then VT the car.

      If you want to part-exchange the car for something else, they obviously need to be giving you at least the value of the BMW settlement. Check car buying sites like webuyanycar.com to see what it is going to be worth – they’re far more realistic than BMW dealer ads.

      In answer to your question “Would MB view this as a chance to capture from BMW or would the fact that I want an HP deter them?”, the answer is that they couldn’t care less. They will want to sell you a car, and it will just depend on how the numbers stack up.

    • Thanks for that. I’ve obtained valuations from webuyanycar, CAP and Glass which all gave an estimate of between £500-£2000 below the finance owing which would leave me with a shortfall. The MB site valued it even lower. Interestingly selling it privately gave an estimate 2-3k above the finance owing. With the advertising etc and arranging viewings, test drives, haggling etc that may be involved with that I think I’ll go an and VT it. I’ve checked the sums and they are favourable for VT. Thanks again

    • Bear in mind that private ads will show you what the seller is asking, but not what they actually sell it for or how long they’ve been advertising the car. Check out our article on part-exchange prices for a bit more explanation.

  61. Hi Stuart. Great article, thanks.

    Quick hopefully easy question. Buy outright or PCP?

    I don't really want to borrow money. Am thinking of getting a one year old MB at about £20k. However MB suggests I go for a car at for about £32k (newer, less miles and higher spec ex demonstrator) and finance it via PCP.


    • Hi Edward. The dealership will ALWAYS recommend that you take their finance offer, and usually a PCP. This is because they are probably making at least as munch on the finance commission as they are on the sale of the car.

      You have answered your own question – “I don’t really want to borrow money”. So don’t. The dealer will make a lot more money selling you a more expensive car on a PCP than a cheaper car in cash, so inevitably they think it’s a much better idea!

  62. Many thanks Stuart. Good linked article.

    PCP certainly seems like an easy way of getting a far more expensive vehicle that otherwise one would not get. For me, over and above the cost of financing, the negatives are the fact the initial payment (erroneously called a "deposit") is most likely lost and also at the end of the PCP period and there is scope for big arguments on the state of the vehicle on what is normal wear and tear and what is damage.

    Seems to me that these days being an outright cash buyer no longer one the advantages as in the past.

    Thanks again


  63. Hello, I am considering taking out a car under PCP. Your articles and comments here are very interesting. However, I am slightly baffled about what happens if I return the vehicle at the end of the period (say 36 months) and I am over my agreed mileage? The dealer says I just hand the car back and they take the ‘loss’ in value for the vehicle as the mileage and guaranteed value would have been affected. But then again, I also read excess mileage charges – what is the interaction between excess mileage at the end of a contract and just handing the car back when the expected value is lower than originally expected? Many thanks Peter

    • Hi Peter. If you go over your agreed mileage and then want to hand the car back to claim your Guaranteed Minimum Future Value, you will certainly be billed for it – even if your car is absolutely immaculate. It is nothing to do with the dealership, it is the finance company who will charge you.

  64. Hi Stuart

    I am looking for purchase a new Audi A1 from a main dealer, originally going to finance through a low apr personal loan (very good credit rating) but now the dealer has introduced me to pcp. So we have gone over the figures has i have never purchased a vehicle this way before. I pointed out the apr was higher than a personal loan but they said you cannot compare directly with a loan as thry work difrently. So i accepted that as we are getting £500 contribution from audi if we take pcp so it goes someway to offsetting the higher Apr. Now my main question as this is totally new to me is the gfv or ballon payment which is 8500 on a 17000 vehicle. The salesman has told me that the A1 have strong res value and likely to get more than gvf when i put the car in 3 years time, the dealer currently has 3 year old vehicles same spec for 13000 on the forecourt, far more than the gfv, so my question is how do they determine the price in 3 years over and above the gfv. If they are selling for 13k after 3 years with same mileage i will be doing i would expect 10k plus when i put it in, but what if they offer just the gfv making them over 4k. Are there rules around this? I could pay the ballon but then i have paid more interest than if i had set up hp from day 1, so the plan is to take another car in 3 years.

    • Hi Alan. For your circumstances, the PCP is only worth considering if you know you are going to change the car at the end of the agreement. If you are planning to keep it (and therefore pay out the GMFV/balloon figure), the higher APR will mean that you will end up paying more in total than you would with a personal loan. The dealer is partially right in that the two products work differently, but at the end of the day the APR tells you how much interest you are paying on the amount you are financing.

      The golden rule when taking a PCP is to always assume that you will not get any equity at the end of the agreement. If you do, then it’s a bonus. Just because a dealer is selling ‘similar’ cars at well above the GMFV doesn’t mean that they will buy your car for more than the GMFV. A dealer will ALWAYS tell you that your car is likely to get more than the GMFV at the end of the agreement, but it really doesn’t happen very often, and they use words like ‘likely’, ‘probably’ and ‘historically’ which do not equate to ‘guarantee’. The only guaranteed number is the GMFV, and that has strings attached to it in terms of condition, mileage and service history.

      A1 resale values are currently quite strong, but in 3 years’ time when your PCP ends, it will have been replaced by an all-new model and the value of the ‘old model’ will inevitably drop. There is also probably a £3,000ish difference between the dealer’s selling price and their buying price. Have a read of this article about part-exchange prices, and why they are usually disappointing.

      You can usually also avail yourself of the deposit contribution without having to live with the dealer’s finance. Have a read of this article about deposit contributions and cooling-off periods.

      Always remember that the dealer wants you to buy their finance (and insurances, and other add-ons) because they make a LOT of money by selling it – often more than they do on the car. Everything they tell you is aimed at getting you to take everything they are offering, regardless of whether it’s in your best interests. Keep that in mind, and you will be well armed to judge things for yourself.

  65. Hi, I have been offered a PCP by a dealer, but a few things don’t seem right. They matched an online deal I showed them with monthly payments, but actually said they don’t need any deposit (the online site wants £800). The website also states I get 10,000 miles per year which is perfect for me. But this dealer easily dismissed the mileage and said “you get 5000-6000 miles but you will be fine going up to 10,000 miles, don’t worry about that” this comes accross rather reckless and seems to be taking advantage of somebody that has no idea about leasing, am I correct? Thanks :)

    • Hi Mike. The PCP quote should show exactly what your annual mileage allowance is. If it is 6,000 miles per year but you do 10,000 miles per year, then after three years you will have accumulated 12,000 miles of excess mileage, which would usually cost you about 10p/mile, so about £1,200 in total.

  66. Hi Stuart, could you offer some advice?
    I am looking at my PCP which comes to an end later this year. The car has been damaged following someone bumping it while parking at work.

    The dealership I have been loyal to with my last few cars have said I’m now in a negative equity of several hundred which won’t change before Oct (unless I get it repaired which I cannot afford right now)

    They’ve offered to get me out of my current PCP now, settle the car and offered me a new Citoren C1 at a slightly higher payment than I pay now.

    As I’ve a VW up!, it seems like I’m having to “downgrade” cars and onto a more expensive agreement.

    Is this a decent offer given the situation or would I be better off waiting? Are they any advantages to waiting?

    • Hi Abby. I’m guessing that you don’t know who damaged your car, and therefore can’t get them to pay for repairs. If your damage is that significant, is it not worth getting it fixed under your car insurance policy?

      If your car is damaged, you are going to be charged by the finance company at the end of the agreement if you try to hand it back. One way or another, it’s going to cost you in terms of repairs or lost value.

      Have a look at the Citroën website to see what the offers on a C1 are, or check with another Citroën dealer, to make sure you are being offered a competitive deal. You should also check and see what the latest VW up! offers are like compared to what you are currently paying, as it may be that today’s offers are not as good as when you bought your current car.

      It’s difficult to know whether you are going to be better off changing now or changing later, as you can never know what the offers are going to look like later in the year. They may be better, or they may be worse.

  67. Hi Stuart,

    Just wanted to say that this is not only a fantastic article but also an excellent comments section. The effort and diligence you put into the site is astonishing and your willingness to understand and respond to each an every question is impressive. Congratulations on a great blog. Would love to meet you for a pint if you are based in London and talk cars.



  68. Hi,

    I have recently purchased a car using PCP, I am slightly worried about mileage. The dealer told me if I was to go over my agreed mileage, if I part exchange my car before the end of the term any excess mileage fees wouldn’t apply, the only time I will be billed for excess mileage is if the car goes back to the finance company?

    For example on two years time I walk in to a dealership and they price my car up, get the settlement figure from the finance company and take it from there?


    • Hi Marc. What the dealer says is true, but it doesn’t exactly help you. As usual, the dealer is trying to suit their needs rather than yours.

      If you go back in two years’ time, particularly if your mileage is higher than agreed on the PCP, the chances are very strong that your settlement figure will be significantly higher than your car’s value, meaning you will have to shell out the difference to get rid of your car. So you won’t be better off at all. Have a read of our article on settling a PCP early for more info.

  69. Hi,

    I am looking at a choice between a C Series Mercedes and a 3 Series BMW. The Mercedes PCP tends to have a low monthly payment with a high balloon payment, whereas BMW have a higher monthly payment with a lower balloon payment. I suspect that depreciation after 4 years would be similar on both cars so why the difference and which would be the better deal?

    Kind regards


    • Hi Terry. The likely difference is that in 4 years’ time, the Mercedes-Benz C-Class will still be the current model, while the BMW 3 Series will probably have been replaced with a new model, making this one the ‘old model’. As soon as a model is replaced, values of the old model drop noticeably.

    • Thanks Stuart. That makes sense, although both models are due a face-lift. The series this year soon and the Mercedes some time next year. I am going to be asking the question of both dealerships and see what their position is.

    • BMW and Mercedes-Benz both tend to work on 7-year product cycles. The 3 Series was launched in 2011 and should be facelifted this year, which would probably mean an all-new car in 2018 or thereabouts. The C-Class was all-new last year, so will be due a facelift in 2018 and an all-new replacement in 2021.

  70. Stuart,

    Thanks for some really great advice on here! I am still a bit confused about something though. It seems like a PCP is exactly the same thing as a lease in practical terms: low monthly payment in exchange for both a mileage limitation, with the option to buy out the car at the end. What, if anything, is the practical difference between the two from the buyer’s perspective? Thanks!


  71. hello there i kind of regret getting my clio on pcp finance as i recently changed my career and now cannot afford all of my bills. the agreement started in feb 2013 (for around 13k, i have the exact number somehwere), if i wanted to terminate early what kind of fees would i be looking at?, would it be cheaper to simply keep paying the monthly finance? (178pcm)

  72. hi, my dad is buying me a car on hp and we would like the car to be changed into my name and my dad carry on paying the repayments, is this possible on a car on finance or does the car have to be paid off in full first. we would like the insurance in my name as i do not live with my dad so the car would not be parked at his address.

    • Hi Annabel. This is not normally possible, even though you are related. It’s called an Accommodation Deal, and that link will take you to an article all about them. Most finance companies will insist that the vehicle order, registration, finance and insurance are all in the same person’s name for the duration of the finance agreement. This will be particularly problematic as you do not live at the same address as your dad.

  73. Hi I’m going to see a dealer at the weekend regarding a corsa on PCP unfortunately I do have a bad credit score of 561 do you think there is any chance of me getting the car its £99 deposit and £99 pm for 36 mths I currently have £42 of credit on my score and a late payment has just been added to my credit file I don’t think I have a chance but thought I would ask for a little advice. Thank you

    • Hi Barbara. It sounds unlikely that you would be approved for credit on the basis of what you have described. Also, if you are struggling to pay your current bills, is it really a good idea to be adding another £100/month plus running costs to your monthly expenses?

    • Thank you for getting back to me. I thought I wouldn't get credit I just needed confirmation on that. I can afford the car that is no problem as i have my own business that i am at from10-5 6 days a week and i also work 12-16 hrs a week with an evening job I only have a late payment as it completely went out of my mind its only a home catalogue. Im so busy I just forgot to pay it. But thank you I am trying to rebuild my credit that's why i got the catalogue. If I get my score up to fair what s the likely outcome for car finance?.

    • Every application has to pass basic credit score and affordability tests, and each case is usually assessed individually based on all the information that you and the dealership provide the finance company.

      This is done by the finance company at their head office, rather than at the dealership. The dealer simply submits all the information provided and has no influence on the decision.

  74. Dear Paul,
    Excellent advice from what I read. We have a very unusual scenario. Expensive car (47k) from main dealership on PCP (36 months). Car had non functioning heating system. They would collect the car, bring it back saying to wait 6 weeks for ordered part from Germany, recollect, deliver 3 days later not fixed. This went on for 2 years and 9 months when after 7 such cycles we finally have heating. The mileage on the car today is only 3k. As you can imagine the car was not drivable in the north west without ability to demist etc. We now have to pay 20k to buy the car as we want to keep it now that the heating is sorted. We want to take legal action for compensation for luck of use, not as described etc. If the finance company is the owner, can we take legal action against the deslership? Any advice is appreciated. Many thanks.

    • I would say that you should be taking any action against the manufacturer (or their UK head office, given that they’re German) rather than the dealership, if the car has been repeatedly failing under warranty. The only fault of the dealer would be if they had repeatedly incorrectly installed perfectly good equipment which resulted in it not working.

  75. Hi

    I’m a bit confused. PCP deals on new cars seem to be a lot better deal than on used say 4 year old cars, the APR seems a lot higer on used eg Nissan 14.9% Am i right in saying you might be better of getting a loan at around 3.6% and paying over a longer period than taking out a pcp on a used car with a high APR. To me it seems a bit of a con to buy used on a ridiculous rate. I’ve only started looking do you know if you can negotiate on the APR on a used car doing a pcp ? I’m in a position where a new one is out of budget and a used one is but still want to get a good deal. Also there are sites where you can order a car online (new and used) seem a lot cheaper than going to main dealer, Has anyone experienced a main dealer matching an online site monthly payments for like for like car ? I know most people never pay the asking price but in a chicken and egg situation whereby want to make sure i can afford the payments before going to testdrive and liking the car ! but i can’t negotiate price until i am ready to buy the car. I just want to save time and money so any advice would be appreciated. Sorry for the long post !

    • Hi Lou. The manufacturers will always do better deals on new cars because they want you to buy a new car, rather than one they built and sold four years ago. As such, they subsidise/discount the new car offers via deposit contributions and reduced APRs. Used car finance rates are usually unsubsidised, which means that the new car might cost twice the price of the uesed car, but the monthly payments might be a lot less than twice those on the used car. It’s all aimed at pushing people towards new cars rather than used.

      It is usually pretty difficult to beat the manufacturer’s own finance offer on a new car, once you factor deposit contributions in. The lower APRs usually mean there is much less margin for the dealer, so less (or no) room to negotiate the rate.

      On a used car, there is every chance you can negotiate with the dealer on the APR. The dealer has a margin on the finance just as they have a margin on the car. It might only be a couple of percentage points (eg – 12% vs 14%), but there is always a margin.

      On used cars, there is every chance that a bank will offer you a personal loan at a much lower APR. Bear in mind that a personal loan is unsecured, so if you fail to keep up your repayments the bank can come after you and your personal assets. A PCP or HP is secured against the car, meaning you can’t personally be driven into bankruptcy (worst case scenario!) if you can’t pay off the loan.

  76. Hi Stuart please can you help I am hoping you are able to give me a solution to my problem! I have a Range Rover on a PCP and am 1 year in on my agreement. I have just taken a new job where I am doing a lot more annual miles. I have spoken to LEX and they have told me there is no way I can alter the agreement at all which means I am going to be really stung at 22p per mile at the end of the term. Any advise would be really appreciated. Thanks Laura

    • Hi Laura. LEX tend to finance fleets and business users, so their contract purchase terms & conditions could be quite different to other companies' terms. I don't believe they offer a PCP, although they do have a contract purchase option aimed at small businesses. If you are using your vehicle for personal use more than business use, a business finance option is not usually the best choice.

      If the vehicle is being used for business purposes, you should be able to claim your mileage as a business expense, but you will need to speak to your accountant.

      Your contract should have all the details regarding settling the finance early if you do not wish to continue with the vehicle, however you will need to be prepared to lose money since you are still early in your agreement.

  77. can you give the car back any time , and finish the agreement or is there any charges to settle if you want to do that>?

  78. Stuart thank you so much for the article. It was very helpful. I do have a few further questions to fully understand how PCP works in practical terms.

    1) I have seen some suggestions that with certain PCP deals the GMV may be different from the final settlement amount (the balloon payment). This is somewhat counterintuitive so I wanted to confirm that this is in fact true. In other words, under what circumstances, if any, would a customer and finance company choose a settlement amount that is different from the GMV. Or put it differently under what circumstances would a finance company guarantee a value that is different from the settlement amount, which amount presumably equals sales price – depreciation.

    2) What determines the amount of depreciation and therefore the settlement amount? Is this determined on a case by case basis or does every model have a depreciation schedule that finance companies cannot stray from?

    3) How is the actual value of the car at the end of the PCP determined? As an example, lets say the GMV on the car is 10K. How do I and the dealer agree on what the actual value of the car is? Is there an objective source that sets forth prices for used cars with certain mileage and condition or will there have to be another negotiation process with the dealer? I suspect that this is where dealers have the informational advantage and may force customers to agree to values that are as close to the GMV as possible. Would you agree?

    Thank you in advance for your insight.


    • Hi Aram. In a PCP agreement, the GMFV is always equal to the settlement amount at the end of the agreement. In certain other types of car finance, you can choose your own settlement figure/balloon, but the finance company does not offer to buy the car back for that figure.

      The GMFV is determined by a depreciation formula based on the model, specification, mileage and options. It is not varied on a case-by-case basis, so if you had two absolutely identical cars on two identical PCP agreements, their GMFVs would always be identical.

      The valuation of the car at the end of the agreement is simply whatever the buyer is prepared to pay – whether it be a dealer part-exchanging it, a private buyer or an auction value. Dealers will be guided by market values according to industry guides like CAP and Glass's Guide, but you are welcome to negotiate as much as you can for the car. If the valuation/sale price is greater than the GMFV/settlement/balloon, then you get the equity (leftover amount after settlement is deducted). If it's less than the GMFV, you simply give the car back to the finance company and they pay the settlement value (assuming you have complied with mileage/servicing/condition requirements).

    • Stuart…thank you. This certainly clears things up. I do have three more follow up questions if you don't mind:

      1) It seems that the "equity" transaction is between the customer and the new dealership and the PCP arrangement is of course between the customer and the financing company. So it appears that the "equity" transaction is not a guarantee under the PCP arrangement since the party granting equity (the dealer) is not obligated to do so since it is not a party to the PCP arrangement. What recourse does the customer have if dealers are refusing (for w/e reason) to grant equity based on the customers assessment (or CAP and Glass's Guide) of what the car is worth? Would the finance entity step in and grant some form of rebate towards a purchase of a new vehicle (same brand of course)? Or is the customer at the mercy of the market forces at that point and would have to either accept a lower amount of equity or buy out the car and try to sell it himself/herself.

      2) Do you know approximately what percentage of the new car sales are made under PCP arrangements and under standard PHC arrangements. I want to assess what other customers are finding beneficial based on statistics.

      Thank you again.


    • Your car is worth whatever someone will pay for it – so market value. You are free to shop your car around to as many dealers as you like to get the best price for it, but there is unlikely to be a massive variation in the car’s value. Dealers buy and sell cars every day of the week, so they have a good idea of how your car compares to everyone else’s. Their valuation will depend on what they think they can sell the car for – have a read of this article about part-exchange values, and this one about how to get a better price on your part-exchange.

      The finance company funds your car purchase – they don’t get involved in vehicle valuations. You owe them £X to settle your PCP, and you hope that your car is worth more than £X so you have a bit left over once the finance is settled. If you give it back to them, they cover the £X settlement regardless of whether the car is worth more or less than £X (assuming you’ve kept to your responsibilities of mileage/service/condition).

      The percentages of cars bought on PCP vary significantly between new & used cars, and between brands. But most manufacturers are pushing PCP finance because it suits them, not because it's a wonderful deal for the customer.

  79. Hi Stuart. Just a quick question. I'm looking to take out a new Audi on A pcp. I've got a fair credit score, what kind of chance do you think I have?

    • Hi Mike. Credit score is one component of the application criteria, but Audi Finance will take several other factors into consideration as well, such your income vs. expenditure, deposit amount, other credit commitments, and specifics of your credit history before making a final decision.

  80. Hi Stuart…great article! We are looking to upgrade our faithful Kia Sorrento tow car. We tend to buy nearly new cars…look after them and keep them! The problem is that aren't many near new Sorrento's around! Our current car is a 2006 model, and cost us @ £11K. The same 2-3 year old used now costs @ £18K – £20K, that's if you can find one within a sensible travelling distance. Our car has only done only 72K miles, and many 3 year plus are already reaching this sort of mileage. Kia prices have soared over the last 5 years, and are no longer the budget brand they used to be. To be fair…the cars have improved immensely, especially the 'All New Sorrento'

    We need a 4WD to get us off muddy fields, and our current car has been amazing! Due to the lack of nearly new, we are thinking of biting the bullet and buying new at around £30K. This seems an awful amount of money to spend! Our local Kia dealer suggests PCP @ 4.5% APR, and paying the 'balloon figure' at the end of the term. They assure us that this by far the best way to do it…I bet they do!

    I'm attracted by the lower monthly payments, and low deposit. Our GFV is @£11K , sorry figures not to hand, which seems to be ok as we can't buy, or even find, a 2-3 year old Sorrento for anywhere near that sort of price. We are thinking of term ownership here, due to Kia's 7 year warranty. Our mileage is quite low @ 7,000 miles per year. Would you advise this sort of deal, or hold out for the right second hand car and go down the personal loan finance road. Thank you in advance.


  81. hi i am at the end of a 42 month pcp. i am looking at part exchanging it for a new car. since i took out existing car i have unfortunately accumulated a poorer credit rating,. it is nothing major, and all car payments, mortgage and cards i have an exemplary record for. nevertheless the rating is now given as 'poor'
    question is, is the new pcp an entirely new contract agreement? or is the a way to take a new agreement with old finance company without them running a credit search? i have had no issues at all paying the car payments for the last 42 months

    • Hi Lulu. Yes, even if you stay with the same finance company, it is an entirely new contract and credit check. The credit check is one part of the overall process, although it is important. If you are making a new application with the same finance company, obviously they will be able to see that your payment history has been exemplary, so they will take that into consideration as part of the overall application. However, all finance companies have rules which they are required to stick to, so it will depend on the overall circumstancees of your credit history and your new finance application.

  82. Hi

    I visited an Audi dealership last Wednesday and walked away with a PCP. Once talking with senior memebers of my family, it was clear that i had acted out of haste. I revisited the dealership on the Thurs and advised them of my request to cancel, the salesman dealing with my transaction advised that this would not be possible and that i am now liable for the car- somewhat became very rude.
    I signed some paperwork on my original visit to the dealership and paid £500 of a £3000 deposit. The remainder was due to be paid upon collection of the car.
    I challenges the salesman who then advised that i should write to sales manager and inform her of my request which i did immediately after leaving the dealership. I am yet waiting a resposnse.
    Please can you advise me if there is anyway of me to cancel this purchase?

    Many thanks,

    • Hi Sobi. Legally, the salesman is correct. You can cancel the PCP (you have a 14-day cooling-off period for that), but if you signed a contract on the dealership premises and were of sound mind at the time, you can be held to it. Cancelling the PCP simply means you will be invoiced for the full price of the car. There is no cooling-off period in the purchase of a car on the dealership premises. For more information, have a read of this article about changing your mind after you have bought a car.

      You have acted correctly in advising the sales manager in writing of your intention to cancel the order, however, you are reliant on the dealership agreeing to cancel the purchase. You will almost certainly lose your £500 deposit if they agree to cancel.

      You said that you signed ‘some paperwork’ when you visited the dealership. This was presumably a vehicle contract, and you should have been given a copy. You should also have been given a receipt for your £500, which should clearly state that it was a deposit for the purchase of a new (or used) car.

      You seem to be unhappy with the way that the dealer has treated you, but on what grounds do you think you should be able to cancel your order?

  83. Hi Stuart

    Can you provide a definitive answer to the question of whether I am obliged to use a main Mercedes Benz dealership for servicing in order to remain within the terms of my PCP arrangement with MB Finance.

    I have seen a number of blogs, which contradict each other but one blog in particular sites EU anti competition law as a reason as to why they cannot insist on dealership servicing as long as it is done with MB genuine parts and to the required standard.

    Any help much appreciated!


    • Hi Darren. Short answer is yes, you have to use Mercedes-Benz servicing if you want to hand the car back and claim your GMFV at the end of your agreement. This is because the valuation they guarantee for your car is based on a full manufacturer service history. If the car has not been serviced by Mercedes-Benz, its value will be reduced (although the finance companies do tend to exaggerate this to suit their purposes).

      If you get to the end of the PCP and your car is worth less than the GMFV, you give it back to the finance company rather than part-exchanging it. If your car is worth more than the GMFV, or you plan to pay out the settlement figure (which is the GMFV) and keep the car, it doesn’t matter where it has been serviced.

      From a warranty perspective, you don’t have to have the car serviced by Mercedes-Benz. Have a read of this article about servicing and warranty requirements for more information.

  84. Hi Stuart, my mileage is far higher than the agreed mileage in the PCP contract so I am trying to decide what to do after my monthly payments are up. Either to keep the car by re-financing or take out a new PCP deal, will the excess mileage hamper this?


    • Hi Alex. Your contract will tell you how much you will be expected to pay if you hand the car back (usually it's about 10p/mile, which is £100 per 1000 miles). If you part-exchange the car or sell it privately, it may be that even with the high mileage that the car is still worth more than the settlement figure.

      Refinancing is usually expensive because you have already paid interest on the GMFV amount as part of your PCP. So if you are refinance, you are paying interest on money that you have already paid interest on, plus the rates are normally quite high.

      Explore all your options becire making a decision; it may be a case of what is the least expensive option.

  85. Hi
    I have a merc on pcp, initially it was for my husband and agreed mileage of 40k a year but then he changed jobs and had a new car
    The final bal is due in November of 6500 I would assume the car will be worth more as that value was worked out with the car having done in excess of 120k miles when it has in fact done 55k
    I don't want the car so will be changing it , so will pay the 6500 and then can I sell it privately or to something like we buy any car ?
    Confused as to what to do

    • Hi Jane. Yes, you can pay out the settlement figure and then do whatever you like with the vehicle. If you want to part-exchange it on another car, the dealer will settle your finance for you as part of the part-exchange process. If there is any equity, then you can use that towards your next car.

  86. I am trying to weigh up my options for when my PCP is ending next year and have a few questions regarding high mileage. Due to my job being relocated my mileage is much higher than it was agreed on the initial contract. (by the end I am looking at 25k over!) I wish to know what options are open to me. Handing back the car is out of the question due to the massive mileage ive clocked up. If I were to part exchange it for a new car/pcp would the high mileage become a hinderence with regard to the GFV, will I be offered much lower by a car manufacturer than id need to part exchange the car for a new one, eg, will I owe money on it? For instance if my GFV was £5000 based on 35k mileage over 3.5 years, my mileage is 55k, surely this would make the Value of the car too low to pay off the GFV? I hope im making sense to you, basically can I part exchange my current car on pcp when its finished no matter what the mileage?

    Many Thanks Indeed


    • Hi Alex. Yes, your car’s value will be reduced as a result of the increased mileage, and you will be stung somewhere in the region of £2,000 if you hand it back and claim the GMFV. If you part-exchange the car, the chances are that you would have some negative equity but likely less than the penalty from your mileage.

      You can usually call the finance company and ask them to bump up the mileage allowance. This would increase your monthly payment but would cover off the excess mileage cost. The only problem is that this is best done before your mileage starts going up rather than a long time afterwards. If your mileage is already well over the contract amount, you will probably have to pay a significant amount more each month to cover the increased mileage.

      If I were you, I would start saving now for the expected negative equity when you get to the end of your PCP next year. Alternatively, depending on your situation, you may be able to go down the voluntary termination path.

  87. Hi Stuart

    This is a very helpful article. Can I just ask, say I enter a PCP now and use a trade-in as the deposit. Pay the 36 monthly payments. Then the three years are up and I decide I would like to move up to a newer model… Obviously the balance of the finance is outstanding… I understand that I can hand back the vehicle to settle the finance on the existing PCP contract. But does this mean that I need to have the deposit for the new vehicle saved at this stage? Or does the vehicle from the old PCP form the deposit for the new PCP? Some of the adverts are not terribly clear on this – they almost make it sound like you can drive away in a new car in 3 years without having to put any money down, which I suspect might not be the case. This arrangement is relatively new where I live and so I am just looking for some general clarity (subject to all individual agreements being different and me needing to read the small prints). Thanks

  88. Hi Laura. You are correct in that much of the advertising is (deliberately) unclear about how a PCP works and the financial implications.

    Once you hand over cash or your part-exchange as deposit, it is gone. I try to avoid the word 'deposit' as it is misleading and you will never get it back. I prefer 'initial payment' or 'up front payment'. At the end of the PCP, you will need another deposit for your next car. It may be that your car is worth more than its outstanding finance, so that will give you some deposit (eg – you still owe £5K, but your car is worth £6K, so you have £1K left over once the finance is settled to put towards your next car), but this is relatively rare and you should always budget to have no equity left over at the end of your PCP, so you will need to save another deposit.

    • Thanks for the reply Stuart. I expect it is rare that the car is worth more than you owe at that point given the small repayments over the term and if you were to go back to the same dealer they would probably only be entertaining the gmfv figure in any future deal. Thanks for your help – I suspect I might stick with hp!

  89. Hi, My father in law has (had) a PCB but has died recently about 2 years into the contract. Toyota financial services have quoted a £6666 settlement figure. We don't want the car and asked them to collect the car. They have offered instead to sell the car on our behalf raising the risk of a shortfall. Aren't we entitled to just ask them to collect it? Clive

    • Hi Clive. Sorry to hear of your loss. Unfortunately, there is no provision in a PCP for this scenario, meaning that the money is still owed to the finance company. If the car is sold, then any shortfall would be claimed from the estate just like any other outstanding debts.

      You may be able to voluntarily terminate the agreement if more than 50% of the Total Amount Payable has already been paid. Alternatively, it may be that the shortfall to get to 50% is less than the shortfall if the car is sold and the settlement paid. Finance companies tend not to explain how voluntary termination works as it means they get less money, but it may be a solution in this instance.

  90. Hi Stuart. Does the way different manufacturers calculate GMFV differ much ?. The reason I ask is we are coming to the end of a 24 month ford options pcp and obviously will have to pay a further deposit to start another plan. Some one we know took out a 24 month pcp about the same time as ourselves with Audi and now tells us that she`s changed her car with the same monthly payments and no upfront cost. I find this difficult to believe. Is this possible ?.

    Regards John

    • Hi John. As rule, the finance company doesn't want to be left at the end of the agreement with a car that is worth less than the settlement figure (GMFV), so they will be slightly conservative in their valuation. However, they do plenty of research into the market and are generally very accurate in their estimations, so there isn't normally a lot in it.

      it is entirely possible that there is something going on behind the scenes that this customer is unaware of. Sometimes there will be bonus offers for renewing customers, other times there will be offers for conquest customers changing from rival brands, or possibly there was a particular deal on a particular car that the dealership was desperate to get rid of. There are many possibilities for someone to get a deal which is better than an advertised offer, but it's always to suit the manufacturer or dealership needs rather than the customer.

  91. Hey! Can you get a pcp on a used car? Or would you tend to get better offers on new cars? The used cars being cheaper in value, does that mean the monthly payments will be lower?

    • Hi Imon. Yes, you can absolutely get a PCP on a used car. The APR will usually be significantly higher compared to a new car, but the car will obviously be cheaper. Also, there is usually little or no deposit contribution on a used car, which is a common discount tactic for finance offers on new cars.

      In short, your monthly payments will usually be less on a used car than on a new car, but not by as much as you might expect given the sticker price difference.

  92. Hi,

    I have ordered a new Touareg from VW which is due to be at the showroom at the beginning of August. I am looking to PCP this car. The dealership has come back and suggested that I wait until the new plate is Sept before taking the car. They have said that if I take it when it arrives then I will be hit by 3 months depreciation. I would have thought that this would all equal out over the course of the agreement, but this is not the case and would effect the price that they will offer me that may be above the minimum future value. is this right or is he just trying to manipulate his sept registrations?



    • Hi Lee. It’s most likely that the dealer is trying to manipulate their registration numbers for August and September based on their targets and number of cars already sold. If you’re planning to keep the car for 3-4 years, it’s not really going to matter. If you need/want to sell it in a few months’ time, then yes there will be a negative effect. Have a read of our article on new car depreciation for more information.

  93. Hi iv recently bumped my car after only 3 months it's resulted in it needing a new bumper , am I able to have it fixed anywhere or does have to be by an approved manufacturer. And when I return the car will they know it's been repairs will I have to declair this? And do I have to tell them it's happened as I'm not wanting to go through my insurance?

    • The repairs don't have to be done by the dealer, but they do have to use approved parts. You don’t have to declare the repair to the finance company, as they are only interested in the car’s condition. If it has been properly repaired, there shouldn’t be any problem claiming the GMFV at the end of the agreement.

  94. Hi Stuart, Please can you advise. I have a PCP through Mercedes and have had the car for a year. I have been transferred to Jersey by my work and I would like to take my car with. I would have to register the car with the Jersey authority and receive new number plates. Is it possible to do this under a PCP and if so, do I need to notify Mercedes? Thanks Patrick

    • Hi Patrick. Different manufacturers have different rules when it comes to the Channel Islands. Check your PCP agreement to see if there is a clause about permanently moving to the Channel Islands. Alternatively, call Mercedes-Benz Finance to ask them. You will have to notify them of address and registration change anyway.

  95. Hi Stuart

    I have a 2012 Hyundai IX35 with trade in value of approx euro 19,000. – Owned outright – no finance due.. I am looking at buying a new VW Passat. They have offered me a PCP deal with part-exchange allowance of 7,500.00, plus 8,500 in cash by way of a cheque. The idea is that I bank the cheque which will pay for 22 months of the 36 month repayts.

    Is this normal?

    I am presuming that if I buy another new car in 3 years time, any additional value of the Passat over the nominated residual value will be added to the part-exchange (deposit) or will they give me a cheque for the difference again?

    Many thanks

    • Hi Hugh. You say that your trade-in value is €19K, but they are offering you €7.5K + €8.5K = €16K?

      In terms of process, it's not unusual, but it doesn't mean it's in your best interests. There will be a maximum amount you can put in as deposit on a PCP, and it's likely that you won't be able to use you full trade-in allowance. Hence they give you a cheque back for the difference. In theory, you could choose to put only €1K in as deposit and get a cheque back for €15K if you like (in fact, they'd love that as they get paid a commission based on how much you are financing).

      What you do with your cheque is up to you. Yes, you could put in a savings account and use it to pay your monthly bill. Or you could spend it or invest it elsewhere; it's your money.

      At the end of the agreement, the Passat may be worth more than the GMFV. In that case, you can use the equity towards the deposit on your next car, or keep it. Again, up to you.

      Given that you own your current car outright, it may be better for you to use your whole trade-in value as a deposit on a Hire Purchase (HP) and pay the whole borrowing off, rather than use a much smaller deposit, pay off less of the borrowing and then have a balloon amount to deal with later. The monthly cost may not be too different. The dealer will push you for a PCP because it suits them better , not because they genuinely think it's best for you.

  96. Hi Stuart,

    I have a complicated situation in that I signed a PCP agreement with 30k mileage under the agreement that I would receive a letter of agreement upping the mileage so there were no charges at the end of my term. This is obviously never going to happen, I'm angry with the dealer and intend to shop elsewhere for my next car. I'm going to be at least double this mileage at the end of the agreement.

    Do you think it's best I take a short term loan out to pay the final payment so there's no excess mileage charge and then part exchange the car on a new (better negotiated) PCP agreement with a different dealer? Or alter the agreement and pay more now? Or bargain with the existing dealer for a new car at the end of the agreement? So many options…I just want to choose the best to avoid paying more than I have to.

    I have a 2013 Toyota Yaris D4D 1.4.

    • Hi Stephen. Unfortunately, if you don't have anything in writing from the finance company then there's not much you can do. A verbal promise from a dealer is worthless. If you wanted a higher mileage, they should have set that up for you at the outset.

      You should be able to contact the finance company and have the annual mileage allowance increased so that you are not exceeding it at the end of the agreement. Obviously this will cost you more money each month, but is likely to be cheaper than taking out a loan.

      If you have already paid more than 50% of the Total Amount Payable specified in your contract, you could potentially voluntarily terminate the agreement and avoid any excess mileage payments. Have a read here: http://thecarexpert.co.uk/car-finance-voluntary-termination-pcp-hp/

  97. Hi
    I have both a car with a PCP loan 6 months ago; however th ecar is not what I expected and I am not longer happy with it. Can I echange my car with another one and keep my existing PCP loan or do I need to wait till the end of the 36 months? thank you . Monica

    • Hi Monica. You can’t swap your car and keep your PCP – the car has been bought and paid for by the finance company and you are repaying them over the term of the agreement. You would have to settle the outstanding finance, part-exchange the car and start again. This will probably be expensive – read this article about settling your PCP early.

  98. Hi Stuart,
    I'm looking at buying a new Audi RS3 on finance, can you please give me some advice.
    The car value is looking to be about £45,000 OTR.
    I have been offered £4,000 p/ex, but looking to sell current car privately for £6-6.5k. I want to own the car after 3 years, and keep for 6 years in total. I was thinking of putting in the £6k from existing car, then adding a further £2-3k on top to bring down the monthly payments. I would have to refinance after 3 years to keep the car, BUT the dealer has said I should put less deposit down…. however I was thinking if I could bring monthly payments down to day £380, on months where I had spare cash, I could the save maybe an extra £200-300pm in a savings account to help pay the ballon payment in 3 years… is this a good idea???
    I have looked at a bank loan but that would mean committing to £680ish a month, which would be achievable, but doesn't give me the flexibility to only pay the pcp figure on months that I need extra cash for living, especially as partner is now talking about starting a family…
    Thanks in advance

    • Hi Jon. The dealer will ALWAYS tell you to put less deposit in, because they get paid a commission based on how much money you finance. So it's in their interests, not yours, for you to have a smaller deposit. If you want to ultimately keep the car beyond three years, a personal loan or HP will normally cost less overall than a PCP. You pay more each month, but don't have the balloon in the end. If you are taking out finance to pay for the balloon, you are paying interest on the loan on top of the interest you have already paid on the balloon as part of your PCP.

      If you want to keep the car but are not comfortable with HP or personal loan payments, I'd suggest looking for a cheaper car.

  99. Hi Stuart,

    I'm nearing the end of a PCP agreement for a Nissan Qashqai, I have a GMFV of £6000. Putting the registration through webuyanycar.com is giving me a value of over £11,000. I note from previous comments that to have money left over is unusual, would I potentially have nearly £5000 for the next purchase or am I missing something? We did have an initial payment of £5000 along with 0% interest.

    kind regards,


    • Hi Wayne. If you have that sort of equity in your car then that's great. Make sure you have the model details (plus mileage and ownership details) correct, as it can make a significant difference.

  100. hi stuart
    im looking at buying a new Audi RS3, I have been offered 5-6% discount. I am thinking about taking out pcp with them but would ideally like to keep the car at the end of the 3yr period, however the ballon is still 25k. which would mean a bank loan for another 3 years- so 6 years in total. not great.
    So with regards to apr on a pcp deal 6.4% or Barclays Bank loan 6.8%, would I be better off to pay the 681 a month bank loan over 5 years, rather than even consider pcp? I want to pay as little interest as possible.

    also if I had pcp over 3 years, would I be better off to sell car privately if it was mint, then pay off pcp and pocket any equity to use as a future deposit?

  101. I am looking to purchase a new car on PCP but just have a quick question about the deposit.

    A theoretical example…
    Cash price – £13,500
    Deposit – £3,000
    Monthly payment – £160
    Term – 36 months
    GMFV – £6,000

    Once the term is up I have the option of paying the balloon payment, giving the car back and walking away or giving the car back a getting newer model car.
    Say I choose the option of giving the car back to exchange it for a newer model…would I have to find the £3,000 deposit once again or would I just exchange the car and continue with a similar monthly payment??

    Sorry if it’s such a simple question but I haven’t found a direct answer and I don’t want to get stuck in a PCP contract. I normally buy older cars for cash and this would be my first car on finance.

    Thanks in advance!

    • Hi Round. Yes, the word "deposit" is a misnomer. It is really an up-front payment. When you start another agreement at the end of this one, you will need another deposit. This catches out a lot of people, especially on a PCP.

    • Hi Jim. The finance agreement is in your name and remains your legal responsibility until it is completed. You are required to keep the car and insurance in your name and you are obligated to continue paying off the agreement until it is completed or settled early. You can lend your car to another person, and they can be named on the insurance policy, but it is still your responsibility. The car does not belong to you; it belongs to the finance company until the finance is settled in full, and they make the rules.

  102. If a car is bought on a PCP contract, can the car be returned within the first 14 days and the contract ended. If so what would happen to any deposit and part exchange

    • Hi Andy. You can withdraw from your finance contract, but that doesn't mean you can give the car back. It just means the finance company will invoice you for the amount borrowed, which you will have to pay.

      The finance contract and the vehicle sales contract are two separate agreements.

  103. Hi Stuart
    Read with interest the articles on pcp and volountry termination. I am 17 months in on a 48 monthly agreement with vw finance, I purchased an old model polo in march 14.
    my reason for writing is my credit rating has dropped considerably since owning my polo, I have had agreements with seat, skoda and now vw since 2009 and I have always paid every month since that date and continue to do so.
    What do you think will be my best option?, continue the agreement till the end and owe £4900 balloon payment ( which I know I wont be able to raise), its highly unlikely that I will get finance from vw to replace my car
    Or do I terminate when ive made half the payments.
    I do not think my pre face lift model will be worth what they say, even though it will be within my set mileage of 7000 per annum.
    Your thoughts will be appreciated

    • Hi truck. You can VT the car once you have paid 50% of the Total Amount Payable (which will probably be about 3 years into your 4-year PCP), or you can keep running the car until the end of the full 48 months and then give it back. Either way, you give the car back and have nothing left to show for it – effectively you’ve rented the car for a few years. The differences are really as follows:
      VT – give the car back early, can’t be charged for excess mileage or not following service schedule, may end up arguing over damage charges (they normally try to recoup anything they can)
      Wait until the end – give the car back after 4 years, you will be charged for excess mileage or not servicing at a VW dealer, fewer arguments over vehicle condition. Plus if the car is worth more than its settlement figure, you can sell it privately or PX it if you want a new car.

      If you are happy with the car and can afford to keep running it, there’s no need to VT it. With a PCP, you can give it back at the end – you’ll end up in the same position (ie – no car), but will have basically rented it for a few months longer.

  104. Hi Stuart I took a car out in March on a no deposit 24 mth pcp. There is 18 mth let to run. How easy and expensive would it be to upgrade my car before the 18mth is up.?

  105. Hi there,

    We have just placed a deposit on a vehicle. We were strongly advised to set our annual mileage much lower (6000)than our actual estimated use (10,000) as the difference on the gmfv was minimal and brought the car within our monthly budget.

    We were told.this is the only bearing the mileage has on the sale and there was no mention of mileage penalty. However an excess pence per mileage is quoted within our contract. In the heat of the sale we obviously missed clarifying this very important point, will we have to pay 12,000 x 14p at the end of our term? He was very adamant it only.affected gmfv a bit and nothing else.

    Have you heard of this approach, or would you recommend pulling out of this sale?

    • Hi Emily. The dealer has been somewhat deceitful here, and certainly not acting in your best interests based on the information you have provided him. The whole purpose of the GMFV is to allow you the option of giving the car back at the end of the agreement without penalty. If you exceed the mileage, you will most certainly have to pay an excess mileage charge (unless the car’s value exceeds the GMFV, which is unlikely if it is 12,000 miles over its estimated mileage at the end of the agreement).

      If you know that your annual mileage will be 10,000 miles, then you should not agree to an mileage limitation of 6,000 miles per year on your PCP. I suggest you cancel your order and get your deposit back, and complain to the Sales Manager about his staff’s sales tactics.

  106. Hi, Stuart.

    I currently have a PCP business 24 month deal (I think) with Audi. It is on my business.
    I need to change the agreement to a personal PCP accountants orders.

    I have spoke to Audi to see if I can change the agreement. I picked up the car 30th June 2105.
    So I have only made 3 payments so far. What are my options if I cannot change to a personal PCP?

    Regards 'Gary

    • Hi Gary. Make sure you are speaking directly to Audi Finance (Volkswagen Financial Services), rather than the Audi dealer. You will get a much better answer.

      It is likely that they will have no real reason to want to alter your contract terms in any way. They would be expecting to honour the terms of the contract, and would be expecting you to do the same. If you can't run it through your business anymore, you would probably have to sell the car and cancel the finance agreement, but you will lose a lot of money (or I guess, sell it to yourself, and take out a personal loan to pay off the PCP).

  107. Hello,
    My current pcp plan has come to an end . The finance company have not written to me to remind me of this this information and that I will have to settle the finance up . The finance company have got a debt agency involved now and when I spoke to them they have told me that my options are to pay the final figure or they will come and reposess the vehicle . No option of refinancing the rest of the money , and they also said I cannot part exchange the vehicle against another one . Please can you give me some advice as I haven't got much time left . Thank you .
    Mrs P ASHTON

    • Not sure why they would say that you can't part-exchange the car on a different one. If you do so, the dealer where you buy your next car will settle the outstanding finance when they buy it from you. If you want to refinance the settlement, you would have to take out a personal loan from a bank and use that to pay off the finance company.

      Talking to the debt agency won't help you, as they are instructed only to collect the money and have no interest in anything else. Has the finance company explained why you can't simply give the car back as per your PCP agreement?

  108. Hi Stuart,

    Appreciate the reply.

    I have not as yet spoken to Audi finance I have spoke to the guy who I have
    taken out 3 deals with at Audi. This being the 3rd, but as yet, has not said yes or no to changing the agreement.

    Before I do call Audi finance, just so I am aware of roughly how much I am expecting to pay out,
    how is the amount owed worked out?

    You said sell the car. Back to the main dealer? I did not think we owed cars on these types of agreements.

    I have made 3 payments on a 24 month deal. Payed a deposit.

    Do I have to pay up 21 months payment to end contract and give the car back?
    Or am I wrong on this calculation? The t&c are confusing and as always not very clear.

    I have in the past taken the cars back early 19 months-ish and taken out new deals. I am also not too concerned with paying out an amount as this is my fault and need to take off my business. I have a good relationship with the dealers and can understand them reluctantly wanting to change the current deal.

    Appreciate your time and reply.

    Kind regards Gary

    • Bear in mind that the dealer has zero authority to change the agreement. They act on behalf of Audi Finance in setting up the agreement, but ultimately the dealer sells the car to the finance company who lets you drive it until you've finished paying for it. The agreement is controlled by someone in Audi Finance HQ in Milton Keynes, who simply looks at your contract and tells you what you can or can't do. The dealer would be happy to help if they value your custom, but it's out of their hands.

      Your settlement figure can be calculated by either Audi Finance or your dealer. If you are settling the agreement now, you will save 21 months' worth of interest but will pay a small admin fee (usually equal to about 2 months' of interest).

      Once you settle the finance, you can do whatever you like with the car as it will then belong to your business (currently it's owned by Audi Finance). So you could take out a personal loan in your own name, buy the car for yourself from your business for the settlement amount, and your business pays off the PCP with that money. You would probably want to run that past your accountant, and your monthly payments on the personal loan will be higher than on your PCP (as you're currently not paying off the balloon), but it may be better than getting rid of the car altogether and losing a large chunk of money.

  109. Hi Stuart. I'm 18 months into my 24 months PCP contract and the dealership is offering to part exchange my car for a new/ different model giving me nearly 4K in equity.
    My question is, giving that my car has some slight curbed wheels will this mean that my equity be penalised when part exchanging?
    Also can I part exchange for a different car brand? i.e audi to mercedes?

    • Hi Mario. If the dealership is offering to part-exchange your car rather than you giving it back to the finance company, then you will not be penalised for anything. (I am assuming that they have seen your car and made the valuation based on that, rather than a theoretical valuation).

      Yes, you can absolutely part-exchange your current car on anything you like. The deal you get elsewhere will not necessarily be as good, or it may be better, but each dealership will value your car separately based on how much they are prepared to pay for it.

  110. Hello Stuart,

    I currently have a car that I've had for approximately 3 months under PCP. I am going away for extended travel lasting 18 months in June next year. I currently live with my parents and know that I have to continue paying the monthly payments whilst I'm gone, but is there anything to stop my parents taking insurance out on the vehicle (of course, fully comp.) to use it whilst I'm away?

    • Hi Caroline. You will need to check your finance agreement to see what it stipulates, or call the finance company and see what they advise. However, it's likely that you will need to keep it insured in your name (with your parents listed as named drivers).

  111. Hi.
    I have about 9 months to go on my pcp.
    I'm wanting another and am just wondering if my current car will be traded in or will it depend on how much is left over from the car after they pay the current finance?

  112. Hi Stuart, I am interested in applying for a PCP, but I have recently moved to the UK (19 months ago). Despite every other plus point on the credit reports, I’m having a tough time finding someone who’d be willing to lend to me given the 3 years in UK requirement they are after. I don’t mind paying at a higher rate. Would you know a typical lender that would be happy to accept someone like me?

    • Hi TS. We are not authorised by the FCA (Financial Conduct Authority) to provide advice or recommendations on specific lenders or offers. Everything we cover is in general terms only.

      However, some lenders are able to extend their credit checks beyond the UK, so they can potentially ‘find’ you in your country of origin. Failing that, it may be that you have to explore options other than a PCP, such as contract hire (leasing) or a bank loan.

    • Hi Jon. The word ‘deposit’ is thrown around a lot in the car industry, and it can be misleading.

      When you sign an order for a car, regardless of whether it’s new or used and regardless of how you plan to fund it, you will need to leave a deposit to secure the vehicle. This may be a few hundred pounds, but it’s usually about 10% of the vehicle price. So if you’re buying a £20K car, you will usually be expected to pay £2K when you sign the order.

      When it comes to funding the car, you can finance the whole thing (so, in the above example, finance £20K and get your £2K deposit back) or finance part of it (for example, you may finance £15K of the £20K total, in which case you need to come up with £3K in cash to add to the £2K you have already paid). Any additional cash payment is due when you collect the car. This is also often referred to as a ‘deposit’, but it’s more correct to think of it as an up-front payment. A deposit implies that you get it back later, which you won’t.

  113. Hi Stuart

    My apologies if this has already been asked. I am currently on a 4 year PCP deal with solutions finance (audi) they have told me that at the 36 month point they will contact me offing me a new PCP deal. Is it possible at that point to go to a different company (say Mercedes) and take a new deal with them or would I have to wait the full 4 years to change company.
    Many thanks

  114. Hi Stuart,

    I took a car out on finance this time 2 years ago. The value of the car was 28k initially, I paid a deposit to the Bmw dealership of 4 thousand, they secured this finance to be conducted by Blackhorse finance, they approved the PCP request for the car. I can no longer afford to keep the car unfortunately, however the agreement does not end until 42months are up. I’d like to consider a voluntary termination of the contract, now is it true that I need to hit equity, so once I have paid off 50% of the payments I can seek to terminate the contract by handing in the car without any extra costs and walk away from the agreement providing the car meets the conditions.

    Please get back to me on this,

    Best regards


  115. Hi Stuart,

    Sorry the length of the agreement is 48 not 42. I pay £397 a month, the first month was £550, so 24 months have been by to this date, 23×397, plus 550 on top of that. The interest totals up to around 8k on top of the initial car price. Now agreement states that I need to pay off around 17k before terminating the contract without further charges. Does this include the payments I’ve made plus my 4K deposit? If so does that mean I have around 3-4K left to pay before I hit the 17k mark so I can return the car ?

    Please get back to me on both comments

    If anything is unclear please say so

  116. Hi, I have read that, great article. The contract states 17k to VT but is that including my deposit plus the payments it made or just 17k of monthly instalments that have been paid for?

    • Yes it includes your deposit. Your contract should give you a Total Cost Payable, and show how that is broken down.

  117. Hi, I am considering buying my next car on pcp and I am currently looking at a used focus at a main dealer. The car has just turned two years old and has 19.5k miles on the clock. Would I be able to take a pcp over 48 months and with 20k miles per annum or is there a max term and mileage that dealers apply to used cars?

    • Hi Oliver. Different finance companies have different policies on how old a car can be at the END of the PCP term. If the car is only two years old, you can probably get a four-year PCP on it. Some finance companies have a limit of six years old old at the end of the agreement, so if it was three years’ old, you could only get a three-year PCP. However, this varies between finance companies.

      Same applies for mileage – some will have strict limits, others will be more flexible.

  118. Hi, I have always had a car on PCP and in 2014 i exchanged my car early for a new one from the same manufacturer, I am now 24 months into a 42 month contract and would like to know whether when this car is returned there will be a charge due to the early exchange as I don’t remember paying any extra at the time of exchange? I will be looking to lower my payments as I currently pay £205 a month on my PCP so wonder whether it is beneficial to return the car or get a new one.

    • Hi Laura. No, there should be no fees due on this agreement as a result of you settling your previous agreement early.

  119. Hi Stuart
    I have a car on HP which I have had for 2 years. The original contract was for 4 years with a £4,000 balloon payment at the end. I now realise this is an insane amount for a fiat 500. I have recently had a minor crash (not my fault) and am waiting to find out if the car can be repaired or written off. Just wondering if the car is able to be repaired will I still be able to terminate my contract after i have paid 50%? Or if the car is written off will the full finance payment be paid off or will they just pay out the current value of my car? I took out gap insurance when purchasing the car but was wondering if I will still be left out of pocket for someone crashing into me? I have paid the car off for 2 years does that mean 2 years of paying £300 a month has gone to waste and I will have to start all over again? (Sorry for the 36 questions!)

    • Hi Chloe. To answer your 36 questions:
      1) Assuming the repairs are done by a Fiat-approved repairer, you should be fine to pursue a voluntary termination without any further penalty.
      2) If the car is written off, your car insurance will pay you market value, and your GAP insurance should cover you for either the rest of the original invoice price (i.e. – the gap between the original price and what your insurer has paid you) or the outstanding finance amount, whichever is greater. This will depend on your GAP policy, as not all of them offer cover for finance settlements over and above the car’s value.
      3) If your car is written off, and your car insurer and GAP insurer both pay out correctly, you should be able to settle your finance and still have some cash to put towards your next car. Even if you don’t have any cash left over, your £300 hasn’t “gone to waste” as you have had full use of the car during that time.

    • Thank you for the reply Stuart,
      I know I have had full use of the car for the past 2 years but I could of leased the same car for a lot less, I guess that this is just a learning curve for me as this is my first (and last!!) new car on finance.
      Thank you for clearing my questions up.

  120. Hi Stuart

    Firstly, like others previously, can I say just how informative this site is and how helpful you have been in responding to everyone’s questions – some of which are repeats so I expect you find it a little frustrating answering the same question.

    I hope you dont mind me asking one more.

    I have a 42 month PCP with Seat however am looking to buy a Kia. I have gone over my allowed mileage and also i am in a little negative equity based on this additional mileage I have done. I am in the middle of negotiating deals with various Kia dealers, but with regards to the mileage, do I have to pay the additional mileage charge? I am assuming not as I am not handing it back to Seat. I am using the car as part exchange and the lack of equity is being swallowed by the dealership within their proposed discounts so it really does come down to whether or not I have to separately pay anything regarding the excess mileage.
    Any help you can give would be amazing thank you


    • Hi John. You are selling your car to the Kia dealer, who will settle the outstanding finance and then sell the car. You don’t need to worry about charges for excess mileage, servicing or anything else.

  121. Hi Stuart, First thank you very much for all this information.
    My questions pcp hand-back, but first some brief background: I have a VW Up which comes to the end of it’s PCP on 12th March. I intend to hand the car back, and I have told VW finance that I am doing so. I tried to get ahead of the game, and to arrange the hand-back for the last week of February. This is because I will be on holiday in the first two weeks of March. After a couple of confusing phone-calls and misinformation from VW Finance, they finally said on 16th Feb that they would set up the hand-back with British Car Auctions and asked me to call BCA today 18th to organise the collection. I called BCA today and it turns out that VW have not even begun the process of setting up my hand-back. In talking to VW Finance this morning, they said that they would trigger the hand-back today, and that it would be another two working days before I could call BCA. BCA apparently need about two weeks to set up the hand-back, so that means it is unlikely we could do this before I leave for holidays. I am happy to let the car sit on my drive until I return from hols, but the tax and MOT will have expired by then. The car will also be due it’s annual service, though there is a bit of flexibility on the exact date of that. I have kept the car serviced under a VW plan, and it’s last service was 13th March 2015. Specifically, tax runs out on the 29th of Feb, insurance 19th March and MOT is due before 12th March. My questions are as follows:

    1. In the event that BCA cannot collect before I return from hols on 14th March, do you think I will be liable for the costs of the MOT and tax? I raised this issue with VW Finance last week, and they just said that if the car could not be legally driven and had to be transported by BCA, there would be a £200 fee. Other than that they were vague.
    2. I am liable to service the car in accordance with VW’s schedule, and I have done so, but what about this last service due on the 13th (plus or minus a couple of weeks I think). I am not keen to pay for a service on a car I will not own.

    All advice welcome.

    • Hi Michael. Usually the finance company is happy for you to take the car to your nearest BCA site, which would be an option for making sure it is done before your road tax expires.

  122. Thanks Stuart. I asked about that and they (VW Finance) said that the BCA site would be Measham. This is doable, but about 60 odd miles (I am in South Birmingham). I will try them again as there is at least one BCA in Birmingham.

  123. Hi Stuart

    I am coming to the end of a 3 year PCP agreement with Ford and have 3 payments left to make ( Deal ends in May)
    I have just signed up for a new car and PCP deal with VW and the salesman says he can have the new car by early March
    The salesman recommended doing a VT on my current PCP deal so I can hand the car back to Ford early and pick up the new car in a few weeks.
    Would this harm any possible finance with Ford in the future?
    I don’t want to do a VT if it puts a black mark on my credit history.

    The car is in excellent condition and is under the mileage.
    I have got a valuation and it slightly more than the settlement figure.
    I’m not looking to claim any equity out my current car.
    Do you think Ford would take back the car and let me out of the aggrement early?


    • Hi Gary. If the valuation is more than the settlement figure, then there is no point VTing the car or handing it back – you may as well sell it and make a small profit.

      The salesman would love you to VT the Ford now and take the VW sooner rather than later, because he is only concerned with his commission. Make sure you are making decisions based on what is best for you, rather than what is best for the dealership.

      As for whether VTing your current car would preclude another finance deal with Ford, it’s impossible to say with certainty. Plenty of people have reported no problems with VTing their car and taking another one from the same finance company, while others have confirmed that they have been rejected for subsequent finance agreements from the same company after VTing. However, I haven’t heard either story from Ford Credit customers. Again, the VW salesman won’t care about your future prospects with Ford or anyone else; he’s only interested in getting you into a VW in March instead of May, regardless of whether it’s a good idea for you.

  124. Hi Stuart,

    Thanks for this very informative article and thanks for answering all the questions!

    I feel in pretty well informed now after reading this, but I’m still a little bit confused by the concept of “swapping for a new vehicle” that dealers like to keep shouting about. Surely it’s not as simple as just swapping for a new car at the end of your term? In reality, isn’t it “pay a hefty deposit or have your monthly Pcp payments rise significantly and swap for a new car at the end of your term” ?

    I’ve paid a 3k deposit and will be paying £129 for 48 months, with a final payment of £4,365. Surely I’m not going to be able to just hand the car back and carry on paying a similar amount for a similar spec new car without fronting up for a deposit again?

    Why do dealers imply you will have equity in your car on these deals when you likely will not?

    • Hi James. You are correct – you will probably need to find another significant cash deposit each time you want to start a new PCP.

      Dealers will tell you whatever it takes to get your signature on a contract. But because it’s all forward forecasting and predicted values, they are not technically lying…

      Always assume that you will have no equity at the end of a PCP. If you do have anything, consider it a bonus.

    • Indeed! This whole “….or, just swap it for a new car!” stuff from the dealer isn’t quite right is it…..?

  125. Hi Stuart,

    I am 26 months through a 48 month PCP agreement and was considering my options for either ending the deal (VT) or trading for something else. I stumbled across your website and discovered that most PCP deals require you to service the car at the dealership. I wasn’t aware of this and have had my last service and MOT done at my local garage. I have read through all of the documentation that I received at the time of the purchase and can’t see any term that makes it clear that this needs to be done. Nor do I recall the salesman mentioning it at the time. It is only after browsing your website and then downloading Audi’s “Fair Wear and Tear” document that I see the servicing requirements mentioned.

    I would like to ask if a) I will be penalised, and to what degree, when I hand the car back and b) whether it could be considered unfair that I was not made aware of this term at the time of the purchase.

    Thanks for your time


  126. Hi Stuart,

    Thanks for your swift response. My concern was that in the Fair Wear and Tear document it stated “If work is carried out on your vehicle by non-Audi Authorised mechanics, or there is an incomplete service history, you could be charged at the end of the contract in order to compensate for the reduced value of the car at re-sale.”

    Not being particularly experienced with purchasing cars and being mindful that dealerships often try and extract money from customers where they can i was slightly concerned.



    • The Audi clause relates to the guaranteed future value only. It is not enforceable in a VT situation, because the law only states that you must take reasonable care of the vehicle. It could easily be argued that a good independent garage would take reasonable care of your car.

      You are correct that dealerships and finance companies will always try and extract money from you where they can, and they are often reliant on you not knowing your rights – which is one of the reasons this website has become so popular…

  127. My daughter has PCP, she is just over half way through a 4 year contract on a Renault Twingo. She is well over the amounted mileage she is allowed for the 4 years. What are her options? She contacted the franchise about what to do and basically she was told it would be sorted at the end of her agreement. How do we find out what she has to pay per mile over the allowed mileage? Many thanks

    • Hi Karen. Contact the finance company rather than the dealer, as the car belongs to the finance company and they may be able to amend the payments to allow for the increased mileage. It no longer has anything to do with the dealership, as once they have sold the vehicle it is not their problem.

      The finance contract should state the excess mileage cost if it is paid at the end of the agreement – it’s usually about 10p/mile (or £100 per 1,000 miles).

  128. Hi Stuart,

    I have bought numerous new or pre-registered cars but always used cash or personal loans. I have been offered a deal on a new car using PCP, whilst I understand the principles of it I am uncertain for any pit falls to look out for and have also been considering the same car on a personal lease arrangement.

    The deal offered is deposit of £499 and £255 a month over 36 months at 4.9% APR with balloon of £11,208 based on a cash price of £19,499 for 10k p.a with £2,500 finance deposit allowance.

    They have offered to take my current car as part ex so to speak and give me the value of the car in a cheque.

    The deal appears to be to good to be true, am I missing something or could they be just desperate to sell their car as the deal needs to be completed this month….

    Any advice would be appreciated.

    • Hi JR. The deal sounds about right. If you add up the total amount listed there, you get to £23,387 (plus any fees which you have not mentioned). That’s about what you’d expect on a £19,499 car. The £2,500 deposit contribution means they are keen to sell the car this month. If you would like more information about how to keep the deposit contribution without the three years of finance, have a read of our article about deposit contributions.

    • Thanks Stuart, there are no fees associated with the deal, however, I have been told that the balloon payment is now £10,208 – why does the same car’s GMFV vary from dealer to dealer with the same finance company?

    • The GMFV is set by the finance company, not the dealer, and it’s usually worked out by a computer based on the car’s age, specification and mileage. If you are looking at used cars, every car will be slightly different because every car is slight different. If you are looking at new cars, the GMFV should be the same each time if the same parameters are being entered.

  129. Hi Stuart,

    I am approx 18 months into a 48 PCP contract. I am already considering changing my car as my circumstances are set too change and a different model would be more suitable. Is it possible to part exchance my car for a different model, yet still remain on a PCP contract? Or do I have to wait the 48 months before I can consider a change? Also, if the car I wish to exchange for, cost less, will the monthly repayments of my PCP reduce?

    I would appreciate any advice.

    Kind Regards

  130. Hi.
    My father died in February 2016 and has a VW PCP arrangement which he took out in June 2015. What are my options please? I want to be for armed before speaking with VW solutions. Thank you

    • Hi Manda, sorry to hear about the loss of your father. My understanding is that Volkswagen Finance will be a creditor in your father’s estate, meaning that they will either claim the cash value owed to them, or claim the car back and any outstanding balance. I suggest visiting the excellent forum at http://www.legalbeagles.info, which will probably have much better advice for you on this topic and how to manage it best.

  131. Hi Stuart. We bought a used car on pcp and after 2 years we exchanged for a brand new car. The thing is the new car is too small. We have gone back to the dealer and explained this and although we had the final say on the car, the sales rep did not say it will be too small a car for a family of 4. Infact the sales rep said it is plenty big enough. So now they have our car and are letting us drive demo cars while they try and sell it.
    They have had it from 2 months old and it will be a year old in June. We’re not sure what to do as the sales manager has said that the deals are much cheaper on new cars than used. We understand this but unsure where we stand with handing the car back or exchanging it elsewhere.
    We dont know if it is still in negative equity. We just want to get this sorted, they have treated us really well by letting us drive around in cars while we still pay for the one their trying to sell. Thanks Jaime

    • Hi Jaime. It’s unusual for a dealer to be happy for you to drive their demonstrator cars for months on end, so I’m not sure what their position is – it must be costing them thousands.

      You will almost certainly still have significant negative equity at this time. You can contact the finance company and find out the settlement figure, and the dealer will be able to tell you what the current value of your car is. However, usually a car does not reach equity on a PCP until quite near to the end of the agreement.

  132. Hi there
    Weve got a car on pcp over 36 months interest free. Seve been trying to terminate it early but said we cant do this till another 7 months which means we would of had the car 28 months. We looked at paper work today and seen theyve actually included the balloon payment in the finance agreement at the 36 month payment. We was under the understanding of paying 36 months of the monthly payment then having the choice after the 36 months to pay the balloln figure give the car back or take a new car put. Should this balloon figure be included in our finance agreement?
    Many thanks

    • Hi Nicole. You can voluntarily terminate the contract at any time, however you still have to pay off 50% of the total amount payable. So if you haven’t paid off enough to cover that yet, you would have to pay whatever was still owed to get you to 50%.

      Yes, the balloon is included in your finance amount, as you have borrowed that money. You settle the finance by paying it back as a lump sum at the end of the agreement, or by giving the car back (whose value is the same as the amount owed). Therefore, the balloon amount is included in the VT calculation. For more information, read our article about voluntary terminations.

  133. Hello Stuart

    The answer to my question may already be somewhere in this thread, so apologies is that’s the case. If I hand back a car financed on PCP (at the end of the term, before the balloon payment is due), can I just start another PCP deal… and when that’s finished another after that… and so on? Thereby avoiding a balloon payment? Are there any penalties… or will it affect my credit in any way?

    • Hi Darren. Yes, that’s what most people do. Instead of a case settlement for the finance owed on a PCP, you return the car which covers it. This completes the agreement, and you go off and start another one.

  134. Hi Stuart,

    I am not clear on how is the PCP treated purchased by a Company. You’ve referred to a PCP as a Hire Purchase which it is, probably with a difference where you can return the car. Is a PCP a Finance Lease, Operating lease or a Hire Purchase??

    Thanks in advance

    • Hi Aamit. A PCP is a type of hire purchase, not a lease.

      A lease is simply a rental, not really any different from going to Avis and renting a car for a few days, except that it’s usually for a few years.

  135. Hi Stuart,

    Good article – missing a couple of points:

    1. On PCP you should always put in as small a deposit as possible – this is because you are moving purchase of car from in business terms, capex to opex – I.e. you are financing it as an effective rental on a monthly basis – handing over a large deposit is effectively lost money as you will never get anywhere near it back at the end of the PCP term. This can lead to a position where a similar car can’t be afforded on the 2nd PCP as the monthly figures would suddenly rise significantly!

    2. No mention that you can (and should) still haggle on the price of the vehicle bring financed on PCP – e g I recently negotiated over £4000 off the list price on a new fiesta, effectively reducing the monthly payments by £166 per month over the 24 month terms. Also beware of the options bring added to the car as you rarely get anything back for these at the end, e.g. metallic paint on a fiesta is over £20 per month on a 24 month term.

    When keeping a vehicle PCP with manufacturer incentives it is often cheaper than HP especially combined with low interest rates on the interest only loan of the gfv. E.g. ford currently give £950 off on a fiesta and interest rate of 0.9%, effectively they are paying you nearly £800 to have the car on PCP. This makes PCP cheaper than HP especially if over the PCP term the difference in payment between Pcp and HP is saved to give to the finance company at the end of the PCP term.

    The Calculator on my website has been designed to fairly accurately (within a few pounds) get the correct per month (or per mile [if you desire]) figure taking into account incentives, etc. The only thing it does not do is the gfv as this figure is not available to the public.

    • It is not necessarily true that you should put in as small a deposit as possible; this is something that dealers always say because they are making commission on the amount being financed. You pay interest on every pound financed, so if you would rather pay more up-front and less each month, you are ultimately paying less overall. The “lost money” argument is rubbish.

      The article specifically had nothing to do with price negotiation; it is about how a PCP works. It also specifically avoids reference to offers, as obviously any offer on a specific product will affect its competitiveness relative to another product.

      And if your PCP calculator doesn’t take a GMFV into account, it’s not much of a PCP calculator…

  136. Hi Stuart
    I am currently on my 3rd passport finance deal with Peugeot each one been over 3 years. It is due to finish in September and obviously the bubble payment is massive and not worth it and we want to hand the car back and shop around for another deal. However, when we have returned the cars in the past and exchanged for a new one they have hardly inspected the car. I have heard horror stories about been billed for every little ding or scratch the car may have and i feel we are locked into this awful passport deal. Any advice would be really appreciated?

    • Hi Joanna. The T&Cs of your agreement will refer to ‘fair wear and tear’. this is a very broad description, and can be used as a point of negotiation by the finance company to charge you for damages. You can argue any claim from the finance company for damage repairs, as often they are just trying it on in the knowledge a large number of people will just pay up.

  137. Hi Stuart,

    Great site and fantastic information!

    I’m sure my questions have been asked in part before but here goes …

    I’ve recently bought a Land Rover Discovery Sport on a PCP deal.
    While finalising things at the dealer, the finance manager mentioned ‘partial payments’ and I quizzed him on reducing interest over the life of the deal etc. He said I could pay all the ‘monthly payments’ in one lump sum if I liked (or multiple smaller lump sums), circa £10k in total, and essentially have no monthly payments for the life of the PCP deal (36 months), significantly reducing interest, and only having the £17k balloon payment to think about at the end. I then asked if there was interest on the £17k; he said “yes” but I’d only really pay for this if I planned on keeping the car at the end … he suggested either giving the car back and paying nothing, or … if the car was worth more vs. the GMFV, selling it privately, paying off the finance and pocketing the difference.

    Now this all seems somewhat bizarre to me, and clearly there’s a catch – but where is it??

    Here are some numbers:
    *Purchase price = £32,900
    *Deposit = £10,000
    *Amount remaining on finance = £22,900
    *Charge for credit = £4,188
    *Repayment balance = £27,088
    *Total amount payable = £37,088
    …. monthly repayments = £278; and the final balloon payment = circa £17k.

    1. If he’s right and I pay the monthly payments more or less upfront, will this dramatically reduce the £4,188 charge for credit? (if yes, how can I calculate this? – I assume if this is a lump sum payment it wouldn’t be close to the £278 x 36 months = £10k expectation … but much less).
    2. If I decide to hand the car back at the end, will I ever pay any interest on the GMFV £17k?

    The reason this is interesting to me is not only the interest rate savings … it looks like you can buy a car with minimal interest, not having to pay the full amount upfront (or ever!) by leveraging the ‘partial payments’ + balloon payment mechanism – assuming you have some cash to finance the monthly payments early at the beginning of the PCP deal.

    Would be really interested in your thoughts here – a loophole?

    FYI, I’ve checked with Land Rover Finance and they have confirmed that there are no penalties for what I’m suggesting re: the ‘partial payments’ …

    Thanks in advance!


    • Hi Nick. The finance manager is not being entirely truthful. You are paying interest on the total £22,990 borrowed, which includes the GMFV (that is the interest figure of £4,188.). PCP deals are what is known as ‘front-loaded’, which basically means you pay off most of the interest before you start paying back the capital.

      If you make early or partial payments, this will reduce the total interest payable as you have less money borrowed to be paying interest on – much like overpaying your credit card reduces your interest payable compared to just making your minimum monthly payment – but the calculations will still be based on the entire £22,990 (£17K of which will be borrowed for 36 months, even if you repay the rest immediately).

  138. Hello there, I must admit to burying my head in the sand with finance although at the time of changing my car I like to think I push for a good deal. I normally have finance for 36 months then change to a new car every three years. The car is due to be changed in September this year but my finance has another year to go. I foolishly signed up to a 49 month agreement last time to bring the monthly payments down. Should I hang on another year before changing my car? The price the dealership is offering for part exchange is ridiculously low and even though the mileage is 15,000 less than predicted I’m in negative equity of about £300. They are offering a pretty good deal on a new automatic golf (£20,693 with £2693 discounted) but with a 42 month finance deal. I’m stumped. Help!

    • Hi Sue. We are not able to advise whether you should change your car now or hold onto it. What we do is draw your attention to the relevant points you need to consider to make the best decision for your situation.

      If you have negative equity of £300, then you need to pay £300 to get rid of your current car as well as coming up with the deposit for a new car. The flip side to that is that you probably would not have to service or MOT the car, which would likely cost about £300 anyway.

      The deal on the new Golf may sound attractive in terms of the discount on offer, but it depends on whether or not the overall deal works for you. It’s a 42-month term, so shorter than what you have now but still six months longer than you prefer. You need to look at the amount of interest you are paying (represented by the APR figure) and the total monthly payment to determine if it is within a comfortable limit for your income.

      You should also carefully check the exact specification of the new vehicle against your current car. There are always swings and roundabouts in terms of equipment, and while a salesman will always trumpet any new features you don’t currently have, it’s interesting how often they forget to mention that several other features are no longer included or will now cost extra…

    • Thank you for replying so quickly, Stuart. I’m just getting a little bogged down with the figures – not helped by the fact that I always assume the dealer is ‘getting one over on me’ and I never know just how far to push it. New spec is fine, actually more than I have in my manual ’63 golf. APR 5.4%, the payment are £10 more than I was paying – which I don’t want. How much should I be pushing for a better part exchange? I know they need to make a profit but the £9800 they are offering is a lot less than the £12500 cars with similar mileage, year etc are currently selling for. I guess what I’m basically asking is where should I focus my negotiation and which bits make no difference on the financial agreement?

  139. Hi Stuart,

    I’m somewhat confused about my PCP finance and have a question about my PCP as it’s almost at the end.

    I’ve received a letter from Citroen finance informing me of the 3 choices as the agreement ends in December.

    On the return option, it states that I apparently chose to finance an insurance premium with my vehicle. I’m informed this is GAP. A final payment of £180 on the insurance element of my agreement will need to be paid if handing the car back. This figure is hidden within the final payment to purchase also.

    The question is, is this normal to pay roughly half the premium over 36 months and then pay the remaining half in cash at the end?

    I’m also annoyed because I would never purchase GAP through the main dealer, and was told at the time that i’d be getting it free.

    Many thanks for your help


    • Hi Mark. You will need to check your vehicle contract, as it should have GAP insurance included on there and a price (even if it is £0). Unfortunately, there are dealers who will try and sneak GAP insurance into a deal, one way or another, because it boosts their commission. If they give it to you for free, they don’t get paid commission, so often they will discount the vehicle by the same amount as the GAP insurance costs – so you pay £500 for GAP and get £500 off the car.

      You can’t finance GAP insurance as part of your PCP, so it will have probably been set up in a separate arrangement but with all the figures presented to you in a combined total.

      If you take the matter up with the dealer, or with Citroën UK, you may be able to get this charge reimbursed. However, it would probably involve a lot of arguing and threatening to complain to the FCA about misconduct for them to go along with it.

  140. I’ve scraped the back door and bumper on a concrete post on my PCP Audi Q3, will I have to have this repaired before I return to get a new car or will dealership repair and lower value of existing car??

    • Hi Kevin. Generally, you are better getting the repair done yourself. If you don’t, the finance company will charge you whatever they like for the repair, which is almost certain to be a lot more than you would pay yourself.

  141. Hi Stuart,
    My PCP agreement ends next July but I’ve had it serviced over the years by a local garage. How much will this affect any equity? Also, I need a new tyre will they expect this to be a like for like on what it came with at the time of purchase?

    • Hi Stacey. If you plan to return the car to the finance company and claim the GMFV, you will probably be penalised heavily for not having the car serviced by a franchised dealer. If you are not giving the car back, it will slightly reduce the car’s value but hopefully not by too much.

      With your new tyre, it’s a similar story. If you are giving the car back, the finance company will expect an approved tyre. If you’re not, you can buy whatever you want.

    • Thanks Stuart. I’ve had a like for like tyre fitted. The car has been serviced with genuine Peugeot parts so hopefully they will be more lenient. I’ll talk to them at the time regarding the GMFV and if it’s massively effected I may look into privately selling

  142. Hi Stuart.
    I am hoping you can offer some advice as I am looking at my 1st PCP deal and although at first I thought it sounded very good I am now not so sure..
    A dealership has offered me the opportunity to pay £1000 less deposit than an advertised deal, alongside a monthly payment which is £35 less than again the advertised offer for the same yearly mileage etc.
    Having considered this, and not yet questioned the GMFV my concern is that the result of this ‘good’ deal in the short/med term will simply result in me not paying off as much of the car and being left with an unrealistically high GMFV leaving me with no equity in the car at the end of the agreement.
    I hope this makes sense and would greatly appreciate any information.

    • Hi Jamie. The £1,000 less deposit is what is called a deposit contribution, and is basically a discount which is contingent on your signing up for their finance offer.

      The monthly payment reduction could be a few things (or a combination of them all): they may be discounting the price of the car, so you are borrowing less money; they could be reducing their commission on the finance; or they may have extended the term (for example, making it four years rather than three). the first two options are great, the last one not as they are locking you in to a longer contract which will cost you more money overall.

      The GMFV should not be affected by any discounting on the price of the car now, as its future value will not change based on the deal you do today. However, always assume there will be no equity, regardless of what they tell you. Having equity at the end is a bonus these days, but usually there won’t be.

  143. HI Stuart,

    Firstly, you have provided some fantastic advice in the complicated world of PCP which is much appreciated.

    We are due to hand our PCP car back in 6 months time with an ever so slightly loose front bumper. Our local garage has said it would take a lot of work to take the bumper off to inspect and provide a quote for repair costs. I’m yet to decide whether to repair it first.

    We put down a £2000 initial payment on the car, if I hand the car in without repairing and they deem the repair costs are in excess of £2000, would I have to get my wallet out and pay what they want or is £2000 the maximum the finance company can claim from me?

    Many Thank

  144. Hi Stuart,

    I have to decided to buy my next car outright and avoid PCP altogether. I have a £2000 initial deposit in my current PCP car and i understand if I continued with another PCP deal, the £2000 would transfer to the new deal as long the value of the PCP car was high enough. Would I still get this deposit back or transferred to a car that was bought outright?

    Thank you

    • Hi Chris. No, you’re mistaking how a PCP works. Your initial £2,000 is gone and you will not be getting it back.

      If you hand your car back to the finance company, any damage (over and above wear and tear) is chargeable to you – regardless of whether it costs £20 or £2,000.

      If you part-exchange the car on another one, regardless of whether you take another PCP and regardless of whether you go back to the same dealer or even the same brand, the dealer will pay off the finance settlement as part of the deal. If your car is worth more than the settlement, you get the difference (equity) to put towards your new car. If your car is worth less than the settlement amount, you would either give it back to the finance company and pay for any damage costs, or you would pay the difference between the value and the settlement (negative equity).

  145. Hi Stuart,

    Settlement amount is also known as the GMFV, right? I’m probably a bit confused, but from what I have gathered, if the price of the car is less than the GMFV, then when my term ends I can just hand in the keys and walk away without paying any further costs? Or is this not the case for slightly damaged cars?

    Kind Regards

    • You are correct that the settlement figure at the end of the agreement is the GMFV. If the car’s value is less than that number, you can give it back. However, you will be charged for excess mileage, incomplete service history or damage beyond normal wear and tear. The first two points are pretty clear-cut, the third is very subjective so you may need to argue your case with the finance company as to what constitutes ‘damage’ and what is ‘normal wear and tear’.