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Personal Contract Purchase: the PCP explained

What is PCP car finance? We’ve put together the ultimate guide to the Personal Contract Purchase

Welcome to the UK’s best guide to the personal contract purchase (PCP). Since the first edition of this article was published back in 2014, a whole host of copycat articles have sprung up on other car sites. In response, we’ve completely rebuilt this guide from start to finish to make sure it remains the most comprehensive and independent guide to PCP car finance.

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. 

In this guide, we will explain exactly how a PCP works, why it’s so popular, what the advantages and disadvantages are, and what you should be looking our for. We also answer a lot of the FAQs we get about this type of car finance.


Car manufacturers and car dealerships all push PCP finance pretty hard. In fact, a car sales executive is more likely to be interested in your monthly budget than which car you want.

About 80% of all private new car purchases in the UK are paid for using a PCP, so it’s far more popular than a hire purchase, personal contract hire, bank loan or any other type of funding.

PCP car finance is also becoming more and more popular for used car finance, especially ‘approved used car’ offerings from big dealerships. Up to half of all used cars sold by dealerships are now finaced with a PCP, and this figure continues to increase year-on-year.

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.”

Why is PCP car finance so confusing?

The personal contract purchase may be the most popular form of car finance in the UK, but it’s a rather complicated finance product and most car buyers find it confusing. 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.

There are 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 you’re not sure how a PCP works, you’re certainly not alone!

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.

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 your debt is secured against the car, so the finance company effectively remains the owner of the vehicle until the last penny has been paid off. This is an important point that many people don’t understand.

The main difference between a PCP and an HP 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 (it’s also called the Guaranteed Future Value (GFV), but that’s actually a slightly different thing).

We will use some basic examples* below to help illustrate how this works in different situations.
*(examples for comparison purposes only, exclude interest and fees, etc.)

If you borrow £24,000 on a hire purchase over four years, you would have 48 monthly payments of £500. If you borrowed the same amount on a PCP over the same period, you would have 47 monthly payments would be about £340, so you’re saving £160 every month. The catch is your final payment is about £8,000. This is shown in the first example below:

Hire Purchase
Borrow: £24,000
Monthly payments: 48 x £500

Personal Contract Purchase
Borrow: £24,000
Monthly payments: 47 x £340
Final payment: £8,000

In both cases, the car only really becomes yours once you have made your last payment and cleared all the debt. For a PCP, this includes the final £8,000 balloon payment.

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. 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.

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 repaying a much smaller amount each month and deferring a large amount (the balloon) to the end of the agreement.

For a car buyer, this means:

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

In reality, however, what has generally happened over the last decade here in the UK is that rather than enjoying lower monthly payments by switching from an HP to a PCP, buyers have still been spending the same monthly amount but using a PCP to be able to afford a much more expensive car, as shown below:

Hire Purchase
Borrow: £24,000
Monthly payments: 48 x £500

Personal Contract Purchase
Borrow: £36,000
Monthly payments: 47 x £500
Final payment: £12,500

As you can see in this example, the monthly payment is the same for both PCP and HP, which means you can borrow substantially more money on a PCP because there is a large balloon amount at the end.

The upshot of this is that, thanks to PCP car finance, more buyers are choosing more expensive cars without increasing their monthly payments. As a result, Mercedes-Benz is now the third biggest-selling brand in the UK, outsold only by Ford and Volkswagen. BMW and Audi are close behind, selling more cars than brands like Vauxhall, Toyota, Nissan, Renault and others.

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?

Here at The Car Expert, we are building commercial partnerships with companies who can offer you competitive PCP deals on either a new or used car (as well as other types of finance if you prefer). Check these out before signing any finance agreement with a car dealer:

  • We Finance Any Car can arrange PCP or HP finance at competitive rates
  • FairSquare can find and finance either a new or used car, and deliver it to your door

Our car finance partners

Looking for an alternative to dealer finance? Our commercial partners can offer you a great deal.

The best websites for every aspect of buying and owning a car

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.


  1. Great article, very informative.
    I’m currently considering a PCP on a new Tesla. The balloon figure sits between 16-20K depending on model.
    Am I wrong in thinking that is pretty low considering how in demand Teslas are and probably will still be in 3 years time as EVs become more much sought after?

  2. Hi,

    We got a car on Hire Purchase in September 2018.
    In December 2019, it broke down – took it to the dealer’s garage – they ‘fixed’ it, and we paid for the repair.

    Since then, Dec ’19 to July ’20 – it has broken down with the same issue again 5 times – we keep having to take it back to the garage, being assured it is fixed this time, and then it breaking down. We obviously now have no faith in the car working or the garage repairing / don’t want to drive it anywhere in fear of it breaking down.

    We’ve spoken to finance & the dealership about rejecting the car and ending the contract 2 years in, as obviously the car isn’t fit for purpose and we’ve given them more than enough opportunities to repair the vehicle.

    I just want a second opinion on what the outcomes of this situation COULD be as I feel like I’m at a dead end – I don’t want to accept the car back ANOTHER time – but I just feel like the dealership don’t want to offer any other options.
    But surely they don’t want another 2 years of me bringing the same car back to them every month that they can’t fix, it’s a waste of their time!

    I would like the dealership to buy the car back from the finance company and just end the contract – or I am prepared to accept a like for like car to see out the end of the contract, but I’m looking for confirmation on what my actual rights are in this situation?

    **just an addition – this issue has been on going for some time now, the dealership have currently had the car for 6 weeks whilst they tried to ‘fix it’ and we have been trying to find a resolve for the issue – they’ve not given me a courtesy car in this time, so I’ve just paid for a month & a half of contract without having a vehicle, can I claim this back?!

    Any help really appreciated!!

  3. Please can you offer me some advice i am just finishing my first year of a 4 year pcp contract with Mitsubishi. I am reading all these things about them leaving the UK and Europe I am under the impression they will still contribute to service my car etc but what will happen when I come to return it ? What it depreciate more than expected could I end up owing more ?


    • Hi Chantelle. The expectation is certainly that Mitsubishi dealers will still be around to service or your car for the next three years. If the brand does withdrw from the UK, it will probably mean that they stop selling new cars at some point this year or next year. Servicing, warranty and repairs will continue for as long as there are Mitsubishi customers wanting service, although the number of service centres may reduce over the next three years.
      If you have a PCP, you will have a guaranteed future value (GFV) at the end of the agreement, which means that (as long as you meet the conditions of your contract) you can hand the car back to the finance company at the end of the agreement regrdless of how much it has depreciated.
      Yes, your car may well depreciate more than expected with Mitsubishi leaving the UK. That means it may potentially cost you more to change your car before the end of the agreement, since you don’t have the protection of the GFV until your contract finishes. However, if you’re not planning to replace your car before the end of your PCP anyway, that’s the finance company’s problem.

  4. so in your explanation can we take it there is NO interest payed and the actual cost of the car is £24000 and not that you have to borrow £24000 for a car that is on sale for £20000 or less

    • Hi Colin. The example used is simply to illustrate how payments work on a PCP compared to a hire purchase.

      It excludes interest and fees, as well as any upfront payment (deposit), part-exchange value, negative equity or any other considerations. The numbers are simply a guide to show the variation in payments between the two products.

      If you compared a standard PCP quote and a standard HP quote for a £20,000 car (ie – no discounts or deposit contributions, similar interest rate on both products), they would look something like this comparison, but the exact amounts will depend on many factors.

  5. Hi there, we collected a new car on pcp in march, had problems with it regarding it not being the same experience as the test drive from the 2nd week onwards has been taken back twice to dealership and they said theres nothing wrong with it but also not getting the correct mpg which was the deciding factor in getting a diesel over a petrol i now have lost faith in the car and want to stay with the same brand but move to a petrol what options do i have? also i have contacted the finance company and they have opened a investigation i have no idea what this entails any thoughts? many thanks

  6. Hello, I had a car its PCP but at the end of the contract the finance company want me to pay the total balance of £11,000 but the current market value of the car is £7,000 I dont have money to pay off the negative equity as such I cant swap it for another. No finance compay accept to finance the £11,000 without me buying another car but i want to keep this car. Now the finance company said they will reclim the vehicle so what do i do.

    • Hi Tonio. If you want to keep the car then you have to pay the balloon figure – regardless of what the market value of the car is.

      If the settlement is £11,000 but the market value is only £7,000, you may want to consider handing the car back and buying a similar car for £7,000.

  7. I currently have pcp and wanting to hand my car back on VT. I put my car in for a services and was advised I have 75-80% left of my brake pads. Would I have to get there replaced before handing the car back or is this classed as wear and tear.

  8. Is it possible to opt out of a pcp contract due to a poor product ?

    We have four cars in total, three are fine with no issues whatsoever. The problem car is a Range Rover velar which has a lot of electrical issues affecting the day to day use of the vehicle. I don’t feel that it’s value for money so would this be a good enough argument to start the process of terminating the contract

    • Hi Nigel. If you are rejecting the car under the Consumer Rights Act, you have to do it through your finance company (it’s their car). For more information, have a read of our guide to rejecting a faulty car. However, the Act only applies if a fault genuinely prevents the car from doing its job, not just being a bit rubbish.

  9. i have purchased car Jan 2018, and basically the car is too big for me. i like the brand and would like another model from the same dealership. on PcP agreement, is this possible and how do i go about this?? any advice be great :)

  10. Hi Stuart
    My husband and I have our cars on pcp, but since buying a company van my husband hardly uses his car. We went into the dealer we bought our cars from and asked if we could trade in them both and just get one vehicle. After taking details the rep said that we don’t want to do that it would not work. When I asked why, and would the pay be that much higher he just said it is not a good idea.
    What I suppose I’m trying to find out is it possible to do this and would the monthly pay be that much of an increase?
    Cars are Mazda CX-5 and Mazda 3 and want to just get one Mazda 3

    • Hi Cheryl. It’s definitely possible, but if a car salesman isn’t that keen to try and sell you a car in the middle of a prolonged new car sales crisis, it suggests that he knows that your negative equity on the two cars is probably quite large.

      If you’re having to spend thousands just to get rid of your current cars before even thinking about the deposit on a new car, you’re less likely to be inclined to do so.

      You can call the finance company and find out how much you owe on each vehicle. Then check out any of the car buying sites (We Buy Any Car, We Want Any Car, etc.) to get an idea of what your approximate position is. You may get a nasty shock…

  11. Hello Stuart, I have reached the end of my PCP term with only the balloon payment left. However the finance company have not contacted me with my options and they have stopped requesting monthly payments. Am I under any obligation to contact them about this and can I still drive the car if needed?

    • Hi Kevin. That’s odd, as payments are normally taken via direct debit with no advance notice. Ultimately the fact they haven’t yet taken the balloon payment doesn’t change the contract, so you will still need to take action if you want to avoid paying the balloon.

  12. Hi Stuart, what are your thoughts on Diminution in Value when a vehicle is purchased on PCP? My car was hit and I have been told that the third party insurance company will more than likely refute a claim for depreciation given that nature of PCP agreements.

    • Hi Michael. You’d need to speak to a lawyer about that. However, I suspect that you don’t get very far.

      Any real diminution of value will depend on the severity of the damage and the quality of the repair. If the car is repaired satisfactorily, there is no case for claiming its value has been reduced by the accident. If teh repair is of poor quality, you’d need to be taking that up with the insurer and/or repairer.

  13. Say you order a new car on PCP and plan to withdraw in 14 days to pay in full. The new car is 12-14 weeks from delivery. When does the PCP actually start? When you order? So you’d need to cancel within 14 days of that or is it when it’s delivered?

    • Hi Rich. If your car is not going to be arriving for another 12 weeks, I assume you won’t have signed a finance contract yet. Usually this is not signed until a few days before delivery.

      Your contract starts once both parties have signed the contract. If there is a long period between signing and delivery, you can argue that the cooling-off period doesn’t begin until you actually take delivery of the car, since obviously you won’t start making payments until after you take delivery.

  14. When you buy a car on a PCP plan as a chauffeur you can claim back the VAT when you get the car , what happens regarding VAT when you come to the end of the term (3yrs) and send the car back please?

  15. Hi
    I have took my car out through PCP. I have a full service history. My car needs brake pads and discs – do i have to put genuine Vauxhall ones on or can i get cheaper ones?

    • Hi Emma. You don’t have to replace them with genuine Vauxhall parts, but if you use aftermarket parts then they must be the correct specification for the vehicle.

  16. Hi Stuart, thank you very much for your comments, it was all down to haggling skills, I played three dealers against each other, to achieve what I thing is a great deal for a car with a list price of nearly £53k.
    Thanks again.

  17. Hi Stuart, love reading your comments you really explain things as they should be, keep up the good work.
    I have ordered a new car for delivery for the end of September, I just need to know whether this is a good deal on PCP.

    List price £52240.00
    Price with haggle discount £44608.00
    Dealer contribution £4100.00
    Final cost price £40508.08
    My deposit £13500.00
    Amount owed £27008.08
    Intrest rate 2.9%
    48000 miles (12000 per year)
    Payments 47 x £280.85 (total £13199.95)
    Final payment £16318.73
    Total cost at the end of 4 years £43018.68
    Keeping the car at the end hopefully.

    Managed to also get thrown in :-
    3 year service plan £399.00
    4 years Gap
    Autoglym protect in and out
    1 full tank of petrol.

    What is your opinion on the above deal ?

    Thanks in advanced.

    • Hi Sukh. We don’t offer opinions on specific deals, as we never have all the information and don’t know the full story. Ultimately you’re getting a £53K car for £40K plus a few hundred quids’ worth of extras thrown in as well, so there’s presumably a reason for that apart from superlative haggling skills.

      If the numbers work for you and you’re comfortable with both the car and the finance plan, then great. If your plan is to pay off the final balloon and keep the car, then plan for it right from the very beginning so that you are in a position to make that payment when the time comes. Plenty of people say that they plan to pay off the balloon, and then when the time comes they don’t have the money available to do so.

      Also, if your plan is to keep the car at the end, you should get a quote on a hire purchase (HP) as well as a PCP. Your monthly payments will be higher, but there’s no balloon to worry about at the end.

  18. I have done far less mileage than I signed up for. Will this result in increased equity, because the final value of the car will be more than it would have been with a higher mileage? Or should I contact the finance company to adjust the expected mileage and reduce my monthly payments? I anticipated 108,000 miles after 4 years. 3 years in, I have only done 22,000 miles!

    • Hi David, You generally can’t adjust your mileage allowance downwards, only upwards to cover increased mileage and avoid excess mileage charges at the end of the agreement.

      Having a lower mileage than you are allowed should mean that your car will be worth more if you part-exchange it on another vehicle. It may also mean that you have slightly more equity in the vehicle over and above the guaranteed future value in a PCP agreement (assuming you have any equity at all).

  19. Hi Stuart. Fantastic article alongside your commitment to responding to years of comments!
    One thing I’m confused about…
    I’m currently 3 years into a 4 year PCP with Land Rover (and in negative equity). My ideal scenario would be to wait until the end of the 4-year contract and drive away in a brand new LR on a new PCP. I’m really confused about the timing of switching to a new car with the same dealer on PCP though.
    Do I have to wait until the end of my current contract, then order a new car on PCP using any equity in my existing car as P/X, but then also wait 6 months for the new car to be built (leaving me with no car in the meantime)?
    Or do I have to try and guess the timing so that I order the new LR and hope the delivery date coincides with the end of my existing PCP?
    I would have thought a dealer would make it easy for you to stick with them and buy a new PCP car?
    Hopefully, I’m making sense!

    Many thanks

    • Hi Andrew. You can work with the dealer to get your new car ordered so that it arrives at the time your current PCP ends. They should be able to value your car based on a part-exchange date a few months ahead, particularly if you’re at the end of your contract and they know what the GMFV is going to be.

      If you’re sticking with the same brand (and same finance company), there’s usually a bit of leeway to timings, so if the car arrives a bit early then they’ll usually be happy to end your current contract to suit. If there’s a delay in your new car arriving, most prestige dealers will arrange a short-term courtesy car – but there’s no obligation to, so you’d need to insist on it as part of the contract negotiation.

  20. Hi Stuart,
    On the 9th of February, 2017, We need a seven seater car so I part exchanged my Toyota Auris Touring Sport with Arnold Clark for a used Chevrolet Orlando Seven seater.
    The P/X value is £9028.20
    Settlement: £10792.90
    Net P/X value is -£1764.70

    I recently called the FCA Automotive Services (Fiat Finance Services) to find out how much I was owing on the car if I can take the car in for part exchange with another dealer as the car was giving me some mechanical problem like losing power and the service engine light always comes on telling me to check the engine. I was told by the finance company that is was a personal loan finance that was given to me that the loan is on me and not on the car. That I can sell the car off if I want. I was shocked that it was a personal loan as Arnold Clark did not explain it to me when I was signing the contract. I have been to Arnold Clark, I spoke with the sales executive that sold the car and fiance to me and he said there is nothing he can do. The Branch Manager stepped in and decided to resolve the issues by telling me to call Fiat Finance and explain to them what happened, which I did.

    Fiat Finance said the personal loan contract can not be cancelled since it has gone live.

    Fiat Finance Services said Arnold Clarke should buy back the car and pay them their loan on the car. Then I can enter a new contract on either Hire Purchase or PCP with Arnold Clark on the same car.

    I spoke with Arnold Clarke Branch Manager he said I need to bring in the Net P/X value of -£1764.70 plus interest. So they can end the personal loan contract and enter a fresh HP or PCP contract with me.

    My Questions:

    1: Do I need to put in the Net P/X value of -£1764.70 plus interest since I was not the one that did a wrong sales process with Arnold Clark.

    2: Since the initial business agreement with Arnold Clark did not go out well, I am afraid of entering a new contract with them as trust has been broken. Hence, I will like to return the car to them and work away. If I do that do I need to bring in the Net P/X value of -£1764.70 plus interest. Also since the sales process was wrong I am of the opinion that Arnold Clark should bear the interest on the Net P/X value of -£1764.70.

    Please I need your advice on this.

    • Hi Joseph. You are now more than five months into your loan, so it can’t be cancelled and can only be settled.

      I’m not sure if your “net PX value” is something you rolled over into your new loan or your current negative equity, but it is unlikely to make a difference whether you are on a personal loan or a PCP. If you have only had your car for five months, your settlement figure will almost always be more than your car’s value.

      The advantage of having a personal loan is that you are legally allowed to sell the vehicle to help settle the finance. So you can try to sell it privately rather than part-exchanging it through a dealership to try and get more money.

      Arnold Clark has a poor reputation when it comes to sales (and aftersales) service, but unless you have written evidence that you were expecting a PCP or HP rather than a personal loan, you don’t really have an argument and can’t show that “the sales process was wrong”. You also had the opportunity to read the contract before signing it, and clearly didn’t.

  21. Hi Stuart,

    I recently ordered a Tesla Model S 90D partly because the PCP quote I received only involved a £2,000 deposit. The car is not due for delivery till August/September but the PCP quote only remains valid till July 3rd. I see on their latest PCP illustrations Tesla have raised their minimum deposit from £2,000 to 10% of the the car’s value (about £10,000). The APR is still 1.5% and I’ve no reason to think my balloon payment will have changed – though it’s difficult to be certain as the 90D was recently withdrawn, so Illustrations specifically for it are no longer available. Can I sign up to the PCP quote before July 3 and pay the £2,000 deposit or do I have to wait till August/September and pay the £10,000 deposit?

    • Hi Colin. If the finance quote is valid until 3 July, then presumably they will honour it up until that time.

      The deposit amount will not affect the balloon value – on a PCP, that is determined by the car’s predicted value at the end of the term. The deposit level is (to a degree) up to you, and will affect your monthly payment amounts up or down.

  22. Hi Stuart,
    I bought a Nissan Qashqai plus two before 16 months from Evans Halshaw on PCP. Now the DPF is blocked and warranty from Evans doesn’t cover DPF. They are asking for £1500 to replace it. I bought 2-year extended warranty and 4 years service from Evans at the time of purchase.
    I am not in a position to pay that much money for repair. I have maintained and serviced the car through Evans all the time. Do you think sales of goods act apply in this case as my car is less than 6 years old?

    • Hi Prasad. No, a DPF (diesel particulate filter) is a wear-and-tear item so it will not be covered by your warranty unless it is faulty. If it is blocked, you have most likely been ignoring the DPF warning light for possibly weeks before the filter blocked completely.
      For more information, have a read of our article about diesel cars and city driving.

  23. Hi, my pcp agreement is due to end in march … unfortunately since we took out the agreement my husband was injured causing him to have significant time off work which in turn has adversely affected our credit ratings. We are working on improving this but it is a very slow process. Ideally we would like to use the option to trade the car for a new one when the time comes however I am worried that when the time comes, we may be refused for finance. What are our options if this happens? Any info would help. Thanks

    • When your current agreement is concluded, you have to go through the application process all over again if you want to start another finance agreement. So, as you say, there is always the possibility that you will be refused outright or offered a lesser value loan amount.
      If you can’t take out another PCP, you could explore the option of a personal loan to pay off the balloon and keep your current car. Or you give the car back to claim the GMFV and buy a cheap car with cash.

  24. Hi Stuart,

    I recently voluntary terminated my agreement and have now had my letter back detailing charges. My mileage was 10,000 per year and I have handed it back with 27,700 with four months remaining. I have had a letter saying I have exceeded my pro-rata milege and have been asked to pay the difference.

    I have had a good look through my contract and I can’t see anywhere that it states my mileage will be pro-rata, it just says 10,000 per annum. They have also worked it out over 37 months so not sure how that extra month fits in with the wording of the contract, surely the 37th month takes me into a new mileage year if I was to keep the car for the full time.

    I’m sure you have answered this before but I just phoned to enquire why I was being charged and the conversation got quite heated, their end not mine, and its left me unsure as to where I stand with them. How should this be approached as I am not keen to ring them again and be shouted at. Is there a process to follow where I can point out I haven’t exceeded 30,000 miles a year so not sure where the figure has come from?


    • Hi Elizabeth. Excess mileage is a disputed aspect of voluntary terminations, so there are often arguments over it. Finance companies will usually try to invoice for excess mileage on a pro-rata basis, but you should be able to dispute it successfully.
      For more information, have a read of our guide to voluntary termination.

  25. Hi Stuart,

    Thanks for you reply.

    I have read the article you suggested, in it you say that the dealer is perfectly within their rights that I honor the contract, but then go on to say that they may negotiate in order that I don’t walk away.

    If the former is true then I can’t cancel the contract and walk away anyway!

    We do want the car and I understand that they to a certain extent they hold morale high ground, so to speak, but your opinion and for future good customer relations would you think that they may renegotiate the original offer price.


    • If you walk away, there’s not a huge amount they can do except keep your deposit. They could try to take you to court to enforce the contract, but it would probably cost more than it’s worth. If they don’t want to renegotiate, you would need to decide if the cheaper car elsewhere is worth losing your deposit for.

  26. Hi Stuart,

    My Wife has recently signed a PCP agreement for a new car and paid a £1000 deposit. We have been told the car will be a 2018 model year and therefore wont be built until August at the earliest for a possible September delivery date, but we have now found the car cheaper at another dealer.

    I would like to know what options we have to try and negotiate a new deal for this car, or if we are not satisfied with their answer can we cancel the deal without any costs to us and purchase the car from the other dealers.

    Thank you.

  27. Is there an optimal time to trade the car back in for another,my dealer suggested coming in at month 34 of a 48 month PCP deal as this would put me in a good position regarding equity in the value of the car. Customer retention is a major point for most dealerships???

  28. Hi Stuart, I just did a very interesting calculation using the Mercedes-Benz finance calculator for a new SLC.

    I discovered that to keep my monthly payments as low as possible and also the the final GFV as low as possible in 24 months time when I intend keeping the car, but not wanting to buy the car outright on day one by coughing up 33k, all I had to do was say I was going to cover 40,0000 miles a year. This reduced the GFV to a manageable 13k in 2 years time, and this also increased my allowed deposit to 15k plus the contributions. The result was just £50/month for 2 years. Interestingly this reduces the MB interest you pay and the overall final price of the car. Amazingly this worked out cheaper that putting down £15k and borrowing the rest from say Santander over 2 years at a lower APR (3.1% for them and 5.7% MB) . Ok only by £200 quid but it was a surprise that having the safety net of £50 a month for 2 years was, over 2 years cheaper than paying £643 month to buy the car from day 1 by borrowing the full amount. As I actually do only £8000 miles a year the car should actually be worth around £18k in 2 years and not what I owe which is the GFV of £13k. So if things go awry and I cant keep it, I should even get some money back. I must be missing something here!

    • Hi Jeff. Take any numbers from an online finance calculator with a large pinch of salt, and get a Mercedes-Benz dealer to confirm them in a proper written quotation. There may be limits in terms of deposit or mileage that the online calculator has not taken into account. It’s unusual to be allowed to put down such a large deposit on a PCP, so there may be an error there.

  29. I bought an audi a3 cabriolet on pcp but as I had intentions of paying the low balloon payment off of 3k4 after the term . I paid a deposit of 10k to keep the balloon low at end . What would happen if say my car was worth 10k at the end of the agreement would I have the 3k4 taken off and I would receive the 6k6 back . ?

    • Hi David. On a PCP, you can’t normally manipulate the balloon payment as it is determined by the car’s predicted resale value at the end of the term.

      However, if you have a balloon of £3,400 and you sell the car for £10,000, you pay off the balloon figure to the finance company and keep the additional £6,600. On the other hand, if you return the car to the finance company then you wouldn’t get anything back.

  30. Stuart,
    Just brought a used approved from a dealer; my question is are they required to provide you with a multi point check to show the vehicle has been examined etc.

    Paul Bradley

  31. Hi Stuart.
    Thank you for the article and the many responses to comments above.
    I recently visited an Audi showroom and was speaking to a friendly salesman about a brand new car. I said I was looking for a PCP, but did not want to go over a certain amount per month as it would have been almost one third of my monthly salary. I asked if it would be possible to make additional payments every so often (when bills are light and I can make the odd saving) to help lower the overall monthly payments. He said it’d be no problem.

    That didn’t sound right to me and I didn’t want to agree to anything until I could find out if that’s actually possible.

    If I were to agree to a PCP expecting to be able to make extra payments to lower the agreed monthly payment, would it have to be specifically added to the contract? or is there usually a facility for that kind of additional payment in the contracts?

    • Hi Lee. Different finance companies have different policies, and I would suggest you contact Audi Finance directly to ask them if they will allow additional payments or overpayments.

      If the finance company does allow overpayments on a PCP agreement, it usually reduces your subsequent monthly payment amount. It will not affect or reduce the balloon/GMFV amount, as that is a predicted value based on a certain point in time and a certain mileage. Sometimes there may be a charge for overpayments, but other finance companies won’t charge you anything.

  32. Hi Stuart.
    Your article has been very helpful & iv taken some notes so thank you for that!
    My husband & I have had various Audi’s over the last 7 years on PCP, at the moment I am now working part time & we have a baby (who costs a lot more than expected!), we are struggling financially to meet our bills every month & have decided the car is a luxury we simply cannot afford any more. What are the chance’s of Audi allowing us out of our agreement with no penalty? We are currently 1 year into a 3 year term with no savings of our own. Have you any advice on what we can say to help our situation & hope they’ll be sympathetic towards us?

    • Hi Alana. I would say your chances are zero, regardless of what you say. I may be wrong, but it would probably be the first time in the history of car finance that a finance company has agreed to take a hefty loss on an agreement because they feel sympathetic towards a customer.

  33. Hi Stuart.
    I am considering a new car on PCP. Will I be able to transfer a personalised number plate to the vehicle from the outset ? If manufacturer is relevant to the answer, I am considering a Jaguar.

    • Hi Mark. If the personalised plate is on an existing car, it needs to be removed from that first. This process can take up to six weeks (because the DVLA is glacial in its operations).

      If you have the plate but it is not attached to a car, you can arrange it to go on your new car from the outset. Talk to the dealership, as they should be familiar with the processes.

  34. Hi – I am currently 31 months into a 48 months PCP deal with Black Horse, Once I reach month 36 I have paid back 50% of my agreement and I intend to VT. My annual mileage for the full term of the agreement was 6000 per year and no more than 41,200 on the clock at the end of the 4 year agreement . As I intend to end the agreement around 13/14 months early on month 36 will the mileage be pro rata? As the mileage will be under the max amount of 41,200 overall, I have read the terms and conditions and cant find any wording re pro rata only that I must not exceed the stated max mileage of 41,200. I will be handing back around 40,000 miles on clock so technically under the max amount however pro rata would be over by maybe 4000 miles or so.
    Any help would be appreciated there seems to be a lot of conflicting info on line re this not being enforceable although it would be asked of you, and also depending on which finance companies as well so history online is black horse do pursue but Barclays wouldn’t. Thanks in advance

  35. Hello, Great article.. very useful.. finding this quite confusing..

    My father has recently deceased.. and has a Car contract for a toyota that he began in 2014.
    Do we have the right legally to terminate the contract without paying? and are they liable for whatever happens should the contract customer pass away?
    we don’t want the car, haven’t signed anything or given any of our payment details.. so technically the contract still lies with the deceased…
    got any advise stuart?


    • Hi Jas. The finance company will become a creditor in your father’s estate and can make a claim for whatever is owed like any other creditor. Depending on the type of finance, whoever is executor of the estate may be able to voluntarily terminate the agreement if 50% has been repaid (or you can pay the outstanding to bring it up to the 50% point).

  36. Hi Stuart, I am going travelling and my friend has asked if he can use my car whilst I am away. My car is owned on a PCP finance deal. What are the implications of this? Obviously he needs to be insured on the car but are there any other issues that i don’t know about?


    • Hi Duncan. It probably depends on how long you will be away – short holiday, probably fine. Two years, probably not.

      The main issue for finance companies is that you need to remain the main driver of the vehicle, and are not financing the car for someone else who is unable to get their own finance. For more information, have a read of our article about accommodation deals.

  37. Hi

    We have a PCP agreement for 3 yrs with an annual mileage of 10k per year. We are just approaching the 2 years anniversary of the agreement and have just hit 30k mileage – a year early. We are not wanting to keep the car at the end of the 3 years or hand it back but would be looking to part exchange. Will we incur any costs at the end of the agreement next year when we trade in or will we simply have no equity to put to another car? Is it worth trying to trade the car in now as I’m presuming its worth today what the RFV will be this time next year? Any advice would be gratefully received.


    • Hi Helen. If you hand the car back to the finance company at the end of three years, you will definitely incur costs for excess mileage. If you part-exchange the car with a dealer (doesn’t matter if it’s the same brand or any other), it will depend entirely on what the dealer is prepared to pay you and what your settlement figure is. The dealer buys the car from you for £X, and then they settle the finance outstanding. Whatever’s left is yours to keep or use towards your next car. If their offer does not cover the settlement, you would have to pay the difference.

      It’s value today may or may not be more than the GMFV in a year’s time, but there’s no guarantee. All you can do is get a valuation on the car and find our from the finance company what your current settlement figure is. If you settle the finance in full (by part-exchanging the car, or selling it privately, and paying off the finance company), the mileage is irrelevant.

  38. Hi Stuart,

    Loved reading your blog and all of these comments!
    I was wondering if you could help me please.

    I am currently coming to the end of my PCP contract with KIA where the final balloon payment is £3,506. I no longer want this car and have already gone to another car dealership and ordered a new car with them on personal hire. With quite a large initial payment (deposit) than i wanted (£1200) but the monthly payments are ok and i have fallen in love with the new car..

    The new dealership have said that they can take my KIA at the end of the agreement. Is this a good idea or shall i just hand the car back to KIA? It is in good condition and I am well below the mileage limit. If the new dealership take it, will i be able to lower the initial payment slightly?

    Any advise would be helpful.

    Many thanks,

    • Hi Sophia. It’s up to you how you dispose of the vehicle, as long as the finance is settled. If the new dealer wants to pay your more than £3,506 for the car, you are better off giving it to them. Kia won’t give you anything if you hand it back to them, and may charge you for any damage.
      If the dealer gives you more than £3,506, any additional amount can be used to put towards the initial payment on your next car. Alternatively, you should be able to reduce the initial payment if you are prepared to pay more per month instead.

    • Hi Stuart,

      Thank you for your reply.
      The new car dealer asked for the settlement figure of £3,506 and that’s what they are offering me for the car. So no extra or nothing in it for me. Deposit and monthly payments stay the same.
      Is it even worth giving it to the new dealer?
      The car only has a small chip in the door paintwork where someone has opened their car door onto mine but I think this will be within the fair wear and tear limits of KIA?
      What is my best option?

      Many thanks,

    • Will probably make no great difference either way then. Personally I’d part-ex it to the dealer, and that way if there are any nasty surprises that you’re unaware of, it’s not your problem.

  39. Hi

    I have PCP agreement for a car that I can only just afford afford. When I got the car my agreed mileage was 25k a year but I’ve since moved jobs and am now doing less than 10k a year. Iv seen questions about people doing more than they’ve agreed and having to pay more but is there any way I can contact the finance company or dealer and reduce my monthly payments based on the fact I’m doing less than half the amount of mileage now?

    Many thanks

    • Hi Mary. I’m afraid not – usually you can only increase your annual mileage, not decrease it. The reason for allowing an increase is that the GMFV will decrease with a higher mileage, so the finance company is reducing its risk. In your case, the mileage is decreasing and therefore the car’s final value should be higher – so there is less risk for the finance company.

  40. Hi Stuart

    Would like your opinion in regards to a new PCP with Mazda which I am currently looking at. About 10 months short of a 42 month PCP on my old Mazda and do have some equity in the car (having made a lump sum payment a while back leaving only the GFV or ‘final balloon payment’ outstanding). The new PCP is over 37 months (36 monthly payments followed by the final settlement payment) and is at 0% interest. Having read the previous posts and your comments on the little chance of getting much in the way of equity at the end of a PCP deal, I was just wondering what your thoughts are on the 0% PCP’s?

    Obviously with no interest to pay, I assume that there is a better chance of some equity at least (accepting that there is still a fair amount of deprecation) given that the total amount ‘financed’ over the period is the same as the OTR price less dealer contribution, less my initial payment (the so called ‘deposit’)? Basically, are 0% deals as good as they first appear?

    Secondly, I have looked at Mazda’s website and their finance example. The figures they quote for the same model are pretty much as given by the dealer today when I enquired, but interestingly they are based on an annual mileage of 9000, whereas my figures are quoted on 6000 miles per annum. I would have thought that, if the same finance company is used (Santander Consumer Finance) that the mileage figures should be fairly similar for the same car?

    Any advice you can offer on this is appreciated.


    • Hi Dave. 0% finance is always better than paying interest, as long as all the other T&Cs are acceptable to you as well.
      With regards to equity, it is a matter of what the finance company sets as the GMFV/balloon and what the car is actually worth once you get to that point. The interest doesn’t really come into it. Based on what you have said, you currently have equity in your current vehicle, which means it has held its value better than estimated at the beginning of the agreement. That may or may not apply to the next agreement, and will depend on what the finance company predicts the depreciation will be on the next car.
      The mileage used for example agreements on websites used to be 10,000 miles per year. However, in recent years many companies have started using lower mileages, as it increases the residual value after three years and therefore makes the payments lower. It’s a bit of a sneaky trick, as the mileage is usually in the small print and many people don’t realise it. When getting a formal quote for your car, make sure the term and mileage match what you’re looking for, as opposed to what the salesman or business manager want you to have.

  41. I was told that as long as you paid half the rentals of a PCP contract you could give the car back with no additional charges and it wouldn’t effect your credit rating. How does this effect your mileage charges?

    • Hi Paul. What you are referring to is called Voluntary Termination. It is not “half the rentals” of a PCP, but rather half of the Total Amount Payable, which is usually only reached in the last third of the term.
      The issue of excess mileage is disputed. If you are massively over, the finance company is likely to fight you hard. If you are only slightly over, they are more likely to avoid an argument.

    • Hi Amanda. The deposit amount will be flexible based on what suits your needs. There will be a maximum amount, which will be about 25-30% of the total amount. There may be a minimum amount, but sometimes not.

      Ultimately, you have to be comfortable with the amount of money you are paying now and the amount you are paying per month. Assume you will have nothing left at the end of the agreement, regardless of what the nice salesperson tells you.

  42. Hi,
    I have a PCP plan taken out in Nov 2014, I have two years left, however I am now unemployed and can’t afford the payments, I don’t want to miss any and have a bad credit record, but it does ay on my agreement that Repossession Your Rights, that If I do not keep my side of the agreement but have paid at least one third which is £7,038.44 (which I have) they may not take back the goods against my wishes, and if they do, they would be required togged a court order!! So, does this mean I can keep the car without making any further payments if i was to contact them to explain my circumstances. Thank you Frances

    • Hi Frances. The repossession rules mean they can’t just turn up to your house and take the car, but they will certainly go to court to get an order to do so. And they will certainly drag your credit score down.

      If you have paid back half of the total amount payable, you may be able to voluntarily terminate your PCP and hand the car back with no penalty and no hit to your credit score. Or if you’re nearly there, you can pay enough to get over the 50% mark and give it back.

      Get in touch with the finance company ASAP and explain your position. Although there is no obligation for them to amend the terms to assist you, they may be able to offer some solution which works for you.

  43. Hi Stuart,
    I have read many of the posts above and it looks like i have landed myself in a rather tricky situation in regards to my PCP for a 62 plate VW CC, i hope you can advise me on my best options.
    In February 2017 my 4-year Lease comes to an end with Black horse, my final agreed resettlement figure is around 8K. Or I could return it if my mileage was under the agreed allowance of 46,000, and general wear and tear of the car etc.
    My issue is, I no longer have the 8k to pay the car off and the car now has 69,000 Miles on the clock and has a few dents in the sill due to a carpark kirb, plus kirbed alloys, scratches etc. probably around £1,200 plus worth of repair work required.
    The excess mileage charge is 0.25p combined with what they will charge for the damage I am probably looking at £9,000 worth of charges form black horse.
    I no longer have a good Credit score, so unlikely to get a loan for the 8k, due to a rather costly divorce etc.
    I now need to look at getting a replacement car, any thoughts and advice appreciated.

    • Hi James. You refer to your finance agreement as both a PCP and a lease; it will be one or the other and they are different things. If it’s a PCP, you may want to consider voluntary termination, but the finance company is still likely to come after you to pay for the damage to the vehicle.
      There are no easy options which will allow you to walk away without paying anything.

  44. Hi Stuart,
    I have a PCP agreement with Mercedes which is a 4 year contract, I’m currently 2.5 years into this contract, however the car has been with Mercedes for the past 3 months due to a major fault. Mercedes have confirmed that they cannot confirm a target completion date and cant even confirm if it will be before Christmas. I’m at the point where I just want to end the lease. Are Mercedes breaching any contracts? I’m still paying £600 a month for the lease.


    • Hi Sarah. It’s unlikely that there is any connection between the dealer’s servicing/warranty issues and the car’s finance agreement, which is with a separate company. The finance agreement is merely a method for paying for the car; it has no impact on your servicing or warranty schedule or technical problems with the car as you are describing.

  45. Hello Stuart,
    I’ve never had a PCP but I’m thinking of taking one out. I wonder if you could tell me if they are flexible, please. For instance, if i start with a low deposit and a high monthly payment, would I be able to make a lump payment of a couple of thousand pounds in a few months time? The idea would be to reduce the monthly payment when a savings account matures. The dealer says that PCPs are completely flexible . . . but would it all turn out to be different when I come to do it?
    Brian (Stamford)

    • Hi Brian. I would suggest calling the finance company directly, rather than relying upon the dealer’s advice. Some finance companies allow you to make additional payments with no charge, others don’t or have specific limits.

      If the finance company does allow it, it will usually mean reducing your monthly payment amount rather than shortening the term or reducing the GMFV at the end of the agreement.

  46. Hi Stuart,
    I am currently on a PCP for a Kuga 3 years. I am completing 1 year very soon. I wasn’t looking for servicing on annual basis and the dealer promised to contact before 1 year to exchange to another car as we will have positive equity. I am now being told the car is in negative equity due to a new model coming up. Can I look for another manufacturer say BMW or Nissan on PCP as I do not want to waste another 2 years with this car plus servicing? What will this mean?

    Kind regards,

    • Hi Priya. It appears you have been somewhat misled by the car dealer. It’s almost impossible to have equity after one year on a three-year PCP, so I’m not surprised you have negative equity. You can change your car to any other manufacturer you like, but you will still have to clear the negative equity, so it will be an expensive process to change.

      All cars need servicing, so you are far better off spending hundreds on servicing your current car rather than many thousands on replacing it so you don’t have to service it.

    • Yes, it looks like we were mislead indeed by the dealer. I understand now that its cheaper to keep this car and service it and think about exchange at the end of 3 years. Thank you Stuart!

  47. Hi there – I’ve just taken out PCP and the garage offered me an insurance Policy, to run alongside my own, whereby if I wrote the car off this would cover the full costs of the car, however, I couldn’t afford this lump sum but it has left me wondering what would happen if the car was written off as I would no longer have the same car to hand back after the 3 years was up.


    • Hi Carole. They are talking about GAP insurance.

      If your car is written off, your car insurance will pay you the value of the vehicle as normal. You then pay off the finance company – if the finance settlement is more than your car is worth, you would have to pay up the difference yourself.

      The dealer wants you to take GAP insurance because they take a fat commission on it, not because they care about your welfare. If you like the idea of GAP insurance, there are usually much cheaper options online.

  48. 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’.

    • That’s very helpful information, thank you.

      I am 2 years into my 3 year pcp and have just done the 1st service with my local garage. Until I came onto this website yesterday, I had no idea servicing with my local garage as opposed to a approved dealership would affect the value when I returned the car.

      Anyway, as I am handing back the car in the 3rd year , would I need to do another service and MOT next year just before I hand it back? is that what is usually expected?

    • Servicing/MOT needs to be up-to-date on the day you hand it back. So if it’s not due, you don’t have to have it done. If it’s due the day before you give it back, you have to do it.

      If servicing and/or MOT are due in the last few weeks, you may be able to give the car back a bit early to dodge it. The finance company should be able to tell you the earliest date you can hand it back.

  49. 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).

  50. 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

  51. 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.

  52. 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

  53. 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.

  54. 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.

  55. 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?

  56. 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).

  57. 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.

  58. 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…

  59. 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.

  60. 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.

  61. 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.

  62. 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.

  63. 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.

  64. 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

  65. 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.

  66. 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).

  67. 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…

  68. 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


  69. 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…..?

  70. 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.

  71. 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.

  72. 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.

  73. 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.

  74. 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.

  75. 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.

  76. 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.

  77. 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?

  78. 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

  79. 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


  80. 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

    • 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.

  81. 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.

  82. 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?

  83. 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?

  84. 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.

  85. 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.

  86. 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?

  87. 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).

  88. 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.

  89. 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.?

  90. 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.

  91. 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.

    • 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.

  92. 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.

  93. 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?

  94. 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.

  95. 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.

  96. 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.

  97. 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/

  98. 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.

  99. 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.

  100. 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.

  101. 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.

  102. 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.

  103. 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.

  104. 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.

  105. 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!

  106. 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

  107. 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 vol