PCP allows you to offset part of your loan to the end of the term. This deferred balance is called Minimum Guaranteed Future Value (GFV). This means that your monthly payments will be lower. At the end of the term (usually 36 months), there are three options. The car to be returned to the lender if its value is below the Guaranteed Future Value, you can buy the car by paying off the GFV or part exchange the car using any equity left in the car as a deposit for your new one.
PCP might be suitable for you if:
- You want lower monthly repayments.
- You want the risk of negative equity passed to the finance company.
- You want to option to own or not own the vehicle at the end of the agreement.
- You like flexibility at the end of your agreement.
- You plan to replace your car every 2-4 years with a new or nearly-new car.