A Personal Contract Purchase, or PCP as it is more commonly known, is a purchase agreement where a predicted minimum future value is offset until the end of the agreement – this is called a Guaranteed Minimum Future Value (GMFV).
The customer usually puts down a deposit at the beginning of the agreement, pays regular monthly instalments over the agreed time and at the end has three options; Keep, Hand-back or Part exchange. If the customer wants to keep the vehicle then they pay the GMFV (either in full or refinanced) and ownership is transferred to the customer. If the vehicle is worth less than the GMFV for any reason, the customer can hand the car back and walk away subject to mileage and conditions.
The most popular option is to Part Exchange the vehicle and use any equity over the GMFV as a deposit towards their next finance agreement.
Conditional Sale is a purchase agreement between the finance company and the customer, where the customer will automatically own the vehicle after all the repayments have been made. An optional deposit can be paid and then regular, fixed repayments will be paid for the duration of the agreement.
Unlike a PCP contract, there are no mileage restrictions on a Conditional Sale agreement however the vehicle must be kept in a reasonable condition for the duration of the agreement, as well as being comprehensively insured.
If you’re still unsure, or would like to hear more about the options available to you then please do contact one of our knowledgeable Sales Executives for more details or a quote.