25 June 2022 19:34

PCP or Bank Loan for Car Purchase?

PCP (Personal Contract Purchase) finance lends you the car while you pay off the value of its depreciation over the term of your agreement. A bank loan provides you with the money to buy the car outright and then pay off the loan, so you immediately become the owner of the car.

Is HP better than a bank loan?

HP is much more easily compared to a personal loan. You simply put down whatever you can afford as a deposit, then pay off the balance on a fixed monthly repayment until the full price of the loan is paid.

What does PCP stand for in finance?

Personal Contract Purchase

Financing a car with Personal Contract Purchase (PCP) | MoneyHelper.

What happens at end of PCP period?

At the end of a PCP deal you’ll have three main options. Your first is to pay the final balloon payment and own the car. Second, you could walk away with nothing more to pay. Finally, you can trade the car in, using positive equity to fund the deposit for your next vehicle.

How is PCP calculated?

PCP financing is based on the car’s residual value, that is the value that the car is worth at the end of the contract. The car finance is then calculated based on the value of the car now minus the residual value.