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Finance at Vauxhall
What is Personal Contract Purchase (PCP)?
A PCP is more suited for those that wish to enjoy the benefits of upgrading their vehicle every two or three years. A Personal Contract Purchase is a variation of a hire purchase agreement which offers monthly payments that are lower than some traditional finance schemes by offsetting a larger repayment to the end of the agreement.
Instead of purchasing the vehicle over equal monthly instalments an Optional Final Payment, sometimes called Guaranteed Minimum Future Value, is deferred until the end of the term. Meaning that you are paying the difference between the vehicles sale value and its minimum worth at the end of the period. The final payment is calculated based upon your driving requirements and annual mileage. Exceeding the agreed annual mileage will result in a pence per mile charge, as the higher the mileage the less the vehicle is worth.
Your repayments are based upon the price of your vehicle less any deposit and the Optional Final Payment, plus interest charges and any fees.
It is important to note that due to market conditions your vehicle may not be worth more than the Guaranteed Minimum Future Value at the end of the agreement, thus affecting the deposit available to purchase you next vehicle and subsequent monthly repayments. Therefore, it is imperative that you ensure that you accurately predict your mileage over the term, as any additional mileage is subject to an excess mileage charge.
How does PCP actually work?
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When you have chosen your vehicle, you will then agree your annual mileage and decide on the agreement term with one of our Business Managers.
We will then determine the Guaranteed Minimum Future Value (GMFV) of the vehicle at the end of the agreement and work out a deposit and monthly amount that works for you.
At the end of your agreement you will then have three options:
Return – Simply return the car the back to us
Retain – Keep the car by paying the optional final payment
Renew – Trade it in for another car
For a quotation, help, or advice contact us and ask to speak to one of our Business Managers.
What are the advantages of PCP?
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- Fixed regular payments
- You have the option of ownership of the vehicle at the end of the agreement
- Variable deposits and periods available, usually between 2 and 3 years
- Once you have paid a half of the total amount payable you are able to exercise your legal rights and voluntary terminate the finance agreement by handing the vehicle back to the finance company (maybe subject to fair wear and tear)
- Satisfactory quality rights under the Consumer Credit Act are provided, meaning the credit provider may be liable for putting things right providing the cash price was less than £30,000
- The ability to repay additional amounts in to agreement and have the interest recalculated, meaning that you could lower your monthly repayment amount
What should you consider when option for a PCP?
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- A significant proportion of the credit is deferred until the end of the period which will need repaying should you decide to own the vehicle
- The interest on the final payment is calculated differently to the body of the credit as no capital is reducing
- The vehicles resale value may not be worth more than the final payment, meaning that your deposit may be reduced for your next vehicle. Therefore, you should be prepared for higher repayments
- A ‘Fair Wear & Tear’ clause will apply if the vehicle is returned at the end of the agreement and may apply in the event of Voluntary Termination
- You do not own the vehicle outright until the final payment is made
- Your vehicle is at risk of repossession if you do not maintain the contractual repayments
- Agreed mileage limits are imposed at inception
- Excess mileage charges apply
- You must maintain fully comprehensive insurance throughout the term of the agreement
- You must not sub lease or rent the vehicle to a third party
- There may be restrictions on usage of the vehicle during the term of the agreement
- Charges may apply for late payments or to alter the repayment date (these are detailed in the SECCI)
- Any outstanding finance must be settled if the goods are sold
Can I settle my PCP agreement early?
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You can normally settle your agreement early by asking the finance company to provide you with a settlement figure. However, the finance company will require you to pay off the difference between what your car is worth, and what you still owe and there may be a difference which is known as negative equity. On the other hand, you may find that at the end of your term your car is worth more than the Guaranteed Future Value, which means you will have some positive equity to contribute towards your next car.
What is Conditional Sale (CS)?
A Conditional Sale agreement is the same as Hire Purchase, except that you will automatically own the car once the finance has been repaid in full without the requirement to pay an additional fee. If you wish to sell the vehicle you must repay the outstanding finance balance in full.
The deposit is paid on delivery of your new vehicle, leaving the balance plus interest paid over the agreed period in equal monthly instalments. At the end of the agreement, you take outright ownership of the vehicle.
Interest is calculated at the start and is added to the amount that you wish to fund, therefore it is fixed for the length of the agreement. This means that the amount you pay is unaffected by any future changes in interest rates, allowing you confidence that your payments will not alter.
What are the advantages of CS?
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- Fixed regular payments
- You are the ‘registered keeper’ of the vehicle with ownership of the vehicle transferred to you at the end of the agreement
- Variable deposits and periods available, usually in monthly increments for 12 to 60
- Once you have paid a half of the total amount payable you are able to exercise your legal rights and voluntary terminate the finance agreement by handing the vehicle back to the finance company (maybe subject to fair wear and tear)
- Satisfactory quality rights under the Consumer Credit Act are provided, meaning the credit provider may be liable for putting things right providing the cash price was less than £30,000
- The ability to repay additional amounts in to agreement and have the interest recalculated, meaning that you could either lower your monthly repayment amount of shorten the term
What should you consider when opting for CS?
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- A ‘Fair Wear & Tear’ clause may apply in the event of Voluntary Termination You do not own the vehicle outright until the final payment is made
- Your vehicle is at risk of repossession if you do not maintain the contractual repayments
- You must maintain fully comprehensive insurance throughout the term of the agreement
- You must not sub lease or rent the vehicle to a third party
- Charges may apply for late payments or to alter the repayment date (these are detailed in the SECCI)
- Any outstanding finance must be settled if the goods are sold
Can I settle my CS agreement early?
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The short answer is yes, you can end your finance early. There are different provisions within each finance agreement that allows you to do just that. If you have got through two-thirds of the way through your finance agreement, the options to end the finance agreement early open up.
For a Conditional Sale agreement, there is an option of paying it off early through a settlement fee. A settlement fee covers the cost of any remaining unpaid instalments and interest payments remaining on the agreement. Once the settlement fee is paid, you take full ownership of the car early.
Under a Personal Contract Purchase agreement, you can also pay a settlement fee for bringing the agreement to an end early. After that, you can choose to hand the car back or you have a second option. Through a PCP agreement, you can take full ownership of the car by paying off the remaining Guaranteed Minimum Future Value also known as a balloon payment.
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