Here is your guide to PCP car finance, you will find all the information you need to know when considering Personal Contract Purchase and how it works. PCP was designed originally to be a personal leasing product for private individuals, However, because PCP is now classed as a conditional sale agreement, it offers private individuals protection under the Consumer Credit Act 1974 and the Financial Conduct Authority.
PCP Car Finance – Complete Guide to Personal Contract Purchase
What Is Personal Contract Purchase (PCP)?
Personal Contract Purchase (PCP) is a flexible form of car finance designed to keep monthly payments low by deferring a portion of the cost into a final optional payment. For drivers comparing options, our dedicated resources such as PCP Finance, PCP Quote, PCP Calculator, and PCP Deals provide additional guidance.
How PCP Car Finance Works
1. Set your deposit
Your deposit can range from 0%–40%. Higher deposits reduce monthly payments. For real-time examples, see our PCP Calculator.
2. Choose term & mileage
Your annual mileage and term length directly influence your car’s future value and agreement structure.
3. Agree the GMFV (Guaranteed Minimum Future Value)
The GMFV is set by the lender and determines the optional final payment. For customers comparing finance options, our PCP Finance page explains these values in more detail.
4. Your three end-of-agreement choices
Return the vehicle (subject to mileage and condition).
Pay or refinance the GMFV and keep the car.
Part-exchange and upgrade, often using equity as your next deposit.
You can explore personalised figures using the PCP Quote form.
PCP vs Hire Purchase (HP) – Quick Comparison
Feature
PCP
HP
Monthly Payments
Lower
Higher
Final Balloon
Yes
No
Ownership
Optional
Automatic
Mileage Limits
Yes
No
Best For
Lower payments & flexibility
Drivers wanting full ownership
Who Is PCP Best Suited For?
Drivers wanting lower monthly payments.
Anyone who changes vehicles every 2–4 years.
Those who want predictable, structured motoring costs.
People comparing PCP options through PCP Deals or premium online brokers.
PCP FAQs
Does PCP affect my credit score?
A soft search doesn’t affect your credit score. A hard search only takes place when you proceed with an application.
Can I settle my PCP early?
Yes. Under the Consumer Credit Act you can request an early settlement figure and complete your agreement at any time.
What if I exceed my mileage?
Excess mileage is charged at a pre-agreed rate. Keeping to your mileage ensures your GMFV remains accurate.
Can I part-exchange early?
Yes. If your car is worth more than the settlement figure, the surplus is your equity. Our PCP Finance page explains this in more detail.
Related PCP Questions
Is PCP cheaper than car finance?
PCP monthly payments are usually lower than Hire Purchase because part of the cost is deferred to the optional final payment.
Can I get PCP with poor credit?
PCP is usually targeted at good to excellent credit profiles. Higher credit scores result in lower APRs and stronger acceptance.
What happens if I can't pay my PCP?
You may be able to restructure the agreement, request support, or voluntarily terminate the contract under UK consumer credit rules.
This guide explains how Personal Contract Purchase works, covering deposits, monthly
payments, guaranteed future values, mileage limits, end-of-term options, and the key
benefits of choosing PCP for your next car.
Guide to PCP Car Finance
This comprehensive guide explains how Personal Contract Purchase (PCP) works and
why it is one of the most flexible and cost-effective ways to fund a car. From
deposits and monthly payments to GMFV choices at the end of the agreement, this
guide breaks everything down in simple terms to help you make an informed decision.
Understanding How PCP Agreements Work
PCP separates the cost of a vehicle into monthly payments and a deferred final
figure known as the Guaranteed Minimum Future Value (GMFV). This structure allows
customers to enjoy lower monthly payments while keeping multiple options open at
the end of the agreement. Deposits, mileage, APR, and term length all influence
the overall cost, making PCP a highly personalised finance solution.
Key Parts of a PCP Agreement Explained
How Deposits and Monthly Payments Are Calculated
PCP deposits are usually flexible and can range from zero deposit to higher upfront
contributions that help reduce the monthly payment. Monthly instalments cover the
expected depreciation of the vehicle during the term rather than the full value of
the car, allowing for lower payments than many other finance types.
The Role of the Guaranteed Minimum Future Value (GMFV)
The GMFV protects you from unexpected drops in a car’s resale value. As long as the
vehicle is within its agreed mileage and in fair condition, you can return it and
walk away without further financial responsibility. This gives customers confidence
and financial predictability at the end of the contract.
Mileage Limits and Vehicle Condition
PCP agreements include an annual mileage allowance because mileage affects a
vehicle’s future value. Staying within your allowance ensures the GMFV remains valid.
Excess mileage and fair wear and tear guidelines are clearly outlined to help you
manage costs effectively.
Your Options at the End of the Agreement
At the end of a PCP contract you can choose to return the vehicle, pay the GMFV to
take ownership, or part-exchange the car using any equity. This flexibility is a
major reason why PCP is such a popular product for both personal and business users.
When PCP Is the Right Choice
PCP suits customers who want low monthly payments, predictable end-of-term options,
and the flexibility to switch into a new car every few years. It is also attractive
for customers with strong credit profiles who want access to competitive APRs and
clear financial outcomes.
Expert PCP Guidance from a Trusted Specialist
With more than 18 years of experience providing PCP and Lease Purchase finance,
our team helps customers find the best possible rates from leading super-prime
lenders. We offer honest, FCA-regulated advice and a transparent approach that
puts you in control of your finance decision from start to finish.
Personal Contract Purchase gives you the flexibility to set your own preferred contract term and mileage per annum at the start of the agreement, then at the end of the contract, you are given three options, either purchase the vehicle outright, part exchange the vehicle with a dealer and any equity going towards the deposit on your next vehicle, or simply hand your vehicle back to the finance company and walk away.
Capital Car Finance offer some of the lowest PCP rates in the country and has done so consistently over the past 18 years, Our Representative APR [Annual Percentage Rate] which is the total charge for the loan including interest, is currently set at just 8.9% APR for our PCP product. Capital Car Finance is a credit broker not a lender, which means we have access to a number of different providers ensuring we can obtain the best deal for your circumstances.
Call us now to discuss the various options with one of our dedicated
experienced advisers
Our Representative APR is currently just 8.9%
Breaking It Down into Small Affordable Amounts
How Are Your Monthly Payments Calculated?
There are several factors and variables to consider when calculating your monthly repayments for PCP, the finance company will take into account the following criteria:
Your vehicle invoice price at the start of the agreement.
Your initial deposit – from 0% to a max of 40%, with 10% optimal.
Agreement term – usually 24, 36, or 48 months.
Expected annual mileage.
Your GMFV (Guaranteed Minimum Future Value) or final balloon payment.
Interest rate charged by the lender.
After all the above has been taken in to consideration, your monthly payments can then be calculated.
What Is The Guaranteed Minimum Future Value?
You will also agree on a GMFV (or GFV) which is the guaranteed minimum future value figure – sometimes called a balloon or residual value. This figure is calculated by the finance company and is based on how well your vehicle holds its value in the market.
At the end of the PCP agreement, you have 3 options:
Option 1
Return the vehicle to the finance company and if you have not exceeded the agreed mileage, there is nothing more to pay.
Option 2
You may keep the vehicle and simply pay off or refinance the outstanding Guaranteed Minimum Future Value [GMFV] payment.
Option 3
You can part-exchange your vehicle and if the trade-in value is greater than the GMFV, the difference is yours to keep.
PCP Car Finance – The Benefits
So, what are the benefits of PCP?
Buying an older car may seem like a safer option – after all, it will be cheaper to purchase, however, one large repair bill can completely wipe out any saving you made on the initial purchase of an older vehicle.
Firstly, you will know exactly where you are financially, with fixed monthly payments that are normally significantly lower than other forms of traditional car finance.
Depreciation is the single biggest cost of owning a motor vehicle, so getting the best deal offsets the cost of buying your next vehicle. The difference between what you pay for the car and what you get when you sell it, is the amount of money you have lost in depreciation.
The aim for many people is to reduce this gap as much as possible – PCP does this by guaranteeing you a future value at the start, so therefore the risk of any negative equity is removed, as the future value of the vehicle is guaranteed.
Your Questions Answered
Personal Contract Purchase and Lease Purchase are very similar products, a full product description about both products can be found in the Finance Products section of our website.
Yes, no problem, providing your dealer is a UK franchise dealer, we can arrange your car finance and you transfer funds directly to them.
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The majority of our lenders are very quick with their decisions and they normally takes around 4 hours to pass approval for your finance.
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Depending on the severity of your credit profile, we may have lenders that can help you, please bear in mind that the interest rate offered by our lender is based on your credit profile and score, so unfortunately this is something we have no control as they offer a “Rate for Risk” policy.
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After your finance has been approved, we will contact you to confirm everything and then arrange for the finance documents to be sent out to you, at this stage we will require also the name, telephone number and contact name of the dealership where you are buying your car, together with the vehicle details also, if these are available.
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Yes, we will arrange the invoice and electronic funds transfer directly with your dealer, the only thing you need to do is tell your dealer you have arranged your finance with your own lender and that we will contact them directly to arrange payment.
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You will need to provide some proofs when you return your signed finance agreement, these are normally a copy of your driving license and a recent utility bill dated within the last 90 days, if there are any additional proofs required, we will advise you at the time of acceptance.
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We normally arrange for your finance documentation to be sent to you directly by email, these are normally sent out either by e-sign or a pdf file format.
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There will be an email giving full instructions of how to complete and where to return your signed finance documents and proofs back to.
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Providing all paperwork is returned back to us correctly and we have received your dealer invoice and bank details for the electronic funds transfer, then we are normally able to complete the whole process as quick as 24 hours.
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Capital Car Finance hold no money or deposits on behalf of their customers at all, once your finance has been arranged, all monies are paid directly to the supplying dealer, this applies regardless of whether CCF arranges the supply of your new car or you have purchased your vehicle from your own preferred dealer.
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We can save your finance quote for you for a period of 7 days, then when you are ready to proceed we can turn your quote in to a formal offer by taking your proposal details and submitting to our lender for approval, once we have approval from the lender we can normally hold your acceptance in place for a period of 30 days (depending on the lender) which effectively locks the rate in place for you also.
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All our PCP and Lease Purchase finance agreements have no full term lock-in or tie-in to the lender, customers can settle early if they wish, by simply obtaining a settlement from the lender whenever they like.
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All the vehicles we supply are brand new UK registered and are supplied directly to you from the UK dealerships, there is no difference to you buying your car yourself directly from the UK dealer, apart from the price of course!
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We are able to offer funding facilities for all cars up to 6 years old, sometimes older depending upon the supply route and vehicle. Generally, as long as the finance balance is £10k or more, we can normally assist.
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Absolutely not, warranty is provided by the manufacturer not the dealer and therefore it is exactly the same regardless of which finance route you take.
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Normally the first payment to the finance company is paid approx 30 days from the date of signing of the finance documents.
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There is no VAT on any of our finance agreements from the lenders we deal with, if you have been offered a deal +VAT, then this normally means it is tailored as a business product and therefore you will certainly be locked in for the duration of the finance agreement, so be careful.
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All our consumer finance agreements are regulated by the FCA, you can pay a lump sum payments off your loan at any time throughout the agreement, which will either reduce the balance outstanding or reduce your monthly payment, whichever is preferred at the time. There is no limit as to the number of times you can do this, however this facility is NOT available for business customers.
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If you are happy with the finance quote we have provided, the next step is to take a finance application from you, this is normally done over the telephone and takes just a few minutes, once your finance application has been accepted, we will then email your finance documents for signing.
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When your pcp or lease purchase finance has been accepted, we will make contact with your supplying dealer to arrange the payment of the balance with them directly, we normally request that customers make contact with them first to explain that we will be in contact.
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Capital Car Finance Ltd operates without any call centres, not only can you call us directly on 01270 306000 but we have various methods of communication Contact Us to make it easier to get in touch with us, you will always speak to and deal with an experienced finance adviser who will have all the answers you need, we have a very high standard of customer service too, so you are in safe hands.
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When you know the make & model of your chosen vehicle, simply enter the information on our Get a Quote page or alternatively call us directly on 01270 306000 to speak to a dedicated professional adviser, we can then check to see what special offers are available for you and if you are satisfied with the figures, we can then proceed with a credit application to secure funds.
When you know the make & model of your chosen vehicle, simply enter the information on our Get a Quote page or alternatively call us directly on 01270 306000 to speak to a dedicated professional adviser, we can then check to see what special offers are available for you and if you are satisfied with the figures, we can then proceed with a credit application to secure funds. To find out more information about Capital Car Finance, visit the About Us page of this website.
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