PCP

With a Personal contract purchases (PCP), you pay a deposit then commit to pay a set number of low monthly payments for up to three years. The low monthly payments mean that you will not have paid off the full value of the car, so at the end of this term you have three options:

1. Pay off the balance with a final balloon payment and own the car
2. Hand back the keys pay nothing
3. Trade in the car as a part exchange for a new car and sign a new contract.

This method is convenient if you plan to change cars regularly but you don't own the car until the deal is settled (so selling it is more difficult), there are also penalties if you decide to end the contract early.

An 'end of term' value for the car is agreed at the time of arranging the finance, but there are limitations on the mileage and the it must be in good condition.

PCP

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