Car Loan or PCP?
As we enter a new year, many of us consider upgrading our cars, and with that comes the question of car finance and what the best options are. There’s lots to consider, a car loan, PCP or something else?
We’re taking a look at PCP and Car Loans and why choosing a Car Loan from Westport Credit Union is a good call!
PCPs, Personal Contract Plans, are a common offering by car dealers and can appear a very attractive finance option, but what do we really know about PCP and how it works? Read on to find out!
What is PCP?
A PCP is a type of finance similar to a Hire Purchase contract. Many of the same rules apply to both HP’s and PCP’s, the major difference is that you pay less of the amount owed during a PCP agreement than with HP, meaning you will still owe a considerable amount at the end of a PCP agreement
How does PCP work?
There are 3 parts to a PCP agreement, the deposit, the monthly repayments and the Guaranteed Minimum Future Value, otherwise known as lump sum.
The deposit – the deposit is typically between 10% and 30% of the value of the car, depending on the finance provider. Your deposit can be paid in cash or if you already own a car, you can trade this in for part or all of the deposit, depending on its value.
Monthly repayments – PCP contracts are usually made for terms of at least three to five years. PCPs generally have low monthly repayments, which can make them seem more affordable compared to other forms of finance.
Guaranteed Minimum Future Value (GMFV) -A large, final, payment. This is how much it will cost you to own the car at the end of the contract. It takes into account such things as, the car you are buying, length of the contract, the condition of the car at the end of the contract and your annual mileage. This final payment is set at the beginning of the contract, based on the finance company’s estimate of the future value of the car. If you are entering into another PCP, the GMFV is subject to you meeting all the terms and conditions, including any mileage restrictions, you agreed at the start.
To find out more about PCP finance, visit the Consumer and Competition Protection website
Car Loans from your Credit Union
A Car Loan is more clear cut than PCP, and a car loan from your Credit Union is a straightforward transaction, flexible and affordable with no nasty surprises. You will own the car immediately and there aren’t any restrictions on milage or usage, it’s all yours!
What’s the difference between PCP and a Car loan?
Car loan
- You own the car straight away
- No hidden fees
- You can sell the car at any time
PCP
- You don’t own the car until the final payment is made
- Large lump sum payment at the start of the agreement and at the end
- You do not own the car, so you cannot sell it
All in all, a Car Loan is a more flexible, straightforward choice, and a Car Loan from Westport Credit Union is the more affordable and flexible choice. PCP contracts are among the least flexible forms of finance and there can often be lots of fine print in the terms and conditions which can lead to some confusion.
To find out more about car loans from the credit union, visit our website and try out our loans calculator.
