Car Loans vs PCP

Thinking of breaking up with your PCP car finance agreement?

Many people are coming to the end of their agreed Personal Contract Plans (PCP) with their car dealer and are wondering what to do next; sign a new contract, hand back the car or pay the lump-sum to buy and own your car outright. If you’re happy with your car but need a little help putting the lump-sum together, speak to your local Credit Union where you could arrange to borrow it.  Repayments are often lower than what you’re currently paying, you can spread the payments out over a longer or shorter term, make additional payments at no extra charge and there’s no more worrying about mileage restrictions or who actually owns your car.

The Competition and Consumer Protection Commission looks extensively at PCP and offers the following info:

PCP versus Personal loan

The main difference between a PCP and a personal loan is that with a personal loan you borrow the money, pay for your car, and own it immediately. With a PCP you don’t own the car, you are essentially hiring it for an agreed period of time, typically three years. You only own it if you pay the GMFV. This is important because if you were to run into financial difficulty during the term of your contract you wouldn’t be able to sell your car unless you had permission from the lender – as they are the legal owner of the car.

How flexible is a PCP?

These contracts are among the least flexible forms of finance. Because the repayments are fixed for the term of the contract, you usually can’t increase your repayments each month if you want to and if you want to extend the term, you may be charged a rescheduling fee.