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How to use personal contract purchase (PCP) financing to secure your dream car in 2022

PCP deals are a popular way of buying cars because they can be very flexible. Here’s how they work…

By Lexi Goodland  |  December 22, 2021
buying a car

With Christmas around the corner, and presents for loved ones bought and wrapped (hopefully!), you may be considering how best to gift yourself a little something special to welcome in the new year, and – even better – it doesn’t have to be little at all. Take a closer look at a personal contract purchase (known commonly as car finance PCP) to finance your dream luxury vehicle in 2022; the perfect big treat that can be paid for in little monthly instalments.

With Carplus, you can submit your details and choose from a fantastic range of car finance deals. Carplus will take the reins and organise everything on your behalf with the lender so all that is left for you to do is enjoy the ride of your new financed vehicle for the duration of your contract.

What is PCP finance?

A PCP is ideal for people who are wanting to spread the cost of a luxury new vehicle across several months rather than paying the total amount up front – a perfect financial deal following Christmas expenditures. After choosing your desired vehicle, you make a deposit; sign a contract for your chosen length of time (usually 24 to 36 months); make monthly payments according to your agreement; and then, when your agreement comes to an end, you can either return the car, keep it, or exchange it for a different vehicle. So, whether your heart is set on one particular luxury automobile, or you are the kind of person who wants a new ride every few years, a PCP plan is sure to meet all your needs.

A PCP is ideal for people who are wanting to spread the cost of a luxury new vehicle across several months rather than paying the total amount up front

How does PCP finance work?

Usually with this kind of financial agreement, the dealership will request a 10 per cent deposit of the car’s total value, but if you are willing to pay more – even better; obviously the bigger the deposit, the lower the monthly payments will be over the course of the contract.

When it comes to the loan amount, the finance company you choose to sign your PCP with will estimate how much the value of the vehicle will depreciate from the start to the end of your plan and will then subtract your deposit from this amount, leaving you with your total amount to pay over the life of the transaction with interest (this can vary from company to company but in most cases sits somewhere between four per cent and seven per cent).

Your final payment, otherwise known as your balloon payment, is the guaranteed minimum future value you will have to pay if you choose to keep your car and is based on how much the dealer thinks the car is worth at the close of your contract. Of course, this amount is negotiated with you before any contract is signed. If, however, you find yourself interested in something different when your agreement ends, you can simply return the car to the dealer and choose a new car. As your old car will probably be worth slightly more than your final balloon payment, you can use the excess amount as a deposit for your new contract. Sound good? We thought so.

Professional car salesman smiling, shaking hands with his male customer in front of a new automobile
PCP deals are a popular way of buying cars because they can be very flexible

What are the pros and cons?

Now that you are well informed on the technicalities of a PCP, we have made things even easier for you by compiling a simple pros and cons list, thanks to Carplus, to help you decide if this is the right move for you.


  • Lower monthly payments than a loan of instalment plan.
  • No need to worry or stress about the potential value of your car when it comes to selling or reselling it as you simply keep it or send it back to the dealer.
  • There are several options available to you when your contract closes, including the option to buy the car back.
  • Many dealers will often include service and maintenance packages, warranties and insurance within your deal as an added bonus.
  • The affordability of monthly payments means you can splash out on a luxury vehicle that might just have been out of your budget reach before.


  • During the length of the contract you won’t actually own the car, however when the contract finishes, it will be all yours if you want it to be.
  • The interest rates for a PCP are usually higher than personal loans.
  • If the estimated future value of the car is presumed very close to the genuine value of the car, there will be little money left to carry over to another deal if that is something you wish to do.
  • If you love driving fast and hard by all means do it, but just beware you will have to pay additional fees if you exceed the agreed-upon mileage.
  • Equally, the future value of the car is based on its condition when returned so any damage to the vehicle outside of normal wear and tear will have to be repaired before it is sent back.