How does a Personal Contract Purchase (“PCP”) work?
It is a funding package based on a hire purchase agreement, combined with options to offset some of the risks associated with running a car. You purchase your choice of vehicle via a series of equal monthly payments, comprising capital repayment and interest. You do not even need to put down a deposit, although doing so will reduce your monthly payments. No VAT is imposed on the monthly payments, but additional services such as maintenance are subject to VAT. Your payments will be linked to an optional final balloon payment, equivalent to the estimated residual value. If you think the vehicle is worth more than the estimated residual value, or you wish to retain the vehicle, you can pay the final payment, after which the legal title of ownership of the vehicle passes to you. You can then keep or sell the vehicle as you wish. Alternatively, if you do not wish to continue to own the vehicle, or you would like to purchase a new vehicle, you can exercise your option to sell the vehicle to
