PCP Calculator
Simplifying Car Finance and Comparison

Frequently Asked Questions

Is a PCP the only way to finance a new car?

You can finance a second hand car with a PCP deal but you must remember that as soon as new cars leave the forecourt they lose a large chunk of their s so a second hand car PCP will likely have a less favourable interest rate so the dealer still get their ‘pound of flesh’.

How can I get my repayments as low as possible?

A few points that can help ensure your repayments are as low as possible:

  1. Put down the biggest deposit you can afford and increase the repayment time
  2. Choose a car that holds it value
  3. Keep the mileage as low as possible (remember going over your mileage allowance will cost you…)

How much do I pay over the life of the deal?

In most cases you will have to pay a deposit as part of the deal. You should take a moment to look at the interest rate (APR) of you your deal, which includes all interest and any charges that are built into the deal. From this you will have a monthly figure, which is the figure you will be paying in your direct debit. Most finance deals have an arrangement fee at the beginning and a buy back fee should you wish to purchase the vehicle at the end of the term.

Is there an option for early settlement on my PCP?

There is usually an option to finish the agreement early but it can cost you. As you appreciate the finance company bases it’s projected profits on knowing the length and cost of its loans and to shorten the term leaves them with a shortfall. They will look to recover any shortfall by charging the difference between the cars value at the time of sale against the settlement figure on the agreement. Any difference in these values (negative equity) will be charged back to you.

Deals can vary on these charges so check your T&C’s before making a decision.

Why a PCP deal?

The figures published by SMMT (Society Of Motor Manufacturers and Traders) show that 80% of all new car sales were bought with some sort of finance and 60% of the deals were PCP’s. Some manufactures have stated that up to 85% of their new car sales are via PCP deals.

As PCP’s generally work on a 3-year buying cycle it keeps the demand for new car manufacturing strong.

A very attractive part of the PCP deal means that with the balloon payment method people can afford a much higher spec car than they would usually have selected, as the monthly repayments are so much more affordable.

Is there a credit check carried out for the PCP?

You will be credit checked when applying for a PCP loan and this will appear on your file as an application for credit.

As you are taking out a loan for a vehicle lenders will look at the vehicle as an asset and will be a little more lenient with their checks. After all, if you fail to keep up the repayments they will simply seize the vehicle. The advice is to keep up the regular payments for the vehicle as it will work in your favour and it will help your credit record making it easier to secure future loans.

Do I need to take additional GAP insurance out for my car?

In the event your car is stolen or written off with a total loss, GAP insurance (guaranteed asset protection) covers the difference between the current value of the car (the amount your car insurer will usually pay out) and the amount you paid for the car in the first place, or any outstanding payments.

GAP insurance is only usually needed if,

  1. You risk being in negative equity, because you owe more than the car is worth.
  2. You might end up owing more than the value of your car if:
  3. You’re paying a lot of interest.
  4. The kind of car you bought loses value quickly.
  5. The down payment for your finance deal was small (say 20%).
  6. In most cases GAP isn’t really necessary for PCP deals as the vehicle is usually brand new and most fully comprehensive car insurance policies offer brand new car replacement during the first 12 months of ownership. Check the individual policy details.