A couple getting their keys to their new car on pcp finance

PCP car finance

PCP finance is one of the most popular ways to buy a car. Use our guide to find out if it's right for you or apply now to get a quote in just a few minutes.

Zuto is a credit broker, not a lender. Our rates start from 9.9% APR. The rate you are offered will depend on your individual circumstances. Representative Example: Borrowing £7,000 over 48 months with a representative APR of 19.3%, the amount payable would be £205 a month, with a total cost of credit of £2,831 and a total amount payable of £9,831.

What is PCP car finance?

Personal contract purchase (PCP) is a type of car finance. It lets you loan a new car from a finance provider, with you making monthly payments over an agreed period – usually between 24 to 36 months, although some providers offer longer.

How does PCP work?

PCP finance is similar to hire purchase (HP) but, instead of payments based on the car’s total value, you pay off its depreciation instead – that’s the difference between what the car is worth now and at the end of the contract.

There are three simple steps.

1. Your deposit

Your deposit will depend on the agreement with your lender. Some of our lenders do offer no deposit PCP options, but if you do decide to make a deposit, this might be, for example, 10% of the vehicle’s value. This goes towards paying off the depreciation, so the more you can pay upfront, the less you’ll need to pay each month.

2. Monthly repayments

Your monthly repayments will pay off the car’s depreciation. You’ll also need to bear in mind the annual percentage rate (APR) which is the interest you’ll pay on top. For Zuto customers, this starts at 12.9%, but depends on the lender and your personal circumstances.

Just let us know your budget and how much you can afford each month and we’ll do our best to find you a deal which suits your requirements.

3. End of contract

At the end of your contract, you’ll have three choices:

  1. Pay the balloon payment – the car’s all yours. More on balloon payments in our FAQs below.
  2. Hand the keys back – once the monthly payments stop, you can return the car to the lender and walk away. T&Cs will apply.
  3. Get a new car – if your car is worth more than expected, you can’t claim the cash, but you can put that difference – known as equity – towards the deposit of a new car. So if, for example, your car was expected to be worth £5,000 but it’s actually worth £6,000, you can put £1,000 towards the deposit of your next car.

PCP finance example

To help put PCP into perspective, here’s a quick example.

Let’s say you’re looking for a two-year deal.

The car is priced at £15,000 and is expected to be worth £8,000 at the end of the agreement, so its value will have dropped (depreciated) by £7,000.

You can afford a 10% deposit (£1,500), which means you need to finance £5,500.

Here’s what you’d pay, based on 12.9% APR:

  • Deposit: £1,500
  • Amount of credit: £5,500
  • Monthly repayments: £347 (total £8,328)
  • Optional final balloon payment: £8,000

The total without buying the car will be £9,828, or £17,828 if you make the final balloon payment.

Is PCP finance right for you?

Advantages of PCP

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  • You can possibly look at a better car – more modern, fuel efficient, safer, for example – sooner than you might otherwise be able to afford.
  • Monthly payments are usually lower than hire purchase.
  • It’s easy to roll a PCP deal over at the end of the term to get a new vehicle.
  • You have the option to buy the car at the end of the agreement.
  • If your car is worth more than expected, you can use the difference to go towards a deposit on your next vehicle.

Disadvantages of PCP

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  • Exceeding the agreed annual mileage limit may mean a financial penalty.
  • If you are unable to make your monthly payments during the term, you may have to return the car.
  • Your car must be kept in good condition to avoid damage fees.
  • If you can’t afford to make the balloon payment at the end of the term, you will have to hand the car back or start a new PCP deal.

What to think about before applying

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  • Your credit rating – the better your credit score, the more likely you’ll get a better deal. If you have a poor or bad credit rating, don’t worry – our panel of lenders may still be able to help.
  • What you can afford – work out how much you can afford to borrow and consider other costs, such as fuel, insurance and tax.
  • Mileage – your deal will probably have a mileage limit. Make sure you know you can keep within it.
  • Wear and tear – the car’s depreciation is based on the vehicle being in a good condition at the end of the agreement. You’ll need to pay for any damage at the end.
  • Other types of car finance – the alternative types of car finance are hire purchase (HP) and a personal loan. You can find out more on our car finance options page.

What happens when I apply?

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  1. Fill in some personal details – we’ll need to know details like how much you would like to borrow, your address, your employment etc. Our online application form should only take a few minutes to complete.
  2. We’ll check your credit score – our lenders will carry out a check which allows them to understand if you’ll be approved for the finance.
  3. We’ll call you to discuss your quotes – the call usually takes around 5 to 10 minutes. There’s no pressure to agree to anything and quotes are valid for 30 days.
  4. You can agree to a loan – if one of the deals works for you, let us know. We’ll run a full credit check – which is marked on your credit history – and get a formal offer from the lender.

Useful information and guides

  • cms-tick

    How to get car finance with bad credit

    If you have a poor or bad credit rating, you may still be able to get car finance with our panel of lenders. Find out more with our guide.

    Read our guide
  • circled-pound

    Getting car finance without a deposit

    Not all lenders require a deposit. In our guide, we explain how the process usually works and what you need to know.

    Read our guide
  • call

    Contact us now to talk to one of our advisers

    We have people on hand to guide you through it all - from how to improve your credit score to finding a car.

    Contact us


Can I use PCP to finance a used car?

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Yes you can. Zuto helps with used cars and is a trusted AutoTrader partner.

Can I get PCP with any car dealer?

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Zuto has a list of approved dealers. When you apply for a quote, you can browse cars from these trusted dealers.

Will I pay more with PCP than the vehicle is worth?

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Yes, because interest – known as APR – will be added to your monthly repayments. However, the monthly costs mean you might be able to drive a better car than you might otherwise be able to afford with cash or other finance types, as the loan is based on the difference between what the car is worth now and at the end of the contract, with a larger payment to make at the end of the finance (balloon payment).

If you don’t buy your car outright, you might also be charged for any damage to the car at the end of the agreement.

Can I pay off my PCP agreement early?

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Early settlement or termination depends on the contract with your lender. When you make an application, one of our team will be able to talk this through with you.

What’s a balloon payment?

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A balloon payment is what you can pay at the end of a PCP agreement to fully buy and own the car. It’s also known as the Guaranteed Minimum Future Value (GMFV).

What happens if I miss a payment?

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The most important thing is to make sure you only pay what you know you can afford before you start. But circumstances can change. The impact of missed payments depends on your lender. If you fall behind, you may be able to hand the car back (but potentially with something still to pay) or the finance company might repossess your vehicle.

Can I change my car during the contract?

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This will depend on when you would like to change and the agreement you have with your lender. Please talk to one of Zuto’s advisers for any support.

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