What is PCP car finance?
PCP stands for personal contract purchase. You pay any deposit and monthly payments, with a large optional final payment if you want to own the car.
The finance company owns the car during the agreement. You're paying to use it, with the choice to buy it at the end.
If you return the car at the agreed end date, you don't pay the optional final payment. Mileage, condition and other contract charges may still apply.
PCP is credit. Check the total cost and the end choices before deciding whether it fits your plans.
How do PCP payments work?
The lender sets aside part of the car's cost as the optional final payment, often called a balloon payment.
Your monthly payments repay the remaining amount, plus interest. Interest is generally charged on the full amount borrowed, including the amount left for the balloon payment.
For the same car, deposit and term, PCP monthly payments are often lower than standard HP. That doesn't mean PCP costs less overall.
Check the deposit, monthly payments, fees and total payable to own the car. Our hire purchase guide explains the alternative.
What is the PCP final payment?
The optional final payment is set at the start. It's based on an estimate of the car's value at the end, using the agreed mileage and term.
You may see this estimate called the guaranteed minimum future value, or GMFV. This is a technical term for the agreement's future value figure.
It doesn't promise what you could sell the car for. The actual market value may be higher or lower when the agreement ends.
Use a calculator to explore how a final payment changes the numbers. Its result is an estimate, not a quote or a lending decision.
What happens at the end of PCP?
Buy the car
Pay the optional final payment and any purchase fee or other sums due. Ownership then passes to you under the agreement.
If you need to borrow that final amount, a new lender assessment applies. Further borrowing isn't certain and adds another repayment commitment.
Return the car
Return it as the contract requires. The lender checks mileage and condition. You may owe charges for excess mileage, damage or other unmet terms.
Change the car
A dealer may accept the car towards another purchase while settling the existing finance. Any value above the settlement amount may help with a new deposit.
If it's worth less than the settlement amount, there's a shortfall. A new finance agreement needs a separate lending decision.
How do PCP mileage limits work?
You agree a mileage allowance at the start. The lender uses it when estimating the car's future value and setting the payments.
Include commuting, weekends, holidays and occasional longer trips. Use recent mileage records rather than guessing from a typical week.
If you return the car at the agreed end date over the allowance, an excess mileage charge may apply. Check the rate and how mileage is measured.
If your driving changes, contact the lender. Some agreements allow mileage changes, but payments may change too. Options vary by lender.
Excess mileage charges normally relate to returning the car, rather than buying it through the final payment. Check your own contract.
What counts as fair wear and tear?
Fair wear and tear means deterioration expected from normal use. It doesn't cover every scratch, dent, stain or missing item.
The lender's condition standards explain what it accepts when you return the car. Ask for these before signing, then keep a copy.
Follow the service schedule and keep records. Check requirements for tyres, keys, documents and any equipment supplied with the car.
Before collection, photograph the car inside and out and record its mileage. Ask how inspections work and how you can challenge a condition charge.
Don't assume every repair is needed. Ask the lender what its standards require before paying for work.
Do I need a deposit or credit check?
Deposit requirements vary by lender. A larger deposit reduces the amount borrowed, but keep money available for essential bills and unexpected costs.
The lender checks your credit record and whether repayments are affordable. It may ask for income evidence and details of your spending.
Ask a car finance specialist which searches will happen and when. A hard search leaves a record other lenders can see. Several applications can affect future lending decisions.
Acceptance depends on the lender's assessment. Don't assume requesting a quote and making a full application involve identical checks.
Can I withdraw from PCP within 14 days?
The Consumer Credit Act 1974 gives you 14 days to withdraw from credit agreements covered by this right, without giving a reason.
The period normally starts when the agreement is made or you receive the required agreement information, whichever is later.
You must notify the lender in time and repay the credit and interest due within 30 days of giving notice.
This doesn't automatically cancel the car purchase. You'll need another way to pay unless the purchase is separately cancelled.
Can I end PCP early?
For agreements covered by the Consumer Credit Act 1974, you can settle early. Ask the lender for a settlement figure, including any applicable interest reduction and permitted charges.
Voluntary termination is different. For qualifying agreements, you can end the agreement and return the car, with liability generally limited to half the total amount payable.
You must have taken reasonable care of the car. Arrears and condition issues can affect what remains due.
If you've paid less than half, you can terminate but must make up the shortfall. The halfway figure includes the balloon payment, so it may be reached late in the term.
Tell the lender clearly in writing. Mileage charges on voluntary termination can be disputed. Seek guidance rather than assuming the normal end of term rules apply unchanged.
Read ending car finance early before returning the car.
What if I can't keep up PCP payments?
The car may be taken back if payments aren't kept up. Missed payments affect your credit record.
For agreements covered by the Consumer Credit Act 1974, once you've paid a third of the total amount payable, repossession needs a court order unless you consent.
That figure includes the balloon payment. Check your agreement rather than counting monthly payments. The protection doesn't cancel your debt.
Speak to the lender early. StepChange offers free debt help if repayments are becoming difficult.
Who deals with a faulty PCP car?
The finance company is responsible for the car's quality under the Consumer Rights Act 2015. It must be of satisfactory quality, fit for purpose and as described.
Age, mileage and price affect what's reasonable. Report faults promptly and keep evidence. A warranty doesn't replace your legal rights.
Complain to the finance company first. If unresolved, you may be able to use the Financial Ombudsman Service.
How do I ask about PCP?
Fill in the quote form. A car finance specialist then gets in touch, explains the options and gives any quote and any advice.
The lender decides any application and provides any finance. Check the final payment, mileage allowance and return standards before signing.
Updated 7 November 2026
