Confused by car finance options? You're not alone! 'Personal Contract Purchase means' something to many drivers, but understanding it is key. A PCP is essentially a loan secured against the car. You pay an initial deposit and then make monthly payments. These payments cover the depreciation of the car over the agreement term, not the full value.
At the end of the agreement, you have three choices:
* **Trade-in:** Use any equity you have (if the car is worth more than the Guaranteed Future Value - GFV) towards a new car.
* **Return:** Hand the car back, provided it's within the agreed mileage and in good condition (fair wear and tear is usually accepted).
* **Purchase:** Pay the GFV (also known as the 'balloon payment') and keep the car.
PCPS often offer lower monthly payments than other finance options, making them attractive. However, be aware of mileage limits, potential excess mileage charges, and the fact that you don't own the car outright until you pay the GFV. Understanding 'personal contract purchase means' is crucial before committing!
