Honda Salary Sacrifice

What is a Personal Contract Purchase?

Personal Contract Purchase is a popular type of car financing agreement that allows you to drive a new or used car without owning it outright from the start.

With a PCP, you typically pay an initial deposit followed by fixed monthly payments over a set period. These payments cover the car’s depreciation rather than its full value, which usually makes them lower than traditional hire purchase (HP) payments. At the end of the agreement, you have three options: pay a final balloon payment to own the car, return the car with nothing more to pay (subject to mileage and condition limits), or trade it in for a new one using any equity as a deposit.

There are many advantages to personal contract hire including:

• Lower Monthly Payments - Because you’re only paying for the car’s depreciation, not its full value.
• Access to Newer Cars - PCPs make it easier to drive a new or nearly new car more often.
• Flexibility at the End of the Term - You can choose to buy the car, return it, or trade it in for a new one.
• Reduced Depreciation Risk - You’re not stuck with the car if its value drops more than expected.
• Manufacturer Incentives - PCP deals often come with low interest rates or deposit contributions from dealers.
• Easier Budgeting - Fixed monthly payments make it simple to manage your finances.
• Option to Upgrade Frequently - Most PCP terms align with the car’s warranty period, reducing repair costs.

At the end of your PCP car finance term, you can choose to either make the final balloon payment to own the car, hand it back with nothing more to pay (subject to mileage and condition), or trade it in for a new vehicle.