You pay an initial deposit, followed by lower monthly instalments for the remainder of the term to pay of a proportion of the loan amount. Then at the end of the term, you have the option to pay a large final payment to clear the remaining balance and own the car outright. If that’s not for you, you have other options, too. Provided you haven’t exceeded your pre-agreed mileage limit and the car hasn’t suffered damage over and above normal wear and tear, you can hand the car back and walk away, or you can exchange it for another car from the same dealer (new finance is subject to status), using any equity you’ve built up in your current car towards your down-payment.
The amounts of deposit, monthly payments, final payment and length of agreement can be adjusted to suit you, but monthly payments are typically lower than on Hire Purchase, so you can afford a swankier car for your money, or just pay a bit less.
You’ll also have to pay an extra charge if you’ve gone over the agreed mileage limit, or if there’s damage on the car over and above what the lender would consider to be ‘wear and tear'.Learn more about PCP