Personal Contract Purchase (PCP)
The balloon payment is calculated at the start of the contract agreement – which tends to be the vehicle’s original value, minus the depreciation it has suffered.
However, you’re not contracted to make this payment. If you choose to, when the time comes you can simply walk away from the deal.
Essentially, at the end of the contract you can:
- Pay a final balloon sum to own the vehicle outright
- Choose to embark on a new leasing deal
- Hand the vehicle back to the company and decide on something else for the future.
What are the benefits of a Personal Contract Purchase?
With a Personal Contract Purchase there is a range of excellent benefits, so considering this agreement makes complete financial sense. Among the advantages to a PCP contract:
- There’s little risk involved, as you’ll lease the vehicle without worrying about depreciation rates.
- You’ll only have to pay a small deposit, followed by cheap monthly installments.
- There’s a lot more flexibility when it comes to PCP agreements, as there’s the option to buy the vehicle at the end of the contract.
- You’re more likely to be able to afford a more expensive model than you could otherwise pay for.
Arranging the final balloon payment
When arranging your PCP agreement, you’ll arrange a suitable balloon payment to make at the end of the contract. If you make this one-off final payment, you’ll own the vehicle. If not, you can commence on a new deal. The final payment is referred to as a Guaranteed Minimum Future Value and means at the end of the contract, this is what the car will be worth. The value takes into account the vehicle’s depreciation rate over the time you lease the car. Typically, PCP agreements will have low-interest rates as they tend to be favoured by manufacturers. Just be sure to select the right mileage for the contract you’re after, as this will avoid any charges being applied.
For more information on a Personal Contract Purchase agreement, or to arrange yours with Autograph Contracts, simply call us today on 01634 687070.