At the end of a PCP deal you’ll have three main options. Your first is to pay the final balloon payment and own the car. Second, you could walk away with nothing more to pay. Finally, you can trade the car in, using positive equity to fund the deposit for your next vehicle.
Unlike other forms of car finance, PCP agreements let you choose from multiple options when the contract ends. While this may seem complicated, you don’t need to worry, as long as you think about it ahead of time then you can make an informed decision.
Want to know more about your options once you’ve reached the end of a PCP deal? In this guide we highlight what each option entails and things you should consider before making a decision on what to do with your vehicle on finance.
3 options at the end of your PCP finance
Option 1: Buy your PCP car
In order to keep a vehicle you have on a PCP deal, you’ll need to pay the final balloon payment. This is an additional lump sum that can be worth as much as half of the vehicle’s value.
If you can’t afford the balloon payment but still want to own the car, you can choose to refinance this sum. This involves taking out a new PCP deal, the monthly payments of which split the cost of the final lump sum so you can take ownership of the vehicle. Taking this option usually lowers the cost of the instalments too, especially if you stick to the same terms.
Until you pay off the total finance outstanding on your PCP agreement, you won’t be able to sell the car.
Option 2: Trade in your PCP car
PCP deals allow you to trade in your car for a new one on a separate finance agreement. This is a good option if the car is worth more than the remaining finance owed, because you can use the extra cash towards the deposit on your new car.
The easiest way to change your car is at the end of your agreement, when you can hand the vehicle back and take out a new deal on another new model. If your vehicle is worth more than the balloon payment, you’ll even have positive equity that you can put towards the deposit on your next model. On the flip side, if you owe more than the vehicle is worth, you’ll either have to make up the difference or roll the remaining debt into the deal for the new car.
The monthly payments for your new car will be more expensive if you’re paying off your previous vehicle on top of it.
You do have the option to swap your car early if, for example, your circumstances change during your PCP deal (i.e. you become a parent), you may need a bigger car, for example. In this instance, you can swap your car for a model that suits your requirements, taking out a new deal for it in the process.
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Option 3: Return your PCP car and walk away
If you no longer need a car, you have the option to return your vehicle to the lender with nothing more to pay. You’ll need to make sure the car is in good condition and that you’ve stuck to your agreed annual mileage. Otherwise, you’re likely to face charges at the end.
Don’t worry about making the car look like it’s in showroom condition. Finance providers will expect there to be some wear and tear from your use of the vehicle. At the end of your agreement they’ll assess your car’s condition using ‘fair wear and tear’ guidelines.
Under these guidelines a few small scratches/stone chips on the body are acceptable. What isn’t acceptable are serious dents, missing items and cracked glass, for example.
Want to find out more about car leasing and finance? Check out our other car finance guides for everything you need to know.