Of the two main ways to finance a car purchase, which should you go for? THREE LETTERS HAVE come to dominate the car finance market in recent years: PCP. They stand for personal contract purchase, which is by far the most popular way to finance a new car. However, traditional hire purchase (HP) still holds appeal for some car buyers. The main benefit of a PCP deal over HP is that a substantial portion of the amount borrowed is left until the end of the loan. With an HP deal, you'll pay equal monthly payments, typically over three or four years, but with a PCP deal you'll pay a series of smaller monthly payments, with a larger payment at the end of the agreement that's often referred to as a balloon payment, or the minimum guaranteed future value (MGFV). The car is usually worth more than the MGFV, so if you don't want to buy it outright, you can use the equity as a deposit for your next car.
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