Top 5 PCP finance myths uncovered

  • Five common misconceptions about car finance
  • We reveal the truth behind the myths
  • Visit our dedicated section for a quote today

Personal Contract Purchase (PCP) is by far the most popular way to buy a new car these days.

You pay a set amount each month for an agreed term and at the end you can either hand the keys back and walk away, pay the balloon payment to take ownership of the car or go straight into another new PCP deal.

The flexibility of having set monthly payments can be a big draw for many as it makes it easier to manage your family finances, plus many packages bundle in servicing and maintenance contracts too - one less thing to worry about.

But  PCP is not always the easiest thing to understand with so much jargon and small print to get your head around.

To help, here we dispel the top five of the most common misconceptions about PCP finance.  

1. You can’t get car finance with bad credit

Historically this may have been the case, but car finance, in particular PCP, is more readily available these days. Most, if not all, lenders will consider your credit score, but it will not be the only factor they take into account when approving your loan.

Some of the 0% APR deals and bundles may only be available to those with a higher credit rating though, so we’d strongly recommend shopping around to find the best deal. 

If you do have bad credit, leasing may help.

2. You must have a deposit

Saving money can sometimes be virtually impossible with unexpected bills and expenses always cropping up. If you want a new car but don’t have the savings to put down a deposit, the good news is that it is possible to buy a new car and drive away from a dealership without paying a penny upfront.

You need to manage your expectations, though; most premium manufacturers like Audi and BMW are unlikely to offer zero-deposit deals, and most come with higher APR percentages too.

To find out more about non-deposit finance, read our guide here.

3. You can only have finance for one car

Lots of us need two cars in our household, some even have three or more sitting on the driveway if you’ve got older children or young adults living at home.

As with many types of credit, you can apply and have a number of car loans running at the same time. As long as the lender is happy you’ll be able to pay them all back, you shouldn’t have any trouble in being accepted.

Want to learn more about car finance? Take a look at the links below:

4. The car belongs to you and you can add as many modifications as you like

Sadly this is not the case. If you take out a PCP deal then the lending company remains the owner until the balance of the car is paid in full.

This means they can place many restrictions on the deal to keep their asset in tip-top shape, including where and how often you service and maintain the car, and what modifications you make.

If you’ve got your heart set on modifying your car, always ask the lender's permission first. It could end up costing you dearly when it comes to the end of the contract if you don't.

It’s also important to note that insurance companies have separate concepts of ‘Owner’ and ‘Keeper’. When asked by the provider, the legal owner of the car is almost always the finance company, not you, which unfortunately may affect your premiums. For more on PCP and insurance, read our guide here.

5. Getting an early upgrade is a great deal tailored for you

We all like to feel special and when you get the phone call two years into your PCP contract with an exclusive offer to upgrade, most of us are keen to hear what the deal is.

Unfortunately, almost all finance companies will be set up to contact customers who are in the final third of their PCP agreement and the deal they offer you will almost always be more expensive than your current contract.

Yes you’re getting another brand new car, but remember they are calling because they want you back in the showroom to sell you another car, the power is still in your hands and there’s room to haggle.

If you’re considering the early upgrade option, make sure the lender gives you a full breakdown of the value of your current car now you’re ending the contract early and how much you have paid to date. This will give you a full picture of any negative or positive equity in your current car that could be passed over.

If you’re considering buying a new car on finance, make sure you visit our finance section for a quote - we work with more than 20 lenders to give our customers access to more than 100 different lending options. 

Need more help choosing your next new car on finance? These articles may help:

How to buy a brand new car for the cost of a monthly mobile phone bill

New car finance vs used cars

Top 10 new cars for £99 a month

Car finance: which option is right for you?

The small print of dealer finance