How does PCP work at the end of term?

  • Return car, buy it outright, or trade it in
  • Take ownership with optional final payment
  • How to avoid end-of-contract charges
End of PCP agreement

We bet if you’ve come to us via Google, your Personal Contract Purchase (PCP) deal is nearing the end of your agreement and you’ve found yourself asking ‘how does PCP work at the end of the term?’

At the end of your PCP finance contract there are basically three options to choose from. Keep reading for those, or skip to the PCP end of contract section to run through our handy end of PCP checklist and find out what you need to do if you’re not buying the car outright.

Buy the car

Built into any PCP agreement is the facility to buy the car outright at the end. This is sometimes known as the balloon payment, guaranteed future value or guaranteed minimum future value. Pay this, either with cash or a loan, and the car is yours.

If your car is worth more than the optional final payment (and it may well be because of used car pricing being through the roof due to chip shortages) you can always buy the car, sell it and make a tidy profit. 

What happens at the end of a PCP agreement?

Or you can take any equity in the car (where the car is worth more than what it’ll cost you to buy it) by handing it back and taking out another PCP contract.

Trade it in for a new one

This is a common option to choose. Assuming you have equity in the old car, you can use this as a deposit on a new finance deal. If you don’t have equity, you’ll need to stump up more money for the deposit.

It’s important not to bank on there being additional equity in your car at the end of the agreement because the market can change quickly, and easily within the span of a typical three-year deal.

Return the car to the manufacturer

If you’re not bothered about keeping the car, you can just hand it back. If you choose to do this, you’ve effectively rented it, which is pretty much how leasing works.

Leasing contracts tend to be cheaper, so if you are thinking of doing this you should research them for your next car.

PCP end of contract checklist

If you’re returning your car, you’ll need to ensure it’s up to code with the contract you’ve signed. Below we’ve highlighted a list of things to check before it gets picked up. Failure to comply with the terms and conditions of your contract can result in hefty fines.

Mileage

If you’re above your mileage limit, or think you might venture past it soon, contact the manufacturer. They may be able to up the limit for a small fee, rather than you paying a big fine.

Maintenance

You’ve probably read that your car needs to be serviced in line with the manufacturer’s service schedule. And the car’s Guaranteed Future Value is usually dependent on it having a full manufacturer service history. Fail to get that (by going to an independent garage for example) and you might see yourself slapped with a fine.

Cleaning, dings and dents

Your contract will state you can’t have any repairs beyond normal wear and tear. This means light scratches and stone chips are fair game. But dents, curbed wheels and cracked trim generally aren’t.

PCP cleaning

Before handing the car back we recommend giving it a thorough clean yourself so you can see up close and personal if anything needs addressing. Then if anything does, sort it now rather than leaving it for the dealer to correct. 

Fixing curbed wheels can cost between £50 and £100 per wheel, but the fine the manufacturer will give you will generally be more.

How does PCH work at the end of term?

When looking at new finance schemes, be sure you know whether you’re looking at PCP or PCH leasing contracts – as there are different rules surrounding returning a car.

While you can return a car in the middle of a PCP contract, it’s much more difficult – and can be far pricier to do this – with PCH leasing.