Personal Contract Purchase (PCP) plans allow you to break the cost of your vehicle into manageable monthly payments, deferring a significant proportion of the credit to the final repayment at the end of the agreement.

You agree an initial deposit, how many miles you are likely to travel each year and how long you want the agreement to run for. Then, the finance provider will calculate the Guaranteed Future Value (GFV) of your vehicle and confirm your monthly repayment.

At the end of the agreement, you have three options:

(1) TRADE IT. Part exchange the vehicle subject to settlement of your existing finance agreement.

(2) OWN IT. Take ownership of the vehicle by paying the final lump sum.

(3) GIVE IT BACK. Return the vehicle to forgo the Final Lump Sum Repayment. If the vehicle is in good condition and hasn’t exceeded the agreed maximum mileage you will have nothing further to pay.

Your finance provider should have outlined what ‘good condition’ looks like at the start of your agreement. As the borrower, you must adhere to these principles, allowing for fair wear and tear.

Fair wear and tear is not to be confused with damage, which occurs as a result of a specific event or series of events. These include impact, inappropriate stowing of items, harsh treatment, negligence or failure to service the vehicle in accordance with the manufacturer’s recommendations and any applicable warranty.

How do you avoid these fees? Click here for guidance on preventing end of contract recharges.

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Dealing with finance providers

If you purchased your vehicle through a franchised dealership, PCP agreements are usually arranged through the manufacturer’s car finance arm – so Ford Credit, for example, Mercedes Benz Financial Services or BMW Financial Services.

Many independent dealerships and car supermarkets get their finance from big banks' consumer arms, allowing them to offer the same range of deals as the manufacturer-tied dealers. Black Horse Motor Finance (part of Lloyds Banking Group) and Santander Consumer Finance, for instance, supply finance deals to non-franchised dealerships.

Either way, if you have a Personal Contract Purchase finance agreement, we can help you navigate the end of contract process. Whether you’re looking to return the vehicle and not pay any excess mileage costs, or you’re worried about unfair end of contract recharges, simply take action in four simple steps.

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