A Personal Contract Purchase (PCP) is one of the four major finance plan options for any motorists looking to buy a car, and it has plenty of benefits that make it more preferable to the likes of a Hire Purchase (HP) or a Personal Loan (PL). That being said, there are risks involved by entering into a PCP agreement that consumers often do not realise, and we will be taking a look at some of these in this article today.
One of these concerns the deposit that is required beforehand and would sit alongside the regular monthly payments. Depending on what car you go for, this deposit could be quite large to the point that it may put a temporary dent in your finances. A PCP operates with the inclusion of a deposit, but not every finance plan requires this. Their own terms and conditions may seem inferior to those of a PCP, but they do have the advantage of not having a deposit. So, purely from a financial perspective, a deposit could be a risk that might have a greater impact than an aspiring driver initially realises.
Next up, it has been suggested that entering into a PCP agreement for a car can occasionally lead to negative equity on the vehicle. A car will always be of lower financial value come the end of a finance plan as opposed to its beginning, due to the miles on the clock and the general wear and tear that comes from so much regular driving. However, if the car depreciates at a quicker rate than what was originally anticipated, it could mean that the residual price of the vehicle – and what the driver could potentially make from a trade-in – is very different from its actual value, which could impact a driver’s equity when the time comes to change motors. This also impacts the dealer, who will find that they will be selling the vehicle for less than what it would technically be actually worth at that point.
Lastly, as the name of our website suggests, a consumer also has to be mindful of shady dealers that are mis-selling PCP, either intentionally or otherwise. Once a contract is signed, even if a second opinion from an outside party deems that the T&Cs are totally unfair to the motorist, it will be very hard to change this, unless the car proves to be totally unsuitable and thus unable to provide the service that the PCP finance plan had suggested. Therefore, it is very important to understand what you are signing up for, and to know whether the dealer is credible and trustworthy, otherwise it can be a big risk that could lead to plenty of problems further down the line should the car not live up to expectations.
These are the main risks that consumers face with PCP agreements. To read more about this subject take a look at our news section here: www.pcpmissold.co.uk.