What is PCP finance?
Understanding PCP van finance
Choosing your next commercial vehicle requires careful consideration. But once you’ve picked your perfect van, you’ll need to decide on the best way to fund it. Van finance is loaded with jargon, so it can be difficult to know what the best option is for you. At Vanwise Group, however, we’re here to help. Here’s our guide to PCP finance, so you can choose your vehicle and finance it with confidence.
How does PCP work?
If you are purchasing a van for use as a sole trader or in place of a car, PCP – which stands for Personal Contract Purchase – is a great option. It gives you plenty of flexibility and ensures your monthly payments can remain low.
The monthly payments on PCP van finance only cover the depreciation value of the vehicle i.e. how much it is expected to decrease in value over the period of the contract.
You’ll first pay a deposit and choose the length of the agreement you prefer – usually between two and five years – as well as give an anticipated annual mileage. The monthly payments will be based on this, and you will pay them until the end of the contract. When the final payment is made, you have three options:
- Return the van. If it’s still in good condition and you haven’t exceeded the mileage limit set at the start of the contract, you’ll have nothing more to pay.
- Keep the vehicle. This requires you to pay a lump sum, often know as the balloon payment or Guaranteed Future Minimum Value, and means the van is then yours. You can choose to refinance in order to cover the balloon payment.
- Part-exchange the van for a new one. You bring the vehicle back and if it’s worth more than the balloon payment, the difference can be put towards the deposit of your next van. This will in turn lower your next set of monthly payments.
- Low monthly payments
- Flexibility to decide on a course of action at the end of the deal
- Helps you regularly upgrade your van to a newer model
- Fees are incurred for exceeding the mileage limit, usually on a pence per mile basis
- The van must be kept in good condition to avoid damage fees
- The interest charges may build faster than with a Hire Purchase contract
What are the pros and cons of PCP?
The advantages of choosing PCP finance are:
The disadvantages of choosing PCP van finance are:
Used vans in Kent and Essex
Here at Vanwise Group, we have a range of vans for sale at our used van dealersin Kent and Essex, each of which offers a reliable and cost-effective solution for your business. These are all available with van contract hire agreements, and a warranty for your peace of mind. To find out more about the vans on finance that we have in stock, contact us in Maidstone or Harlow today.