Experts in Vehicle Leasing

Personal Contract Purchase

Personal Contract Purchase

All the benefits of leasing, but with the option to own the car

Personal Contract Purchase provides a popular and flexible solution

In return for paying an initial deposit and fixed monthly instalments, you can benefit from low monthly payments but have a number of choices open to you at the end of the agreement.

  • As with contract hire this offers a highly cost-effective route to gaining a new car every few years at far less cost than buying yourself
  • Low initial deposit and monthly instalments
  • No nasty surprises – monthly repayments and the optional final ‘balloon’ payment are fixed from the outset
  • Option to include maintenance with breakdown cover
  • Ability to claim authorised mileage allowance payments (AMAPs) or tax relief on the difference between AMAPs and what they are actually paid
  • Flexible options at end of agreement that give you the chance to own the car if you want
  • Protection from any fall in used car prices thanks to the guaranteed minimum future value for the car
  • Equity to put towards a new contract if car is worth more than guaranteed minimum future value at the end of the agreement
  • Early repayment options

​How it works

Personal Contract Purchase – Hire Purchase (or ‘PCP HP’) is our most popular PCP product and has become increasingly popular in recent years for its cost effectiveness and its flexibility.

In essence, this is like a hire purchase agreement but with the option of a final ‘balloon’ payment at the end of the agreement if you wish to own the car.

The amount of this payment is calculated at the start of the agreement based on our prediction of the future value of the vehicle at the end of the agreed contract term and mileage. This is referred to as the Minimum Guaranteed Future Value (‘MGFV’) and is guaranteed.

Your payments are based on the difference between the original purchase price and the MGFV. As you aren’t paying to own the car itself, you benefit from lower regular monthly instalments than a comparable fully amortised HP agreement over the same term. You can also claim authorised mileage allowance payments (AMAPs) from your employer and if you are not paid the full AMAPs allowed by the Government, you can claim tax relief on the difference.

Maintenance can also be included with breakdown cover. However, you will need to sort comprehensive insurance, which is not included in the agreement.

​At the end of the agreement – which is typically between two and four years – you have three options:

  • 1. Choose to buy the vehicle by paying the MGFV
  • 2. Return the vehicle to us and end the agreement
  • 3. Enter into a new agreement with us using any equity above the MGFV as a deposit

​We bear the residual value risk of the vehicle as we have undertaken to buy the vehicle back at the end of the agreement at the pre-agreed price in the MGFV. This means that you are protected from any falls in the used car market value but you can also benefit from any upside should the vehicle be worth more than the MGFV at the end of the agreement. Any equity can then be used as a deposit for your next PCP agreement.

It also means that ALD owns the vehicle until you’ve made all payments and decided you want to pay the MGFV.

Early repayment options are also available and cover voluntary termination, early full settlement and early partial settlement.