Personal Contract Purchase

 

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

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.

​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:

​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.

Funding options for business customers

Solutions for private individuals