Disadvantages of PCP Car Finance – The Negative Side


A PCP is a type of car finance that is very popular amongst car buyers. Being accepted for this kind of loan means you can drive around in the car of your dreams without having to pay out a huge amount of money or large monthly payments either. A PCP car loan comes from a finance company who can give a potential car buyer a lot of different options when it comes to their vehicle ownership.

What Are the Personal Contract Purchase Disadvantages?

Contract Agreement

PCP’s offer up a chance to pay off the estimated value of the car at the end of the contract minus the deposit at a fixed rate over a set number of months. Contracts can last anywhere between two and four years. However, before you enter into this kind of deal you should know about the personal contract purchase disadvantages.

You don’t legally own the car

When you have a new car, one of the greatest things is knowing you own that vehicle and that it’s yours. Something you might have to think twice about with a PCP is that the car is actually the legal property of the finance company and not you. If you choose to make the balloon payment at the end of the contract, the car becomes yours. But this point could be two to four years away. At this point, new models of car will be out on the market, and you could want to enter into a brand new PCP to take advantage of all the latest technology and upgrade early.

Annual mileage allowance

Car Mileage Excess Charges

At the beginning of the agreement, before you even sign on the dotted line, a finance company may agree on an annual mileage allowance for you. This is a number that dictates how many miles you can drive each year. The lower the amount of miles this limit is set at, the lower your monthly payments which means a lot of people try to estimate the lowest amount possible to keep the costs cheap.

However, there’s a major downside to this mileage allowance. If you go over the limit by any amount of miles, there are strict fees involved. This could be charging anything from 1p per mile you’ve exceeded that limit by. If you decide not to purchase the car at the end of the agreement, this fee will have to be paid for.

You can’t modify or sell the car

Fair Wear And Tear VT

The vehicle is the property of the finance company, not you, until you make that final balloon payment. If you’re someone who likes to modify their car, this is something you cannot do without the permission of the finance company if you have a PCP. Taking it upon yourself to change the car without their permission means they will probably charge you a penalty fee. You also don’t have the legal right to sell the car either but you can swap the contract over to another person if the finance company allows it.

Cancelling early and returning the car

Trade In Options

Sometimes those monthly payments involved with a PCP simply become unaffordable. You can cancel a PCP agreement early, but there are penalties and fees involved. The finance company can also take the car away from you if you fall behind on your payments.

Any potential car buyer should think about these disadvantages very carefully if they are considering having a PCP. It’s definitely not an option for everyone, so make sure you do all of your research properly before entering into a PCP deal.