What is PCP?

This is a Personal Contract Plan you hold with a car dealership or garage that leaves you facing 3 options at the end of the loan term:

• Pay the balloon payment owing on the car and keep it.
• Give the car back and walk away (but what about all the hard earned cash you invested into this?) – you may be charged penalties if it does not reach their “acceptable return conditions”.
• Give the car back and sign into a new PCP for 3 years with a new car, but same make.

Comparing a PCP with a First Choice Car Loan

The main difference between a PCP and a personal loan is that with a personal loan you borrow the money, pay for your car, and own it immediately. With a PCP agreement, you don’t own the car, you are essentially hiring it for an agreed period of time, typically three – five years. You only own it when you make the final repayment.

Benefits of a Car Loan with First Choice Credit Union

• You own your car from the outset, which means you can sell it or change it anytime you wish.
• You can pay off your First Choice Credit Union car loan early, make additional lump sum payments or increase your repayments without facing a penalty. Other lenders may charge you extra for paying back your loan ahead of time.
• Repayments are calculated on your reducing balance, so you pay less interest with each repayment.
• Your First Choice Credit Union loan is insured, at no extra cost to you (T&C’s apply) – other lenders will charge extra for this.
• You can drive your new/used car at ease, not worrying about mileage restrictions or problems you may face with the lender after the loan term is up. It is up to you where you get your car serviced not tied down to one garage.
• With a First Choice Credit Union loan you decide on what make of car to purchase next.

How flexible is a PCP?

These agreements are among the least flexible forms of finance. Because the repayments are fixed for the term of the agreement, you usually cannot increase your repayments each month if you wish to do so. If you want to extend the term, you may be charged a rescheduling fee.

What to watch our for

Before you sign up to a PCP make sure you know who is providing you with the finance, that you fully understand the terms and conditions attached and you know what other things you need to look out for such as:

Mileage: At the outset you agree the number of kilometres you are going to clock up over the period of the agreement. If you keep to this, the car will have a GMFV at the end of the agreement. If you exceed the agreed annual mileage you may find that you owe more on the final payment than you think – even if you were to hand the car back it would cost you money. This is often charged at a set fee per kilometre over the agreed estimate.

Half rule: The ‘half rule’ allows you to end a PCP agreement at any time and return your car, but you have to pay half the purchase price. If you have not yet paid half the purchase price you can still return the car but you will owe the difference between the repayments you have made and half the purchase price. If you find yourself in financial difficulty, returning the car using the half rule may be a good option for you because the finance company may decide to repossess the car if repayments are not met.

Small print: At the beginning of the contract you will agree to a number of different terms and conditions. For instance, the cap on the number of miles/kilometers you are allowed to clock up over the period of the agreement. They may also request that you commit to certain car servicing requirements. Always read the small print before you sign up.

Finance options: When comparing finance options, take the time to compare the total amount payable on a personal loan with the PCP cost (the deposit, plus monthly repayments and final payment). Use our loan calculator to help you. Make sure you also compare the terms and conditions of each option.

Fees and charges: Always enquire about any additional fees and charges. You are entitled to a list of all additional charges and fees, so ask the garage for this before you sign up to any agreement. For instance, ask if there is any documentation fee for setting up the agreement, missed repayments fees or repossession charges.

How is interest charged?

If interest is charged, the rate on PCPs will vary depending on the finance company and the car you are financing. Interest is calculated at a fixed rate on the total amount you borrow for each year of the agreement. If you pay off the agreement earlier than planned, this type of agreement will often work out more expensive than if you had taken out a variable rate personal loan. Also, the deposit you pay at the beginning of the contract will have an impact on the amount of interest you pay.

Can your car be repossessed?

With a PCP the answer is YES, your car can be repossessed if the terms of the agreement are broken, for example, by missing repayments. If you have paid less than one-third of the purchase price, the car finance company can take back your car without taking legal action against you. If you have paid more than one-third of the purchase price, a lender cannot repossess the car without taking legal action. In addition, the car cannot be repossessed from your home, regardless of how much money you’ve paid back.

If your car is repossessed, the finance company will generally sell the car and the money goes towards the outstanding debt, but you will still have to make repayments until the entire debt is paid off.

Security Tips

It is worthwhile checking the registration documents of a second-hand car to make sure that it is not already owned by a finance company, in which case the person trying to sell you the car does not actually own it and therefore does not have the right to sell it to you.

 

First Choice Credit Union 

Get in touch with our lending team and avoid the hassle of PCP Finance.

• Call – 094 9022 969
• Email – loans@fccu.ie
• Apply online at – Online Loan Application
• Drop in to any of our branches in Castlebar, Balla, Ballyhaunis or Achill.