Personal Contract Purchase arrangements represent a significant portion of UK automotive financing, with representative APR rates starting from 9.9% based on individual circumstances. The mathematical structure of PCP differs fundamentally from traditional hire purchase because
Car Plus demonstrates how monthly payments cover depreciation rather than full vehicle value. Consider a £20,000 car with projected £8,000 residual value after three years requiring only £2,000 deposit. Monthly payments cover the £12,000 depreciation plus interest, typically resulting in significantly lower monthly commitments. At contract termination, three options exist including paying the £8,000 balloon payment for ownership. Credit assessments remain mandatory, though poor credit applicants retain access through specialized lender panels. Excess mileage charges apply when contracted limits are exceeded, while fair wear and tear provisions cover normal usage damage.
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