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What Is HP?

What Is PCP?

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What is Personal Contract Purchase (PCP)?

A Personal Contract Plan (PCP) is a type of hire purchase agreement.

This car finance package offers lower monthly payments over a three-year term compared to a traditional Hire Purchase agreement for the same period of time. PCP provides a flexible financing solution tailored to your needs. With a Guaranteed Minimum Future Value (GMFV), you don't need to worry about the vehicle's resale value, depreciation, or costs like NCT fees associated with owning a car for over a long period of time.

How does PCP actually work?

Under Volkswagen Financial Services industry leading PCP product, Volkswagen Financial Services Ireland purchases the car on your behalf. You choose a deposit percentage between 10% and 31% depending on the type of car. Then you pay an agreed monthly instalment over the agreed term of 37 months. A portion of the car's value is deferred until the end of the agreement (37th payment). This amount is the minimum value that Volkswagen Financial Services Ireland guarantees the car will be worth at the end of the agreement, also known as the Guaranteed Minimum Future Value (GMFV).

What are the advantages of PCP?

Monthly payments on a car financed by PCP are usually lower than if your car is financed by a Hire Purchase agreement.
If you decide not to buy the car, you can simply walk away when you've made all the payments.
Similar to PCH, you can drive away a new or used car every few years (dependent on the chosen term) without worrying about selling it on.
If your car is worth more than the Guaranteed Future Value then you can use that equity towards a deposit on a new car.

What should you consider when opting for a PCP?

Similar to PCH, you will need to agree on a mileage allowance at the beginning of your contract and there may be excess mileage charges if you exceed this.
You won’t be able to sell the car without settling the finance.
You won’t own the car until you have made all of your repayments.
You’ll need to keep the car properly insured, maintained and in your possession until the full value is paid off.

Find and finance your next vehicle through PCP

What is Hire Purchase (HP)?

Hire Purchase is a way to finance buying a new or used car. You will normally pay an initial deposit and will pay off the entire value of the car in monthly instalments. When all the payments are made, the Hire Purchase agreement ends, and you own the car outright.

What are the advantages of HP?

You’ll be able to drive away a car that you may not have managed to buy outright.
Unlike a PCP or PCH contract, you won't need to estimate your mileage at the start of your Hire Purchase agreement, so you'll avoid excess mileage charges.
Once you’ve made your final monthly payment, including the option to purchase fee, you'll have full ownership of the car.

What should you consider when opting for HP?

Monthly payments may be higher than some other finance options, such as PCP, as you're paying off the full value of the car.
You won’t be able to sell the car without settling the finance.
You won’t own the car until you have made all of your repayments.
You’ll need to keep the car properly insured, maintained and in your possession until the full value is paid off.

Can I settle my HP agreement early?

The short answer is yes, you can end your finance early. There are different provisions within each finance agreement that allows you to do just that. If you have got through two-thirds of the way through your finance agreement, the options to end the finance agreement early open up.

For a Hire Purchase agreement, there is an option of paying it off early through a settlement fee. A settlement fee covers the cost of any remaining unpaid instalments and interest payments remaining on the agreement. Once the settlement fee is paid, you take full ownership of the car early.

What is GAP Insurance?

GAP Insurance protects you against unexpected financial loss on your car in the event of an accident, fire or theft which results in a total loss. You will be covered for the difference between your motor insurance pay out and what you paid for the car, including any finance repayments outstanding (terms and conditions apply).

So if your car is written off, or stolen an not recovered, you are spared the worry of having to fund the purchase of a like-for-like replacement.