What is Personal Contract Purchase?

Leasing a vehicle can be an extremely good idea and has some major advantages over actually purchasing one. However, there is one large drawback, which is that the car is never yours to actually own. This problem can be dealt with by taking out a personal contract purchase plan.

 

Let’s ask ourselves who can benefit from a personal contract purchase? The easy answer is everyone but it is more suited to people who perhaps wish to drive a car that might otherwise seem unaffordable. It can also be beneficial to people who maybe want to opt out of a company car scheme.

 

Doing this means that you can use your existing company car allowance to pay for the personal contract purchase but not the company car tax. It can be especially useful to people who have a fixed mileage and travel fixed distances.

 

Personal contract purchase shares many characteristics with contract hire but the beauty of it is that you can keep your options open and have the right to buy the car at the end of the term if you wish to do so. This is done with a balloon payment at the end of the agreement and is calculated on the vehicles future value. However, if you, for whatever reason, choose not to keep the car, you can simply return it to the car company and either choose another or walk away.

 

Since mileage is taken into consideration when working out the expected depreciation on the cars value, a set mileage limit is enforced on all personal contract purchases. The monthly payments and the final optional payment are also linked to the expected future value, therefore, the better your chosen car holds its value, the better your personal contract purchase will be.

 

So, why choose to take out a personal contract purchase? Well, they are pretty low risk since the future value of your vehicle is guaranteed. You only need to give a small deposit to get you started. Monthly payments are fixed and generally lower than those of a personal car loan. A better choice of cars is made available to you and you can return it at the end if desired.

 

Personal contract purchase is also VAT free.