| 7.3°C Dublin

To PCP or not to PCP that is the question, car finance explained in simple terms


If the figures are to be believed many of you will be going out in January to buy a new car. Will you spend your hard earned cash or go the finance route? Taking a Personal Contract Plan or PCP might be the answer for many car buyers out there writes Bob Flavin

No matter what dealership you end up buying from a Personal Contract Plan is an agreement between you and the finance company that will mean for at least three years you'll be making payments on the car of our choice.

It's broken into three parts:



Final payment (balloon), keep paying or hand back.

The Deposit

This is the part where you need a trade in and/or cash yourself. The bigger the deposit you can put down the smaller the payments will be, for example taking the average small car price to be €13,495 and putting on a deposit of €2,000 means you'll be paying around €204 a month for 36 months.

If you just put down €1,000 deposit you'll be paying around €234 a month over the same term. That €30 a month difference is coming from the deposit, remember the more you give at the beginning the less you'll be paying throughout.

Payments stage:

Home & Property Newsletter

Get the best home, property and gardening stories straight to your inbox every Saturday

This field is required

The payments are the tough bit, for 36 months you'll have to pay the money on time and keep the car serviced at a main dealer. Add to that there'll be a millage restriction which is usually 15 to 20,000kms, you can get more but this will effect the final payment. Any damage that happens to the car during this stage will be counted at the trade in time and it can make a big difference to the final payments.

The Choices

It's the final stage of the agreement where you need to make a choice.

  1. Keep the car and pay the final payment or finance the payment over another couple of years, either way the car becomes yours to keep when the final payment is made. You can do what you want with the car now.
  2. Hand back the car and make no further payments. This will be subject to the condition of the car and service history, if you've looked after it there shouldn't be a problem. If all is well with the car you can just hand back the keys and walk away owing nothing more but remember you won't have a car either as that goes back to the dealership. You're credit rating won't be effected so long as you've made all the normal payments.
  3. Trade in the car on a new one. If the car is in good condition it can be used as a trade in on another one which starts the whole agreement again. The good part is you'll have a new car, the downside is you'll be back into another three year agreement and have to come up with the deposit. At this stage you might be in a position to upgrade the car to something bigger but remember you are entering into a new agreement so read the fine print again.


There isn't really a downside to the PCP system so long as you keep your end of the deal. Remember to ask questions and read everything before signing, even take the agreement away with you so you can look at the fine print, don't be rushed into a decision on the day.

The example numbers I've used don't include interest rates or APR, it's very important that you look at this rate because at the moment there's some really good offers out there and the interest rate is dead money in the loan agreement.

So if you are looking at financing a new car check out the offers from the Dealerships but read the fine print because there's no two agreements the same.

Most Watched