Getting cars through Personal Contract Purchase (PCP) schemes has risen in the UK. Considering the economic stability, the world is going through serious economic problems, yet cars have become necessary for some individuals. Commuting without a vehicle is impossible with car-hailing rides as they are expensive. However, the bus routes take a longer time to reach the destination. Therefore, people have moved towards a better commuting solution – getting cars with PCP plans. While choosing cars with a PCP scheme, you must ensure that you properly understand the agreement as a borrower to avoid PCP claims at a later stage.

How Do PCP Plans Benefit the Individual?

The PCP plans come with minimum finance because the individual has to make monthly payments. They can make an initial deposit to secure the deal, but that is not a necessary step. Other than initial deposit, there are more advantages to the PCP plans:

Choice of Changing the Car – at the end of every PCP agreement, you can get a new car on the new PCP contract. However, the monthly payments will differ from the previous one, depending on the car's value in the market and current interest rate. As a driver, you can experience driving in multiple cars all your life and do not even have to make full payment.

Affordable Price—You will pay monthly installments according to the car's current value, not the full actual value. You do not have to pay a guaranteed minimum future value (GMFV) while borrowing the car through a PCP plan.

Ownership of the Car—If they pay the GMFV, the driver can purchase the car and its ownership rights.

The most enjoyable situation in PCP plans is when the driver can exchange the vehicle for a popular and loveable choice in the car industry, which offers comfort and luxury.

How Do PCP Claims Work?

However, PCP plans a flexible and cost-effective plan for drivers who cannot afford a car at full price. Though no initial deposits are involved in the PCP plans, deposits can secure the deal for the driver. Sometimes, the dealers would ask for 10% of the car's value at the beginning of the contract. It depends on the vehicle's value and how much they should charge from the borrower. The maths is very simple here. The finance company will determine the car's financial value and request a percentage accordingly. That payment is excluded from the initial deposit but will be paid in monthly installments. Importantly, the average interest rate may vary from 4-7%.

With a PCP agreement, individuals often have PCP claims while using the vehicle. When signing the PCP agreement, drivers are rushed to sign the contract by the salesperson. Sales techniques are often successful for the seller, but they become a problem for the buyer. The lender tends to provide a quick review of the PCP agreement, leaving a lot of questions to the borrower that they may think about later. For example, they may have a question regarding the responsibility of the vehicle's repair if something goes wrong with the vehicle after the PCP plan.

How to Avoid PCP Claims?

An alternate plan to PCP plans could be for the driver to buy the car by making a balloon payment. This is a full payment for the vehicle that the car borrower is buying. However, having ownership of the car will prevent PCP claims in the future.

If you have not bought the ownership of the car and have PCP claims regarding the vehicle, you can choose a solicitor from a renowned claims management company to help you with compensation.