Borrowers can have attractive cars by just making a fixed monthly payment and a small deposit at the time the contract is entered into. The monthly payments are lowered by putting off a certain percentage of the total cost of the car to the end of the contract. The initial deposit required is equal to about 3 months rental or no deposit may be charged, dependant on the borrowers’ credit.
The monthly payments are fixed over a period
of two to three years. Thus, there is little of danger of fluctuating repayments in PCPs. The term of contract is generally small and thus borrowers get to enjoy newer brands of cars within a very small span of time.
PCP offers three options to the borrowers once the contract ends. These are as follows:
Under the first option, an individual using the car can exchange the old car for the new car. The value of the car derived by the authorities can be used for the purpose of deposits for the new car.
The second option is for individuals who want to keep the car that they have been using. They can do this by making the optional payment and the purchase fee.
If the car is in good condition and the stipulated mileage has not been exceeded then the user can handle the car to the dealer without having to pay anything to the lender
The resale risk is lower in PCP and the borrowers get a guaranteed future value at the end of the contract. Other methods of acquiring car loans:
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