Personal Contract Purchase (PCP) deals have quickly become one of the most popular ways for young motorists to own a car. By allowing young people to pay for a vehicle in monthly instalments, after which point they can hand the car back or pay the remaining costs at the end of the term, they are seen as a cost-efficient alternative.
There may be advantages to PCP compared with buying a car in a one-off bulk payment. They allow you to better manage your money in the short term, for example, and don’t require the same kind of commitment as car finance does. However, if a driver is unable to hand the car back, PCP can become somewhat problematic.
It is estimated that just short of half a million cars are written off in accidents every single year. An overwhelming majority of the time, this is because they have been involved in a heavy collision that has rendered the car irreparable. Meanwhile, an approximated 80,000 cars are stolen in criminal acts across the United Kingdom. Drivers who have their car on a Personal Contract Purchase stand to lose a lot of money if they fall victim to either of these.
When a driver has the car they own stolen or is involved in a serious collision, it will inevitably lead to a period of distress as they await an insurance pay out that will hopefully offset the cost of a replacement. This isn’t quite as simple, however, if you are tied to a Personal Contract Purchase deal. These drivers will not be able to claim back the full amount they would normally.
Insurers generally only pay the market value of a car if the vehicle you own on PCP is stolen or written off. That will not cover the full financial settlement and will leave unfortunate young drivers in this situation facing an unexpected debt. Therefore, these are circumstances you should be aware of before you consider a Personal Contract Purchase.