Bmw pcp how does it work

This product is perfect if you are looking to combine flexibility with low monthly payments. Begin by choosing which BMW model is right for you. Then, decide how much you are able to put down as a deposit, how long you want the agreement to last between 24 and 48 months and what your average annual mileage is likely to be. Next — and this is what really sets BMW Select apart — we take a portion of the cost of your BMW and freeze it until the end of your finance agreement.

This becomes your optional final payment and also reduces your monthly payments. To work out the size of this optional final payment, we use our expertise to estimate what your BMW will be worth when your finance agreement ends. At the end of your agreement, you will be asked to choose between three options: 1. With so many finance options available, it can be difficult deciding what option is right for you. Here at Williams Group, we want to make that process easier by giving you all the information to help you decide what is right for you.

How does PCP work? Can I settle my PCP deal early? Pros Lower monthly repayments when compared to other finance options where you can keep the car at the end of the contract. If the car is worth more than the Guaranteed Future Value GFV at any point in the agreement, you can use this positive equity as a deposit towards a new car.

You can hand the car back if you decide not to buy it and simply walk away once the final payment is made. You get to drive away in a new or used car without having to worry about selling it on in the future Remember If you want to buy the car, you will need to pay the final balloon payment or Guaranteed Future Value GFV You will need to agree a mileage allowance at the start of your contract, if you go over this, it will effect your GFV and you'll have to pay a fee for the excess millage when you return the car.

How does PCH work? Can I settle my PCH deal early? Pros You get to drive away in a new or used car without having to worry about selling it on in the future. Maintenance can be included in most PCH packages and can be built into the repayments resulting in trouble free motoring during your contract Lower monthly payments compared to finance packages that let you keep the car at the end of the contract Remember How does HP work?

Can I settle my HP deal early? Pros You get to drive away in a new or used car sooner than expected and it might be worth more than you thought you could afford Unlike PCP and PCH contracts you won't need to agree a mileage at the start of the HP agreement. Once you make the last payment and any fees associated with your contract, you'll own the car. Get in Touch. Make an Enquiry.

Find Us. Join our Journey. Financial Disclosure. Read More. As with all forms of credit it pays to be aware of the advantages and disadvantages of taking out a PCP. The flexibility and guarantee of a future value of the car when you come to the end of the plan are appealing, but dealers love PCPs too because the way they are structured means that buyers will come back to the same brand every three years or so and trade into another car. A PCP finance deal will see buyers paying instalments that cover part of the cost of a new car — usually around a third of the list price — which means that these monthly outgoings will be lower than if you take out a loan to buy a car outright.

If you're looking to buy a car to keep for the long term, then a PCP probably isn't the right kind of finance for you. However, if you must have the latest car to keep up with the neighbours, then a PCP can make a lot of sense. You'll have a brand-new car on your driveway every three years or so, and because you're not buying outright, you can get a bit more car for your money than you'd be able to get by taking out a conventional loan.

This difference between the balloon payment and the car's value can then be used to help reduce the deposit you will pay on the next car the dealer will line up for you when the current PCP runs out. This is ideal if you want to drive away in a car from the same manufacturer, although isn't great if you've had a bad experience with the manufacturer and want to walk away.

You can't take this cash away and spend it elsewhere - it's just there to sweeten any future PCP you may want to sign up to. If you do walk away, that's it - no car, no cash back, but at least you don't have to cover the final balloon payment.

Once the monthly payments stop, that's it, you're back to square one. The only outstanding payments there may be at this stage will be if you've exceeded the mileage allowance for the term of the PCP, or if there is damage to the car that will need repairing.

A PCP can be a good way of owning a car for a short term, then if your circumstances change, you don't have to worry about the financial burden any more once you've handed the car back.

But then you won't have the car as an extra bargaining chip when it comes to arranging a deposit on your next car. PCP deals are particularly flexible, with buyers able to spread their payments out in a way that suits them.

For example, you can pay a larger deposit in order to reduce your monthly payments. Opportunity of equity. The BMW personal contract purchase plan provides the benefits of driving a higher specification BMW for lower monthly oulay, unlike traditional methods of car finance, this is achieved by deferring a percentage of the total cost of the BMW to the end of the contract, which is known as the guaranteed minimum future value.

You will make lower payments than traditional financing simply because you are essentially only funding the depreciation of the vehicle. At the beginning of the agreement, you decide on the total mileage you expect to do. If, at the end of the agreement, having chosen to hand your BMW back to the finance company, your mileage exceeds the agreed level, you simply pay a fixed amount for every extra mile.

The customer will normally benefit from a slightly lower finance rate with a BMW lease purchase car finance product as there is no guarantee offered at the end of the contract, the deferred lump sum amount at the end of the agreement is known as the Residual Value RV or balloon, and this has to be paid by the customer for outright ownership of the vehicle.