Personal purchase (PCP) is similar to a rental agreement, as you usually pay a first deposit, followed by monthly payments. Normally, you can settle your deal prematurely, but the financial company asks you to pay the difference between what your car is worth now and what you still owe (negative equity). On the other hand, you may find that at the end of your life, your car is worth more than the guaranteed future value, which means you have positive equity to contribute to your next car. A consumer (the tenant) can terminate the contract at any time by communicating in writing to the owner of the merchandise (the financial home). Consumers should be aware that breaking a lease before the normal end date is generally accompanied by penalties. You can either: If the lender terminates the contract, for example because you did not follow the repayments, it can recover the goods. As a general rule, the lender needs a court decision. What distinguishes PCP is that your monthly payments pay the depreciation of the car and not its total value over the life. Then, if you get to the end of your agreement, there is a final balloon payment that must be made if you want to keep the car. These contracts are most often used for goods such as cars and high-quality electrical appliances, for which buyers are unable to pay directly for the goods.
A rental-sale agreement is concluded and signed by the tenant (depending on the consumer) and on behalf of the owner (the credit institution). For example, if there is a retailer that has a garage, they also sign the agreement and supply the goods involved. Debts related to a rental agreement are protected against the car, so if you don`t have a strong credit rating, you`ll be accepted for HP rather than for a personal loan. Tenant buyers can return the goods, so the initial agreement is cancelled as long as they have made the required minimum payments. However, buyers suffer a huge loss on goods returned or recovered because they lose the amount they paid for the purchase up to that date. For you, this means that the money you will pay back will be the difference between what the car is worth now and what it is worth at the end of your contract (amortization) plus interest, which will be calculated on the full value of the vehicle. You pay this difference in monthly increments. Like leasing, leases allow companies with inefficient working capital to provide assets.
It can also be tax efficient than standard credits, as payments are accounted for as expenses – although all savings are offset by possible tax benefits on depreciation. If you don`t keep your car purchase payments, you may lose your car. If you are not sure you still need something, check the original credit agreement which must indicate the total price of the merchandise and the amount you must pay when you terminate the contract. The credit agreement is the legal document you signed when you purchased the goods. This information explains what leases (HP) and conditional sales contracts are. It informs you of your rights if you want to terminate the contract and the lender`s rights if you do not pay. Each surplus is then put into a new car – where it can go to the deposit to a new financing agreement that reduces monthly payments – or you can choose to deposit it directly into your bank account.