PCP is a Personal Contract Plan which is a form of hire purchase agreement. It is a car finance package that has lower monthly payments over three years compared to a Hire Purchase contract over the same period. With PCP you can have a flexible finance plan to suit your own circumstances. With a Guaranteed Minimum Future Value (GMFV), there is no need to worry about the re-sale value of the vehicle, depreciation or the NCT costs associated with owning a car for over a longer period of time. Under Audi Financial Services industry leading PCP product, Audi Financial Services purchases the car on your behalf. You choose a deposit percentage of between 10% and 31% depending on the type of car. Then you pay an agreed monthly instalment over the agreed term of 37 months. A portion of the car’s value is deferred until the end of the agreement (37th payment). This amount is the minimum value that Audi Financial Services guarantees the car will be worth at the end of the agreement, also known as ‘Guaranteed Minimum Future Value’ (GMFV).
The key payment aspects are:-
1. The deposit – the deposit is typically between 10% and 31% of the value of the car. The deposit can be paid in cash or if you already own a car, you can trade this in for part or all of the deposit, depending on its value. 2. Monthly repayments – PCP contracts are typically structured over three years but include an option to settle the contract at any time. PCP’s typically have lower monthly repayments in comparison to other forms of car finance. 3. Guaranteed Minimum Future Value (GMFV), the final payment, is how much it will cost you to own the car at the end of the contract. It takes into account such things as the car being purchased, length of the contract, the condition of the car at the end of the contract and the annual mileage. This final payment is determined at the beginning of the contract, based on Audi Financial Services estimate of the future value of the car. This value is guaranteed by Audi Financial Services meaning you do not bear any risk in relation to the future value of the vehicle. This is a real benefit, particularly in a market where car values may be difficult to predict.
What are the options at the end of the finance agreement?
At the end of a PCP contract, there are three options:
1. Part-exchange the vehicle for another vehicle of your choice; 2. Keep the current vehicle – pay the final instalment plus the ‘option to purchase fee’ and the car then belongs to you. Alternatively you can speak with an Audi Financial Services customer care representative about options to extend the current finance agreement and repay the remaining amount (GMFV) over an agreed period; 3. Return the vehicle to the dealer with no further repayments.
What happens if the actual value of the car is below the GMFV?
Audi Financial Services guarantees the minimum future value at the end of the agreement so both you and the dealer are protected. Any shortfall is covered by Audi Financial Services. As previously referred to, this is subject to the condition of the vehicle and the annual mileage.
What happens if the actual value of the car is greater than the GMFV?
At the end of your agreement if you choose to sell your car either to a dealership or privately, the difference between the sale price of the vehicle and the agreed GMFV is known as your equity.
For example: GMFV = €10,000 Sale Price = €12,000 Equity = €2,000
You can choose to exchange the vehicle, or use the equity, as part of the deposit for a new vehicle
Can I settle my PCP agreement early?
You are free to settle your PCP finance agreement and take ownership of the vehicle at any time. However, fees and charges may apply so we recommend you contact your dealer for further information. Additionally, you can part exchange your vehicle for a new vehicle at any time and, at the same time, upgrade your PCP finance agreement if you so wish.
What happens at the end of the contract if your actual mileage is greater than that stated in the finance agreement?
Our PCP product is based on the future value of the vehicle. That value is determined by the wear and tear on the vehicle and calculated on the basis of a maximum mileage (or kilometre) usage. As part of the end of contract conditions, an excess charge applies where that usage is exceeded but only if you wish to handback the vehicle to Audi Financial Services and not in cases when you wish to avail of the option to sell or trade in the vehicle. The excess mileage (kilometre) charges vary from brand to brand however the average charge is 6 cent per km.
Who owns the car and what are the implications for you, the customers?
As with all forms of Hire Purchase, until the final payment is made in settlement of the PCP agreement, the car is legally owned by Audi Financial Services (although it is registered in you, the customer’s name).
How are PCPs regulated?
It is important that we highlight a few distinctions.
(a) Volkswagen Financial Services Ireland as an entity is authorised by the Federal Financial Supervisory Authority in Germany and is regulated by the Central Bank of Ireland for Conduct of Business Rules, which include the general rules within Consumer Protection Code. (b) The PCP product, which is a form of Hire Purchase Agreement, is primarily regulated under the Consumer Credit act 1995, however it is a specific exclusion within the Consumer Protection Code. (c) Dealers are authorised as intermediaries by the Competition and Consumer Protection Commission.
In addition to the regulations referred to above, the rights and protections for consumers in respect of PCP are provided for within other regulations such as general contract and provision of services law, data protection and e-privacy law among others.