In recent years the popularity of PCP or Personal Contract Purchase has sky rocketed for those who are buying new cars. But interestingly, PCP has only recently been introduced to the leisure industry. In this section, we will guide you through the differences between Hire Purchase (HP) and PCP, their benefits and any pitfalls worth considering with either method as a funding option. This is not financial advice but information about various the funding schemes, at the bottom of this page are links to documents that will help you further.
Personal Contract Purchase
PCP was introduced to the caravan industry in September 2016, it had previously been available for those purchasing a motorhome, but for caravans this was a new concept. What exactly is PCP? how does it work and are there any pitfalls?
PCP is like Hire Purchase (HP) with one significant difference. A significant bulk of the credit is deferred to the end of the agreement. This keeps the monthly payments low. Like HP you don’t own the caravan until the final payment is made and, because there is a large balloon payment at the end of the term you are unlikely to opt for this option. More on this later. In fact, to be clear, you are renting the caravan from the finance company in a “use not own” concept.
Like HP you can make an upfront payment. A deposit. Then over an agreed timescale you make regular fixed payments. At the end of the contract you have three options:
- You can return the caravan and simply walk away, and make no further payments.
- You can make a final “balloon” payment to pay off the outstanding finance and gain ownership of the caravan.
- You return the caravan and part exchange it for a brand-new caravan and continue with a new PCP plan, using equity in the caravan as a deposit.
PCP monthly payments are calculated by the size of the deposit and length of the contract. The final balloon payment is calculated by the deposit, monthly payments and the predicted of the value of the caravan at the end of the agreement.
PCP is a great way to “use and not own” a brand-new caravan. It is a great way to have a new caravan every few years and PCP is flexible because of what happens at the end of the contract. It is ideally suited to those who are not sure what to do at the end of the finance. Sounds almost too good to be true, right?
There are a few things to be aware of however. PCP is currently only available for brand-new caravans; Also, Caravans must be fully insured and must be annually serviced by NCC approved workshops to ensure the condition and running order of the caravan is in good order. If you are likely to want to keep the caravan, PCP will require you to make a large payment at the end of the term. You will need to pay this.
If you do decide to return the caravan at the end of the agreement, the caravan must be returned in a “Good Condition” a full explanation of what is regarded as good condition can be found here.
Hire Purchase is very straight forward. You pay a relatively low deposit on your chosen caravan at the start of the agreed timescale. The timescale is agreed up front and this along with the deposit amount will affect the amount of the monthly repayments. You can agree repayment terms of 1 to 10 years.
Like PCP you will not own the caravan until the finance is repaid in full. The benefit of HP over PCP is you will own the caravan at the end of the contract and have no balloon payment to make.
Another key benefit of HP over PCP is that Hire Purchase is available for second hand caravans, whereas PCP is only available for brand new models.
For details and examples of Hire Purchase, how much it will cost you, please visit contact us or pop into one of our branches where we will be more than happy to show you how the various finance options work.
As we mentioned this isn’t financial advice, but if you are interested in obtaining finance you can find out more information on PCP or HP, how it works and for some quotations from any of our branches, where our sales team can run through some actual figures on specific models on our forecourt. Also, you can head on over to the Black Horse Finance website, where more examples and other funding options are compared.
In the next section we will discuss why part exchanging your existing caravan may be a great stress-free solution for you. If you don’t have an existing caravan maybe you would like to know more about what happens next once a deposit is paid.
Swindon, Oxford and Reading Caravans Ltd are licensed credit brokers offering finance from Black Horse and other providers and may receive commission for this service.