Pcp rules (UK)

What is this?

PCP (Personal Contract Purchase) is a type of car finance agreement popular in the UK, where the consumer pays monthly instalments with a final balloon payment to own the car, or returns it if mileage and condition limits are met. Unlike hire purchase (HP), PCP typically includes a guaranteed future value (GFV) set at the start, which determines the optional final payment. PCP agreements are regulated under the Consumer Credit Act 1974 and overseen by the Financial Conduct Authority (FCA), with specific rules on transparency, affordability checks, and early settlement rights.

Key legal requirements

• Written agreement must clearly state the GFV (Guaranteed Future Value) and mileage limits
• Lender must conduct affordability assessments before approving the agreement
• Consumer must receive a pre-contract credit information sheet (SECCI) explaining key terms
• Early settlement rights must be explained, allowing consumers to pay off the agreement early
• At the end of the agreement, the consumer can choose to own the car, return it, or trade it in

Why this matters

Failure to comply with PCP rules can lead to unfair terms, mis-sold finance, or disputes over the GFV and mileage limits. Consumers may face unexpected costs if they exceed mileage or damage the vehicle, while lenders risk regulatory action from the FCA for non-compliance with affordability checks or transparency requirements. Misunderstandings about the GFV or early settlement rights can result in financial loss or legal challenges.

Next step with VetroCheck

Use the Car Finance PCP and HP agent if you want a structured review of the relevant documents and supporting record.

Compliance note

This glossary content is provided for informational and educational purposes only. It does not constitute formal legal advice, does not create a solicitor-client relationship, and should be checked against current legislation, official guidance, and the facts of the specific case.