Auto Loans Personal Contract Purchase

Personal contract purchase or leasing as it is popularly known amongst loan borrowers is quite popular in the lending industry for a number of reasons. For those who don’t know what it is, the PCP or leasing involves taking auto loans on a car but there are differences in how the finances are handled. The term of the loan is usually set by the dealership or lender but sometimes the applicant is also given a choice. The difference here is that after the term of the loan ends, the borrower gets to choose whether he/she wishes to stay with the car or return it to the dealership. In ninety percent of the cases, the borrowers return the car to the dealers for resale purposes.

Hence, in leasing, the borrower doesn’t pay the whole amount of the car but instead he/she pays the difference in the prices of the car at the current economic climate and what the price is going to be after the term of the loan ends. This is calculated by the depreciation rate of the car. If the car depreciates a lot in the next couple or three years, then the financed amount would be much. Even in this scenario the difference is far less considering the fact that the borrower doesn’t have to finance for the whole amount and installments remain low.

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