A PCP (Personal Contract Purchase) agreement is a popular way to finance your new car purchase that works like a hire purchase agreement. But do you know what fees are charged on a PCP agreement in addition to the interest charged?
In this article, we’ll discuss the additional fees that you may encounter when taking out a PCP agreement.
Firstly, there is the ‘Option to Purchase Fee’. This fee is charged at the end of the agreement, and it is the amount that you pay to own the car outright. The fee can vary, but usually ranges from £100 to £250, depending on the finance provider. It is important to note that you are not obliged to take ownership of the car at the end of the agreement, but you will not get any refund for this fee if you do not take ownership.
Next, there is the ‘Administration Fee’. This fee is charged by the lender to cover their costs of setting up the agreement. The administration fee can vary depending on the lender, and it is usually between £0 and £250. It is important to shop around to compare the administration fee charges of different lenders.
Another fee to consider is the ‘Excess Mileage Charge’. This fee is charged if you exceed the agreed mileage limit stated in the agreement. The excess mileage charge can vary depending on the lender, but it is usually between 6p to 15p per mile. It is important to calculate the mileage you are likely to do before taking out a PCP agreement to ensure that you do not end up with a hefty excess mileage charge.
The ‘Early Termination Fee’ is another additional fee that you may have to pay if you choose to end the agreement early. This fee can vary depending on the lender, but it is usually equivalent to a few months’ worth of payments. It is important to consider the possibility of an early termination before taking out a PCP agreement.
Lastly, there is the ‘Delivery Fee’. If you choose to have the car delivered to your doorstep, you may be charged a delivery fee. This fee can vary depending on the lender, but it is usually between £50 to £250.
In conclusion, when taking out a PCP agreement, it is important to consider the additional fees that you may encounter. These fees can include the option to purchase fee, administration fee, excess mileage charge, early termination fee, and delivery fee. By understanding these fees, you can make an informed decision and ensure that you are not hit with any unexpected charges further down the line.
