Can you refinance a PCP?
Written by
Joe Towner
Reviewed by
Amy LancashireCan you refinance a PCP?
Yes, you can refinance a Personal Contract Purchase (PCP) agreement. A new lender, or sometimes your current one, pays off your PCP and you repay that lender instead, through a new agreement such as hire purchase (HP), another PCP or a personal loan.
Refinancing at the end of a PCP lets you keep the car without making the optional final payment (often called the balloon payment) in one go. You can refinance partway through too, but your monthly payments might not go down.
How does refinancing a PCP work?
Get a settlement figure. Ask your current finance company for a settlement figure, the amount needed to clear your agreement. On a PCP, this includes the final payment.
Apply to a new lender. They will check your credit and whether you can afford the new repayments. Many lenders let you check your eligibility first with a soft credit check, which doesn't affect your credit score.
Your PCP is paid off. The new lender usually pays your old finance company directly. Your old agreement then closes and you start making payments on the new one.
Can I refinance at the end of my PCP?
Yes. Instead of paying the final payment in one lump sum, you spread it over a new agreement and keep the car. Some finance companies offer to refinance the final payment themselves, or you can go to a different lender. Spreading the cost means you don't need the money upfront. But you'll pay interest on the final payment for the length of the new agreement, so it usually costs more overall than paying it in one go.
Can I refinance a PCP partway through?
Yes. You might do this if your credit has improved since you took out the PCP and you could now get a lower rate. The thing to watch is that your settlement figure includes the final payment. If you refinance onto HP or a personal loan, you'll be paying off that final payment in monthly instalments too. So your monthly payments could go up, not down, unless the new agreement runs for longer.
What are the downsides of refinancing a PCP?
More interest overall. A longer agreement can mean paying more interest in total, even if each monthly payment is lower.
A hard credit check. Applying for the new agreement usually involves a hard search, which shows on your credit file and can lower your score for a while.
The car has to qualify. Lenders may look at the car's age, mileage and value before agreeing to refinance it, and some set age limits.
You may lose your PCP options. HP and personal loans don't have a guaranteed minimum future value, so if you refinance into one of those agreements, you lose the option to hand the car back at the end instead of making a final payment.
Refinancing a PCP FAQs
Is it better to refinance or hand the car back?
It depends on whether you want to keep the car. If you do, refinancing spreads the cost of the final payment. If you don't, handing it back at the end of a PCP means there's nothing more to pay, as long as you're within your mileage limit and the car's in good condition.
Can I refinance a PCP with bad credit?
It may be possible, but you're likely to be offered a higher APR, and some lenders won't accept you. Checking your eligibility with a soft search first lets you see your chances without adding hard searches to your file.
Can I refinance with my current finance company?
Some finance companies offer to refinance the final payment at the end of a PCP. It's worth asking yours what it offers before the agreement ends, and comparing it with other lenders.
Can I pay off my PCP early instead?
Yes, you can settle a PCP early at any time by paying the settlement figure. Here's what paying off a PCP early involves.
There are a range of financial products available that may suit your needs. We encourage you to research your options carefully and consider seeking independent financial advice before making any decisions. This blog is for informational purposes only and does not constitute financial advice.
