P - Car Finance Glossary

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Part Exchange
Part exchanging your old vehicle as part payment for your new car is a common process. Some dealers may pay you over the odds for your old car in order to sell you a new car. Furthermore, some dealers pay you a minimum cash fee for part exchange.

Payment Protection Insurance
PPI is completely optional. It is worth remembering this, because this extra bolt on has caused much controversy in the car finance market. PPI covers the borrower should they find themselves in circumstances that prevent them from making loan payments. This could include: inability to work, disability, unemployment or serious illness.

Personal Contract Hire
PCH is like contract hire, but is more suited to the individual ahead of the business. Anyone who wants fixed cost motoring or is leaving a company car scheme should consider PCH. This finance option is good because it covers services, repairs, depreciation and disposal. Private individuals cannot claim VAT, however.

Personal contract purchases (PCP)
PCP is a more recent type of car finance, offered as an alternative to hire purchase loans. The vehicle is leased from the dealer after a deposit. The cost of the car is not spread over the loan period, meaning lower monthly repayments. When the loan comes to an end you can either pay a balloon payment, return the car to the dealer, or part exchange the car for another vehicle.

Personal Lease
A personal lease is an effective way of renting a car over a long period of time. When it comes to the end of the agreement you return the car to the dealer. During the lease, some services should be included. The finance agreements are based on how many miles you expect to cover each year… it is worth being aware of this amount because going over it can cost. Some deals include the option to buy the car at the end of the lease.