What Is Personal Contract Purchase Auto Credit?

Nov. 17, 2010 - PRLog -- The lending industry has seen a major shift from difficult auto credit (http://www.nationsautocredit.com) procedures to confusing auto credit procedures. Now, it is easier to get auto credit (http://www.nationsautocredit.com) but it has become confusing because of the sheer number of options. The options aren’t only in the number of lenders and dealers it is also on the credit which one wishes to get. There is prime lending, special lending, PCP, PCH and many more.

Personal contract purchase or PCP is a form of loan in which the car is taken on a lease for few years. It is also popular by the name leasing. In this form of loan the applicant takes auto credit for the difference of the car amount in present day and the end of the term. Full explanation is given by the following example: let the price of the car in the current scenario be equal to 500 dollars and the loan term be three years. The depreciation rate of the car is calculated and seen what its price would be after three years. Let’s say the price after three years is 400 dollars. Now, the borrower just has to take auto credit for this 100 dollar difference.

Hence, one can see the benefits of personal contract purchase. The applicant gets to save a lot of money by not financing the car fully and also gets to drive a new car after few years. However, many things have to be considered before the leasing begins and this is done by setting the car purchase cost. If the borrower wishes to continue with the car after the loan term, then the buy price is seen and then sold for cash or through auto credit. However, if the borrower wishes to drive a new car, then a car exchange price is seen and then a new PCP or leasing is done on a new car.

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