PCP on commercial vehicles

PCP splits the cost of the vehicle in two. You pay monthly for the part of its value you are expected to use during the agreement, and a larger final sum — the balloon, or guaranteed future value — is deferred to the end. That is what makes the monthly payment lower than hire purchase on the same vehicle.

• ✓ A deposit, then fixed monthly payments over the term.
• ✓ A balloon payment set at the start, based on what the vehicle should be worth at the end.
• ✓ At the end: pay the balloon and keep it, hand it back, or trade it in against the next one.

The balloon is calculated on an agreed annual mileage. A van that does 40,000 miles a year is worth less at the end than one that does 15,000, so the limit matters far more on a commercial vehicle than on a family car.

• ✓ Be honest about the mileage. Excess mileage charges are per mile and add up fast on a van.
• ✓ Racking, ply-lining and livery are normally fine if removed or declared, but check the return conditions.
• ✓ Dents, scrapes and a worn load bay beyond fair wear can be charged for on return.

If the vehicle will do very high mileage or take real punishment, hire purchase may simply suit better. We will say so.

PCP suits a business that wants a newer van on a lower monthly cost and expects to change it every few years. Hire purchase suits a business that wants to own the vehicle outright and run it for a long time.