PCP Finance Compensation

PCP Compensation and mis-selling

PCP plans are currently the most popular financing method for car buyers. With a PCP plan, you pay an upfront deposit, followed by monthly payments. This is similar to a hiring plan (HP) but the monthly payments are lower. This makes premium vehicles more accessible than they would be through a traditional car loan.

There are two important differences between a PCP and a traditional car loan from a bank. The first is that the customer doesn’t own the car at the end of the deal. If you wish to buy the car after your period of monthly payments, you’ll need to pay an optional final payment, also known as a “balloon payment”. The second important difference is that with PCPs, the car dealer also acts as the financial broker.

They are the ones to calculate the deal, including the interest rate. Charging a higher interest rate results in a larger commission for the seller, creating a conflict of interest that many customers aren’t aware of when they agree to a deal.