ALD Automotive offers different funding options including Personal Contract Purchase (PCP). This requires a certain monthly repayment. Its payables are lower compared with the payables of Personal Contract Hire (PCH) due to the Guaranteed Minimum Future Value that the client has to pay at the end of the leasing term.
What is Guaranteed Minimum Future Value?
Guaranteed Minimum Future Value, also known as balloon payment, is the amount that the client has to settle at the end of the PCP term, either by returning the car or by paying it. Unlike Personal Contract Hire, your monthly payment is based on the difference of the current value of the car and its predicted value at the end of the term. This is considered as the main attraction for PCP.
How is Guaranteed Minimum Future Value Calculated?
At the beginning of your leasing term with ALD automotive, the car’s future minimum value will be determined considering the following factors:
- Car type
- Car loan term – the longer the term, the lower the GMFV
- Expected annual mileage – the lesser the mileage, the higher the GMFV
Example of Computation:
You want to buy a Ford Fiesta 1.25 Zetec under PCP. The car is priced at £6,488 and your car loan will be good for 36 months. The finance company can offer you a Guaranteed Minimum Future Value of £2,396 at the end of 36 months. Your monthly payment is the difference between £6,488 and £2,396, divided by the number of months, which is 36. (Source: iCalculator)
What are your Options at the End of the PCP Term?
You have two options after your leasing term.
Give back the car.
You can give the car back to the financing company without paying the GMFV. However, this will only be effective when you have passed the company’s term and conditions.
Pay the balance.
If you want to own the car, pay the value as stated by the finance company. Given the example above, you will need to pay £2,396 in order to enjoy full ownership.
Be informed about the terms and conditions before you sign a contract with ALD automotive. If you have any further questions regarding Personal Contract Purchase, please do not hesitate to call 087000 111 81. You can also visit the website for more information.