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How are PCP balloon figures calculated?
How do car dealers decide on the figures when offering a PCP deal? How much depends on the length of the contract, the value of the car and agreed mileage per annum?
Asked on 8 August 2023 by Jerry Pollentine
Answered by
David Ross
Usually when a PCP agreement is calculated, the initial price of the vehicle and its value by the end of the term are the starting point. The difference between these two figures is the amount which is then paid by you as a monthly payment for the duration of the contract, minus your deposit.
The final value will be lower over a longer term or a higher contract mileage, and the balloon figure will usually be slightly higher than the final value to protect the finance company from a financial loss in the event that you decide to return the car rather than make the balloon payment.
The final value will be lower over a longer term or a higher contract mileage, and the balloon figure will usually be slightly higher than the final value to protect the finance company from a financial loss in the event that you decide to return the car rather than make the balloon payment.
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