What does PCP stand for?

• A. Personal Credit Plan
• B. Public Car Purchase
• C. Personal Contract Purchase
• D. Personal Consumer Plan

Answer: (C)

In automotive finance, PCP stands for Personal Contract Purchase. It’s a type of agreement where you pay monthly payments based on the car’s depreciation, with a guaranteed future value (the GMFV) set at the start. The monthly amount covers the drop in value plus interest, so the payments are usually lower than a full loan. At the end of the term you have options: pay the GMFV to own the car, return the car to the dealer, or trade it in for a new PCP deal. The other options aren’t standard terms used in car finance, and they don’t describe this structure of payments tied to depreciation and a final balloon payment.