As with the conditional sale and lease purchase, you pay a reward when purchasing a personal contract (PCP), then the borrowed balance is divided into monthly payments. PCP is great if you want to modify or upgrade your car or motorcycle* at the end of the deal. A rental agreement was found as an ideal solution and all current factors were taken into account to ensure the affordability of the customer. By using the CBILS for this contract, it also meant that the client did not have to pay any advance fees and there was no interest for the first 12 months. Conditional sale is a good option if your customer wants to own the vehicle at the end of the contract. At CS, the customer is usually required to pay a deposit of about 10%, and then the remaining costs of the vehicle, plus interest, are repaid in equal monthly instalments over the term of the contract, which can range from one – five years (12 to 60 months). Financing is insured against the vehicle. If you choose to pay for your car with a rental contract, you normally pay a first charge and pay the full value of the car in monthly installments. If all payments are made, the rental agreement expires and you own the car. What distinguishes PCP is that your monthly payments pay the depreciation of the car and not the full value over the lifetime. Then, if you are at the end of your agreement, there is a final balloon payment that must be made if you want to keep the car.
Fees can be paid in advance or spread over the duration of the contract. If they are dispersed, they are subject to an interest rate, but they will lower the initial advance payment and must be agreed with the customer, as this increases the total cost of borrowing. An optional balloon refund can be set on a rental agreement. This option has some vehicle limitations and the refund of the balloon is payable at the end of the agreed term. Once the final payment is made, you can also pay the OTP (Option to Purchase) tax to become the rightful owner of the vehicle. The amount you borrow is secured against the vehicle. Repayments are set throughout the contract and distributed fairly over the term, which can be up to five years (60 months). There is no lump sum to be refunded at the end of the agreement, unless an optional balloon refund is set.
There are some restrictions on vehicles that can have a balloon refund; To the extent permitted, it shall be payable at the end of the agreed period. . . .