Why a Bishopstown Credit Union Car Loan is a Better Choice than PCP for Financing Your New Car.
4 September, 2024Personal Contract Plans (PCPs) have become a popular way to finance new cars, luring buyers with low deposits and affordable monthly payments. Many dealerships offer attractive deals on the spot, promising an easy route to driving away in a new vehicle. But while these deals may seem too good to pass up, it is important to understand the potential pitfalls before signing on the dotted line.
Here are some reasons why a Bishopstown Credit Union car loan might be a better option for your next vehicle purchase.
Ownership and Flexibility
When you enter into a PCP agreement, you do not actually own the car until the final payment—known as the Guaranteed Minimum Future Value (GMFV)—is made. This means that if you want to sell or trade in the car before the end of the contract, you cannot do so without the dealer’s consent, as the car technically isn’t yours. In contrast, with a Bishopstown Credit Union car loan, you own the car from the start, giving you the freedom to sell or trade it in whenever you choose.
PCP contracts are typically rigid, with fixed monthly payments and little room for flexibility. If you need to make changes or pay off the loan early, you could face penalties. On the other hand, a Bishopstown Credit Union loan allows you to pay off your loan early without extra charges.
Balloon Payments and Total Costs
One of the biggest drawbacks of a PCP is the balloon payment at the end of the term. This final lump sum can be as much as 50% of the car’s value, and until it is paid, the car is not yours. Many people are not prepared for this large payment and may need to take out another loan to cover it, adding to the overall cost.
With a Bishopstown Credit Union car loan, your payments are consistent, and there are no surprises at the end of the term, you know exactly how much you’re paying.
Mileage and Maintenance Restrictions
PCP agreements often come with strict mileage limits. Exceeding these limits can decrease the car’s value and lead to additional charges. Moreover, PCP providers typically require you to follow a strict maintenance schedule at specific service centres. Failing to do so can also result in hefty fees.
In contrast, Bishopstown Credit Union does not impose mileage restrictions or dictate where you should service your car. As long as you maintain your vehicle responsibly, Bishopstown Credit Union is only concerned with helping you manage your finances.
Avoiding Negative Equity
Cars depreciate in value the moment they leave the dealership, and with a PCP, there is a risk of negative equity—owing more than the car is worth. This becomes a problem if you need to sell or trade in the car before the end of the PCP term, as the sale might not cover the remaining balance.
With a Bishopstown Credit Union loan, your payments generally keep pace with the car’s depreciation, reducing the risk of negative equity. This ensures that if you do need to sell the car, you are more likely to have paid off a significant portion of the loan.
Community and Cost Benefits
Credit unions are community-based organisations that run for the benefit of their members rather than for profit. When you take out a loan from Bishopstown Credit Union, you are not just financing your car—you are also supporting your local community. Any surplus income is reinvested in the community or returned to members, often through dividends.
In summary, while a PCP might seem like an easy option for financing a new car, a Bishopstown Credit Union car loan offers ownership, flexibility, and long-term financial benefits that are worth considering. Before you sign a PCP contract, take the time to explore your options with your local credit union—you might find that it is the smarter choice.
For more information on a Bishopstown Credit Union Car Loan, you can click here, email loans@bishopstowncu.ie, call in person to our branch on the Curraheen Road, or phone our lending team on 021 4800010.
Source: 10 Reasons A Credit Union Car Loan is Better than a PCP – The Irish League of Credit Unions
