10 November 2025
Car Financing: Credit Union Car Loan vs. PCP
Are you thinking of getting a new set of wheels in the New Year or perhaps you have a car under a PCP (Personal Contract Plan) that is coming to an end and you are looking to buy it out? Our car loans are designed to give you flexibility, control and peace of mind when it comes to car finance.
Navigating car finance options can feel like manoeuvring through a maze of jargon and fine print. In this post we will explain the differences and why a Credit Union car loan can potentially be a better option.
PCP, or Personal Contract Plan, offers seemingly affordable monthly payments but comes with a catch. You essentially lease the car for a set period, typically 3 to 5 years, and make payments. However, the real kicker is the balloon payment, also known as the Guaranteed Minimum Future Value (GMFV), due at the end of the term to own the car outright. PCP agreements also restrict your mileage and limit your options if financial circumstances change.
On the other hand, Credit Union Car Loans offer clarity and flexibility. With straightforward terms, you borrow the money to purchase the car outright. From day one, you own the car, drive it as much as you want, and have the freedom to sell it whenever you please. There are no penalties for early repayment, and here in Naomh Breandan Credit Union we provide a personalised service tailored to your needs.
Here are 7 reasons why you might consider a Credit Union car loan instead.
- Ownership: With a PCP, you are effectively leasing the car until the final payment is made, so you don't own it until then. In contrast, a Credit Union car loan means the car is yours from day one.
- Flexibility: PCP agreements have fixed monthly payments and penalties for early termination, while Credit Union loans offer no penalties for early repayment and you can sell the car at any time.
- Balloon Payments: PCPs involve a large final payment known as the Guaranteed Minimum Future Value, while credit union loans have consistent payments throughout the term. The payments can typically be broken into three parts:
- Deposit, usually 20-30% of the car value
- Fixed monthly repayments, usually low as a large portion of the cost of the car is not paid until the end of the agreement, and
- The Guaranteed Minimum Future Value a large final balloon payment, which can be anything up to 50% of the value of the car. - Mileage: PCP agreements often restrict mileage, going over the milage can impact the final value of the car, whereas a Credit Union car loan has no restrictions on mileage.
- Maintenance: PCP agreements may require strict servicing schedules, often at specific locations, potentially costing more, while Credit Unions have no such requirements.
- Negative Equity: With a PCP, if the car's value depreciates faster than payments catch up, you may owe more than the car's worth.
- Costs: While PCPs may seem affordable upfront, considering the total cost over the term may reveal it to be more expensive than a Credit Union car loan, which offers ownership without the need for a final lump-sum payment.
Choosing between the two ultimately boils down to your preferences and priorities. If ownership and flexibility are paramount, Credit Union Car Loans may be the way to go. Remember, it's crucial to weigh the pros and cons carefully and explore all options before making a decision.
For advice and support on your car finance journey, reach out to the staff here in Naomh Breandan Credit Union today.
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