In the U.K., a lease financing arrangement between an individual and the leasing company, typically used for employees of companies who receive a monthly car allowance as part of their remuneration package.
With a PCP, the individual finances the chosen vehicle over an agreed lease term. The monthly payments of a PCP are lower than in traditional financing arrangements because the amount amortized is the difference between the vehicle's original value and its Minimum Guaranteed Future Value (MGFV), essentially a projection of the vehicle's residual value.
At the end of the agreed term, the individual can choose to return the vehicle to the leasing company with no further responsibility except for minimum condition standards and allowable mileage, to resell the vehicle with the individual credited with any sale price excess over the MGFV, or the individual may purchase the vehicle at its MGFV.
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