When entering into a PCP agreement, one of the most important factors to consider is the mileage limit. A PCP or Personal Contract Purchase agreement is a type of car financing option where the borrower pays a deposit, followed by a series of monthly payments over a set period. At the end of the contract, the borrower can choose to either pay a final balloon payment to own the car outright or hand the car back to the lender.

Mileage limits are an essential part of PCP agreements, as they dictate how many miles the borrower can drive the car during the contracted period. Typically, the borrower can choose from a range of mileage limits, typically ranging from 5,000 to 20,000 miles per year.

It`s essential to choose a mileage limit that suits your driving habits. If you don`t drive much, it may be wise to opt for a lower mileage limit. However, if you frequently drive long distances or have a long commute, it`s essential to choose a higher mileage limit to avoid paying high excess mileage charges at the end of your contract.

Excess mileage charges are a common feature of PCP agreements. If, at the end of your contract, you have exceeded your agreed mileage limit, you will be charged a fee per mile over the limit. These fees can quickly add up and prove costly, so it`s essential to be mindful of how much you drive.

It`s also worth noting that exceeding your mileage limit can have a negative impact on the value of your car. If you choose to hand your car back to the lender at the end of the contract, the car`s value will be based on its mileage. If you have significantly exceeded your mileage limit, the car`s value may be less than the final balloon payment, leaving you with a deficit to pay.

In summary, when considering a PCP agreement, it`s essential to choose a mileage limit that suits your driving habits. It`s also important to be mindful of the potential costs associated with exceeding your mileage limit, both in terms of excess mileage charges and the car`s residual value. By choosing the right mileage limit and being mindful of your driving habits, you can enjoy the benefits of a PCP agreement without any unpleasant surprises at the end of the contract.