PCP vs Credit Union Car Loan

5 April, 2024

The Difference Between PCP Finance and a Credit Union Car Loan

Buying a car can be complicated enough without all the car finance that comes with it. Inspecting the car chassis and locating the sills can be enough to send your head spinning. And that’s before you even hear a mention of the Guaranteed Minimum Future Value.

Yes, this is a term you’ll have to come to grips with if you opt for PCP finance to buy your new car. Don’t get us wrong, we know PCP finance is very convenient. But we also know it’s incredibly inflexible. And that the low monthly repayments can distract you from a raft of fine print that might otherwise send you running.
Read on for a simple, no-frills explanation of PCP finance. And an explanation of how PCPs differ from a traditional car loan that you can get with Monaghan Credit Union.


First off, PCP simply stands for Personal Contract Plan. A PCP is one of the least flexible forms of finance. Essentially PCP finance is a lease scheme. It makes financing a new car seem affordable – due to low monthly repayments.
In effect, with a PCP you hire the car for a period of time, usually between three and five years, and you make the repayments over this time. At the end of the PCP agreement, you’ll have to make a balloon payment in order to own the car. This payment is also known as the guaranteed minimum future value (GMFV).
With a PCP, you also need to be conscious of your mileage. This is because the balloon payment, or GMFV, will have been calculated with your annual mileage in mind. Crucially, with a PCP you are also restricted with what you do while you are still ‘hiring’ the car.
If your financial circumstances change and you find you can no longer afford the monthly repayments, well, too bad – you can’t sell the car to pay your debt, as it’s not yours to sell.
If you have decided that you are going with PCP finance, then watch out for the below before you sign the dotted line.
  • You may be charged a rescheduling fee to extend the term of the PCP.
  • You need to take note of the cap on the number of miles/kilometres you are allowed to clock up over the period of the PCP.
  • You may be requested to commit to certain car servicing agreements.
  • Ensure you always enquire about additional fees and charges. You are entitled to a list of all additional charges – so ask the car dealership for this before you sign.


PCP finance can set up a situation where the easiest and simplest option is to roll over into a new car and a new PCP plan. PCPs are effectively a way of trying to ensure that you will come back and buy another car from the same dealer or manufacturer.
All well and good, but what if you no longer like the brand of car or the range that dealer/manufacturer has to offer?
The balloon payments can also come as a nasty sting in the tail for many.
Anecdotally, credit unions report that members are taking out loans in order to pay off the PCP balloon payment. Perhaps it would have been easier to just get a credit union car loan in the first place.


A car loan is far more clear-cut than PCP finance. Applying for a car loan is a straightforward transaction where you borrow money from Monaghan Credit Union to pay for the car. Benefits include:
  • You own the car immediately.
  • You can drive the car as much as you like, as there is no cap on the mileage.
  • Additionally, you can sell the car on at any time you want. If you get a car loan before buying the car, you are effectively a cash buyer and you may even be in a position to negotiate a better deal.
If you’re nervous about PCP finance, our Lending team are here to advise you and remember, with a car loan from Monaghan Credit Union, you own you car from day one and no prior savings are required. You can also inform yourself of the benefits of a credit union loan if you want more reasons to be convinced.


First of all, you can check out our Loan Calculator to find out how much you can borrow for your new car from Monaghan Credit Union. Secondly, there are several benefits in taking a loan out with us, including:
  • Quick Decision: Your loan is approved locally, so there’s no waiting around.
  • Flexible: Monaghan Credit Union offers weekly, fortnightly and monthly payments. You can pay off your loan early or make a lump sum repayment – you do it your way.
  • No Hidden Fees: Unlike PCP, taking a loan out with your local trusted credit union means that there are no hidden fees or transaction charges. Plus, as mentioned, you own your car from the outset!
  • Green Transport Loan Interest Rate: 6.5% and (6.69% APR)
  • Car Loan Interest Rate: 7.25% and (7.49% APR).

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*Terms and Conditions Apply. Monaghan Credit Union Ltd. is regulated by the Central Bank of Ireland.
WARNING: If you do not meet the repayments on your loan, your account will go into arrears. This may affect your credit rating which may limit your ability to access credit in the future.