Can I refinance PCP balloon payments?
When a PCP agreement ends, you are left with three choices: pay the balloon payment and own the car, hand the car back, or use any equity as a deposit on a new deal. If none of those options work for you, refinancing the balloon payment is a fourth route worth knowing about. This guide covers how it works, what lenders will consider, and how hire purchase fits into the picture.
A PCP (Personal Contract Purchase) agreement works by deferring a large chunk of the car's value to the end of the contract. During the agreement you make monthly payments that cover interest and the depreciation of the car over the term, but not its full value. The remaining amount, known as the balloon payment or Guaranteed Minimum Future Value (GMFV), is due at the end if you want to keep the car.
Balloon payments can be substantial. On a car worth £20,000, the balloon might be anywhere from £8,000 to £14,000 depending on the term, the make and model, and how much the car is expected to depreciate. It is set at the start of the agreement and does not change.
Yes, refinancing a PCP balloon payment is possible, and it is a route many people take when they reach the end of their agreement and want to keep the car but cannot pay the balloon in one go.
The way it works is straightforward. Rather than paying the balloon payment outright, you take out a new loan to cover it. That new loan is then repaid in monthly instalments over an agreed term. The car effectively becomes security for the new finance, and you continue driving it while making the new payments.
Not all lenders offer PCP balloon refinance as a product. Some mainstream banks will do it as a personal loan. Others, including specialist vehicle finance lenders, will refinance it as hire purchase, which means the loan is secured against the car itself.
Hire purchase is one of the most common ways to refinance a PCP balloon payment. The process works like this:
This approach suits people who want to keep their car and are comfortable continuing to make monthly payments, but do not have the lump sum available to pay the balloon outright.
AutoMoney Trust offers hire purchase finance from £4,000 to £25,000 over 36 to 84 months. If the balloon payment on your PCP falls within that range, you can check your eligibility with a soft search on our apply for car finance page.
Poor credit makes refinancing harder but does not rule it out. Mainstream banks offering personal loans to cover a balloon payment are unlikely to approve applicants with CCJs, defaults, or a poor credit history. HP finance from a specialist lender is a more accessible route for poor credit applicants because the loan is secured against the vehicle.
The lender will still run an affordability assessment and check your credit file, but specialist poor credit lenders take a broader view of your financial situation rather than relying solely on a credit score. The interest rate offered will reflect your credit history.
AutoMoney Trust considers applications from customers with poor credit and CCJs. For more on how lenders assess poor credit applications, see our guide on car finance with a CCJ.
Refinancing is one option but not the only one. At the end of a PCP agreement you have four routes:
For a full comparison of how PCP and HP work at the end of the agreement, see the FAQ: Hire purchase vs PCP.
This is negative equity and it is a real consideration before deciding whether to refinance. If the car's current market value is lower than the balloon payment, you would be refinancing a loan that is already larger than the asset it is secured against.
In this situation, refinancing still has options:
The FAQ The car could lose value covers how depreciation works under finance agreements and what it means for your options at the end of a deal.
The total cost depends on the interest rate you are offered and the term you choose. A longer term reduces the monthly payment but increases the total interest paid over the life of the agreement. A shorter term costs more each month but less overall.
The interest rate will be influenced by your credit profile, the loan amount, and the lender. Rates for poor credit applicants will be higher than for those with a clean file. Always compare the total amount repayable, not just the monthly payment, when assessing whether refinancing is the right call.
Use our car finance calculator to get an idea of what monthly payments and total costs look like at different rates and terms before you apply.
Technically yes, though it is less common. Refinancing before the PCP ends would require settling the full outstanding PCP balance first, including the balloon, which is essentially the same as paying the balloon early. Some PCP agreements have early settlement fees, so check the terms of your current agreement before pursuing this route.
A more common scenario is switching from PCP to HP mid-agreement. This would involve settling the PCP, taking out a new HP agreement for the settlement figure, and continuing with HP payments going forward. This is worth considering if you are unhappy with the PCP structure or want to own the car outright at the end without a large final payment.
For more on how HP compares to PCP throughout the agreement, see our guide: hire purchase vs personal loans, which covers the key differences including ownership, risk, and what happens at the end of each agreement type.
With Hire Purchase, you pay the full vehicle value across fixed monthly payments, then own the car outright after a small Option to Purchase Fee. With PCP, monthly payments are typically lower because you only pay off part of the car's value, with a large optional balloon payment at the end if you want to keep it. PCP often has mileage limits and condition charges; HP does not. AutoMoney Trust offers Hire Purchase only, as it provides predictable costs and guaranteed ownership for customers buying used cars.
All cars depreciate over time, with most used vehicles losing value steadily across a finance agreement. This matters because by the end of your term, the total amount paid, including interest, may be more than the car's market value. Depreciation also affects negative equity risk: if you want to sell or settle early, the car's value may not cover the outstanding finance balance. Mileage, condition, service history, and demand all influence how quickly a car depreciates. GAP insurance can help cover the gap between a write-off payout and your outstanding finance.
Your loan term directly affects both your monthly payments and the total cost of borrowing. A longer term, such as 60 or 84 months, spreads the cost over more payments, lowering the monthly amount but increasing the total interest you pay across the agreement. A shorter term, such as 24 or 36 months, means higher monthly payments but a lower overall cost. AutoMoney Trust offers terms from 24 to 84 months, so you can balance monthly affordability against total cost. Use our finance calculator to compare different term lengths before applying.
A fixed rate keeps your interest rate and monthly payments the same throughout your agreement, giving you predictable costs from start to finish. A variable rate can rise or fall during the term, usually tracking the Bank of England base rate or the lender's standard variable rate, which means your payments can go up or down. AutoMoney Trust offers fixed interest rates only, so you know exactly what you will pay each month. Fixed rates provide certainty but may start slightly higher than introductory variable rates; the trade-off is protection from future rate rises. For more detail, read our guide on What Is Car Finance APR?.
