What does PCP mean?

PCP stands for Personal Contract Purchase. You pay a deposit, then monthly payments over a fixed term, but those payments are calculated on how much the car is expected to depreciate during that time, not its full value.

What that means at the end of the agreement: you're left with a large optional final payment, sometimes called a balloon payment, if you want to actually own the car outright. If you'd rather not pay it, you can hand the car back instead, or use any equity in it towards a deposit on a new deal.

Because you're only financing the depreciation, monthly payments are usually lower than an equivalent Hire Purchase agreement. In return, there are usually mileage limits built into the deal, along with charges for going over them or returning the car in worse condition than expected.