When a PCP or balloon agreement ends, you need to decide what to do about the final payment. You can pay it and keep the vehicle, hand the vehicle back (PCP only), part-exchange it, or refinance the final payment. The right choice depends mostly on what the vehicle is worth compared with what you owe.
In short
At the end of a PCP, you can pay the final payment and keep the car, hand it back, or part-exchange it. With balloon HP or lease purchase, the final payment is compulsory, so your choices are to pay it, refinance it or sell the vehicle to clear it. Compare the vehicle’s value with the final payment before you decide.
Your options at the end of the agreement
| Option | PCP | Balloon HP / lease purchase | Best when |
|---|---|---|---|
| Pay the final payment and keep it | Yes | Yes | You want to keep the vehicle and can pay the lump sum |
| Hand it back | Yes | No | It’s worth less than the final payment |
| Part-exchange | Yes | Yes | It’s worth more than the final payment and you want a new vehicle |
| Refinance the final payment | Yes | Yes | You want to keep it but can’t pay the lump sum |
| Sell it and clear the finance | Yes | Yes | It’s worth more than the final payment and you don’t need a replacement |
Start by checking two figures a few months before the end: the final payment (on your agreement or statement) and what the vehicle is worth (get valuations from a few buying services or dealers).
Worked example
Your PCP final payment is £9,500. Valuations for the car come in at around £11,000.
- Equity: £1,500 (£11,000 − £9,500)
- Handing it back would mean giving away that £1,500. Part-exchanging or selling would let you use it.
If the valuations were £8,500 instead, handing it back would avoid a £1,000 loss.
Option 1: Pay the final payment and keep the car
Pay the final payment (plus any option to purchase fee) and the vehicle is yours. This makes sense if you want to keep it, it’s reliable, and it’s worth at least what you’re paying. If you’ve driven a lot of miles, keeping it also avoids excess mileage charges, as these only apply on hand-back.
Option 2: Hand the car back
With a PCP, you can return the car and owe nothing more, as long as it’s within your mileage allowance and in good condition. This protects you if the car is worth less than the final payment. See handing back a PCP car for the condition standards and charges.
Balloon HP and lease purchase don’t have this option. The final payment is owed whatever the vehicle is worth.
Option 3: Part-exchange or trade in
A dealer values your vehicle, settles the final payment with your lender, and uses any equity as a deposit on your next vehicle. See part-exchanging a car with finance.
Option 4: Refinance the final payment
If you want to keep the vehicle but can’t pay the lump sum, you can take out new finance to cover it. Some lenders offer this for the final payment, or you could use a personal loan.
- You’ll pay more interest overall, as you’re borrowing again.
- Make sure the new term ends well before the vehicle is likely to need replacing.
- Compare the total cost with handing back or part-exchanging.
What if you can’t afford the final payment?
Contact your lender early, ideally a few months before the end. With PCP, you can simply hand the car back. With balloon HP or lease purchase, ask about refinancing, or consider selling the vehicle to clear the balance. If you’re in financial difficulty, free help is available from MoneyHelper, StepChange and Citizens Advice.
What if the car is worth less than the final payment?
With PCP, this is what the guaranteed final payment is for: you can hand the car back and walk away. With balloon HP or lease purchase, you have negative equity and still owe the full final payment.
End-of-agreement FAQs
When should I start planning for the end of my agreement?
Around three to six months before the end. That gives you time to get valuations, check your mileage and decide.
Is the PCP final payment negotiable?
No. It’s fixed at the start of the agreement. What can change is what the car is worth, which affects whether the final payment is good value.
Can I pay the final payment in instalments?
Not usually as part of the same agreement, but you can refinance it, which spreads the cost over a new agreement with interest.
What happens if I do nothing at the end of a PCP?
Lenders will contact you before the end. If you don’t respond, they may extend the agreement temporarily, ask you to return the car, or chase the final payment. It’s best to decide in good time.
Can I hand back a car on balloon HP?
Not at the end. The balloon is compulsory. During the agreement, you may be able to use voluntary termination once you’ve paid half the total amount payable.
Do excess mileage charges apply if I keep the car?
No. Mileage and condition charges only apply if you hand the car back.