Usually when a PCP agreement is calculated, the initial price of the vehicle and its value by the end of the term are the starting point. The difference between these two figures is the amount which is then paid by you as a monthly payment for the duration of the contract, minus your deposit.

The final value will be lower over a longer term or a higher contract mileage, and the balloon figure will usually be slightly higher than the final value to protect the finance company from a financial loss in the event that you decide to return the car rather than make the balloon payment.