Important points to remember about a PCP deal
✔ Helping you secure the best PCP Finance Deal
You will find that not all PCP deals are the same so it may be useful to take a look at the points below to help work out if the deal is right for and or prompt you to check the contract details so you know what you are signing up for.
Buy Back or hand back?
A PCP scheme will let you choose whether you want to purchase a car outright or hand it back with nothing else to pay at the end of the finance term. When signing up you will have the an option for a final payment that lets you take ownership of the car, you can then decide whether to pay the balloon value to keep the car or return it to the dealer.
Cheaper car v’s Premium car
So depending on the type of vehicle you choose from the offset will depend on what you can look forward to at the end of the deal.
As a rule of thumb the premium vehicle will keep it’s value better so you will find a larger balloon payment at the end of the deal, which is the sum you will have to pay to keep the car. In this option it may be better to use the vehicle to enter a new deal for another premium vehicle.
Whereas with the cheaper car it may be in your interest to or pay the lower final payment as you will have already paid off most of the depreciation, with little left to pay to own the vehicle out right.
When is the car yours?
You don’t actually own the vehicle until you have finished paying all the monthly payments and the optional final payment when using a PCP deal and spreading the cost of a car over a number of years. If you do not pay off the final charge then the vehicle will still belong to the finance company. In affect you have just take out a long term HP (hire purchase) if you do this.
APR, dealer contributions and discounts affect PCP offers
What with varying APR, free fuel offers and dealer contributions understanding the best deal for you can be difficult.
The figure you should be looking for is the ‘total amount payable, which will be shown alongside the deal. This will show how much interest is added to the deal along with any other charges.
In order to work out how much you are paying overall take out the dealer contribution and any other savings from the total amount payable. If you are not looking to buy the car at the end of the deal take out the balloon payment as well and the final figure will show how much you need to pay for the duration of the finance period.
Adding in motoring costs
Depending on which manufacturer you go with there are options to ‘lump’ you motoring costs together and include the in you monthly payments.
For example some finance companies offer:
- Insurance
- Servicing
- Road tax
- Breakdown recovery
One to check are the annual service costs of your vehicle so you can see what kind of discount you are receiving should you buy three years servicing from the outset.
For example:
Peugeot had an offer that gave three years free servicing and insurance on its 308 hatchback. With the company’s servicing deal costing around £470 for three years and the average annual cost of car insurance standing at £665 at the start of 2016, this could have saved around £2,450.
How big of a deposit?
The larger the deposit the lower you monthly payments will be. A lot of offers claim you can drive away a new car with no upfront costs but the less you put down the higher the monthly costs are going to be.
Obviously if you don’t put a deposit down you will notice your monthly payments will be greater but you will also be paying more interest on the loan as a result.
A PCP isn’t always the cheapest finance option and you need to look at other deals and your personal circumstances, including what you are using the vehicle for, to see which deal and finance option is right for you.