With a record amount of cars being sold using the finance plan PCP, there has been a lot of scrutiny regarding its use. PCP plans are used to purchase new vehicles, the Bank of England and the press have been looking into the industry closely. From our experience we have the best tips on how to get a good PCP deal.
But is PCP that bad? Well, figures showing it is the most popular way to buy a vehicle. PCP’s are a good way to purchase a vehicle but it’s important that the deal suits your needs.
What Is PCP?
PCP stands for Personal Contact Purchase, it is a finance based on a partial amount of the car. Usually it is the price of the car, minus the deposit and Guaranteed Minimum Future Value (GMFV) or Balloon. This way of financing a car brings your loan payments down compared to traditional finance agreements. PCP gives you the benefits of both leasing and HP in one finance package.
Who Owns The Car?
This is one of the most common questions asked about PCP. The reality is that the vehicle is owned by the finance company. They own the vehicle until if and when the finance on the car is paid off. The registered keeper can be the person who took out the deal but these are two different entries.
The cost of borrowing on a PCP is set up so you pay the interest on the FULL AMOUNT of the car. This is very important to understand when looking at the total cost of the deal.
Benefits of PCP
- Lower monthly payments compared to HP, you are only borrowing a partial amount of the value of the car.
- You have the option to buy the car at the end.
- Most PCP deals give you a better car for your money. Payments are more affordable and you can get a better spec or model.
- You get to change your vehicle more often which gives you the ability to own the most technologically advanced and economical vehicles on the market.
- Fewer maintenance worries if your PCP term is based around the warranty period of the car. You will always have a car under the manufacturer’s warranty.
- Lower deposits in most cases, the is dependent on your credit. You can put a lower deposit than traditional finance options, leaving you with more capital do do smarter things.
So How Do You Get The Best Deal On PCP?
There are a number of methods dealers use to get you into a PCP deal. Some will be beneficial and some are used to make things look more attractive than they actually are.
Beware Of The "Grab Your Attention" Deal!
Ask For More
Most dealers have incentives to get you into a deal. Car manufacturers will support a deal with extras such as free insurance, free equipment options, discounted or free servicing, or free finance. See what extra you can get from a deal.
Cost Up The Full Deal
When looking at the PCP, the actual price you are paying could be lost in the deposit and monthly payments. You need to see exactly what you are paying for the new car, especially if you decide to keep it. Check its price is in line with the value of the car if you were doing a straight cash deal. Also, check how much the finance on the car is actually costing you. Car Buying Guru is happy to help to ensure you are getting the right price on any deal with any dealer. You can contact us here.
Know Your Mileage and Wear and Tear Pattern
An important aspect of PCP is to keep within your mileage, you can be penalised heavily for going over your mileage which can make the deal become less of a bargain. Similarly keeping the car in good condition is vital to ensure you achieve above your GFV.
Be Cautious Of High Guaranteed Future Values
A high GFV set by a manufacturer will have two effects, it will bring your payments down. However, if this GFV is more than what a dealer would pay for it, it will leave you with little or no equity and in some cases negative equity. This is a common trap by dealers to get you into a car for now not caring about what happens in the future.
Protect Your Equity
Keep Deals Separate
Dealers have a habit of tying in part exchanges or old PCP deals with a deal for a new car to make things look more attractive when in fact it could be disguising an overall poor deal. Always negotiate the deal to dispose of your old car first, making sure you are happy with the figures before negotiating your replacement. Car Buying Guru can assist in selling your car. We work with industry partners to get the best quote for you. You can begin this process simply by clicking here.
Getting the right deal does require knowing what you are doing and can be sometimes best left to an expert. For advice and information and great PCP deals contact Car Buying Guru today.