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Thinking of buying a car on a PCP?

Car-Buying-pcp2

PCPs can be a great way of financing a new car but it’s not for everybody writes Geraldine Herbert

When you buy a car on a PCP you are essentially paying to use it for a fixed number of years, with the option of buying it at the end of your contract or giving it back to the dealer. In terms of monthly repayments, it works out cheaper than hire purchase because it lets you defer part of the total cost of the car – a sum known as the guaranteed future value, or GFV, which is set at the start of the agreement. The GFV represents what the car will be worth at the end of the contract. The future value, plus any deposit you choose to put down, usually between 10 and 30 percent, is taken away from the total cost of the car, and you pay monthly payments (plus interest) on the remaining balance for the term of the contract.
At the end of the contract you have one of three options; to return the car to the dealer, pay the final payment and keep the car or trade the car in against a replacement. For many it is a useful way to stretch a small budget but there are number of factors you need to keep in mind

  • If you plan on keeping the car at the end of the PCP you will need to set aside money for the final payment.
  • Cars depreciate, so put down the minimum deposit only.
  • Be realistic about how much you use your car, if you exceed the agreed annual mileage on a PCP you will be charged for it,
  • Before you embark on a PCP remember to factor in other costs particularly insurance and fuel costs.
  • If you cancel your contract and return the car you’ll probably have to pay a fee.
  • You may not get the colour you’ve always wanted. Pinks and purples won’t be a goer.
  • You won’t be able to modify the car in any way.
  • If you return the car with scratches or any damage you may be charged to cover the cost of putting this right.

Geraldine Herbert

2nd July, 2015

 

Author: Geraldine Herbert

Contributing Editor and Motoring Columnist for the Sunday Independent and editor of wheelsforwomen. Geraldine is also a regular contributor to Good Housekeeping (UK) and to RTÉ Radio One, Newstalk, TodayFM and BBC Radio. You can follow Geraldine on Twitter at @GerHerbert1

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2 Comments

  1. Technically, you will only be charged mileage if you choose to hand the car back. If you decide to keep the car, the mileage is not an issue as you have put the miles on the car from new and I don’t think that anyone will charge themselves in this situation. Lastly, if trading in the garage will take the mileage into consideration as always, so, it is irrelevant in this case if the car was purchased on PCP OR HP.

  2. Thanks for the comments Tony the points made are for those not holding onto the car so if you exceed the agreed mileage you will be charged. In some cases unrealistic mileage is agreed at the beginning therefore it is important to be aware of this issue

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