Although PCP has become very popular, it is essential to be aware of the true costs, as one can be dazzled by the prospect of affording a new car that would otherwise be inaccessible.
1. My friends who are on PCP invariably boast of the monthly payment and the residual value but never seem to mention the initial deposit, which once paid seems to melt into the background.
2. Excess mileage payments can add considerably to the overall costs.
3. The residual value can be marred by the car’s condition after 3 or 4 years use. (Not easy to pile on the miles in a Morgan and avoid stone chips.)
4. The level of any possible accrued equity, (which occurs if you have ended up paying more for depreciation than turned out to be necessary) which could be used to renew a contract is in the hands of the dealer; you cant shop around (unless you pay the balloon payment and then try to sell it elsewhere.)
5. Someone has to make money out of any credit scheme and it probably won’t be you.
Having said all this, if you strive for peace of mind and wish to own a car that you may otherwise not be able or willing to afford, PCP is the way to go. I am not poo-pooing the concept, but simply say…just do the maths first!
