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A Sting In The Tail

A Sting In The Tail


Personal Contract Purchase (PCP) is used by thousands of drivers to finance a car purchase, as it offers flexibility and affordability.

PCP is a loan but, unlike a traditional loan, you won’t own the car at the term end (unless you choose to). This has the advantage of lower monthly payments. Determined by the dealer, the car will have a Guaranteed Minimum Future Value (GMFV) at the PCP term end. When the time comes, should the car be valued at a figure higher than this, then you will have the difference between the two figures to put down as a deposit on your next car.

Sounds good. Low payments and a deposit at the end. But be aware of the PCP terms, otherwise you may get stung.

Adverts not only show the fun and affordability of owning a new car, they also show the small-print – notably the annual mileage clause. To get the GMFV figure up, and thus the monthly payments down, the dealer wants a low mileage car at term end. A figure of 6,000 annual miles – that’s 120 miles PER WEEK – is common, which is my weekly commute. Any other driving will take you over that annual figure and the excess charge could be 8p/mile.

A mid-20s driver I know signed up for a 3-year PCP with such a term. He reached the 18,000 limit in 15 months and the finance company have told him to put away at least £120 per month to cover the excess mileage fee he will incur.

PCP is viable way to finance a car but, like any contract, read the small print!


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