Properly researching personal contract purchase (PCP) deals can save you hundreds of pounds over the course of a typical PCP contract. Figuring out the ins and outs can be a laborious act, but there are sites which can help you and provide plenty of information. For example, you can get an industry-trusted car valuation from Parkers, which can influence your decision on the balloon payment at the end of the PCP deal (the final payment you pay if you want to own the car for APR rates). This involves dealing with the expected future value of the car against its original value, at the end of the contract, so knowing the valuation of the car in question can help for when your PCP deal is expected to come to an end.
Below you’ll find more advice, including our top four tips that will help you find the best value PCP deal for you. You might be surprised by just how easy it is to save yourself some serious cash.
But before searching for any PCP deals you need to ask yourself these three questions:
- What’s your monthly budget?
- How long do you want the contract to last?
- How much deposit can you really afford?
Also, if you want to know more information detailing what a PCP deal is, the Money Saving Expert site has a good guide on the subject.
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This point is probably the easiest to wrap your head around, yet, it’s the most overlooked because it can be tucked away in the fine print.
The lower the APR rate, the less money you’ll pay in interest. In fact, a lot of manufacturers even offer 0% deals where you’ll pay no interest at all. You’ll buy a car for its cash price, while benefiting from the fact you don’t need to pay it in one go.
Avoiding PCP contracts with 6% APR and going for ones with 0% APR, can save you hundreds.
Deposit contributions for APR rates
If you’ve spent any time browsing car websites of late, you’ll have encountered the phrase deposit contribution.
Deposit contributions are effectively discounts that reduce your monthly bills. The greater the deposit contribution, the less you’ll pay for your car.
Deposit contributions can amount to more than £20,000 on some luxury cars and can mean the difference between paying a premium to finance your car and paying much less than the list price – where the discount outweighs any interest charged.
For many people, securing a PCP deal with a low, or even zero deposit, is a crucial part of the process.
It’s usually cheaper in the long-run when you put down a hefty deposit. However, low/no deposit deals are handy for softening the blow and getting keys in your hand for a very low up-front cost.
These deals are usually on cheapish cars in the first place. So, if you want an expensive SUV with zero deposit, you need to manage your expectations – most premium manufacturers don’t offer low or no deposit deals.
Total amount payable
PCP deals can look confusing on paper. One trick is to search out the total amount payable sum.
This shows how much interest is added to the price, along with any charges such as ‘finance facility’ and ‘option to purchase’ fees. To establish just how much you need to pay overall, subtract any dealer contributions or other savings from the total amount payable.
If you don’t intend on purchasing the car, subtracting the optional final payment from this last figure should show exactly how much you need to pay to drive the car for the finance period. As mentioned before, it’s worth knowing the current value of the car, as well as the expected future value to understand what this final payment could be.
And finally, when researching PCP deals remember the questions you needed to ask yourself at the start. If you compare different deals with different variables, you can find out which one offers the best value.