PCP finance: Eight signs of a great car finance deal

  • Hunt for 0% APR deals to avoid interest charges
  • Deposit contributions cut your monthly payments
  • Take deposit and mileage allowance into account

Chances are you're exposed to dozens of car finance ads every day and with wildly different monthly payments, APR and deposit figures for all of these, it can be hard to decipher between the best and the worst deals

While some finance schemes offer spectacular value, others are nothing more than a very pricey way to borrow a car. To find the best new car finance deal for you, there are a number of key things you can look for to make sure you get the car you want for a price you can afford.

These include seeking out low interest ratessuitable annual mileage allowances and the large deposit contribution discounts offered by many manufacturers. Keep reading for all the information on how to get the best deal for your needs. 

BMW M6 Gran Coupe PCP deal

Meanwhile, if you've already decided that PCP finance is for you we've rounded up the best deals for all budgets below:

You can also find out how much you can afford to borrow with our car finance tool

0% APR: no interest to pay

Finance your new car on a 0% APR deal and you’ll pay no premium for spreading payments over several years. This could save you thousands compared with being tied into a 6.9% APR contract on the same car, for instance – whether you make the optional final payment to buy the car at the end of the contract or not.

Whether you have enough cash to pay for the car outright or not, an interest-free credit offer can be a wise way to get a great car for a great price – provided there aren't even bigger cash savings available if you are able to pay upfront.

Choose a £20,000 Mazda 3, for example, and if you have the cash flow to leave £20,000 in a high-interest savings account, you could earn around £1,350 in interest over the three-year term.*

Be aware, however, that manufacturer used car finance offers normally come with far higher interest rates; while 0% APR to 7.9% is typical for most new car deals, up to around 20% APR is not unusual on a used car – even from a main dealer.

Fiat 500 finance

Get locked into one of these high-APR contracts and a used car could cost you far more per month than a much more valuable and more desirable new car, simply due to the interest alone. 

Large deposit contributions which outweigh the interest charged

Large deposit contributions can slash your monthly payments dramatically. That's because the bigger the manufacturer contribution the less you have to pay overall.

Find a car with a big enough deposit contribution and you could buy the car at the end of the contract and pay less overall than if you paid cash upfront. Meanwhile, do your homework and you can find 0% APR deals that include a manufacturer contribution, where that deposit contribution is effectively one big discount, coming straight off the price.

Volvo V90 finance

Despite interest-free credit, some of the very best finance offers include deposit contributions that could amount to more than 20% of the list price, too. These mean that you could be able to get a far more upmarket car for your budget than you might expect. 

Low-deposit deals, bringing more models within reach

If you don't have a huge amount of cash saved up for a big deposit fear not; there are many low- or zero-deposit deals out there that help you get your hands on the car you want, without having to save up for years in advance.

Best of all, it's possible to find zero-deposit deals with 0% APR and deposit contributions included, making them both affordable in the short term and good value in the long run.

Looking to learn more about car finance? Check out the links below:

With several companies offering no-deposit, 0% APR deals, it could cost less than you think to get into your ideal car. If interest is being charged, however, be aware that the smaller the deposit you put down, the more interest you’ll end up paying.

Low monthly payments compared with the value of the car

Seeing the cost of a car split into monthly payments might make it look affordable, but that doesn’t mean all finance schemes offer good value. If you fail to shop around it's possible you could get a much more expensive car – in cash terms – for less.

While a £20,000 Citroen C4 hatchback may cost a whopping £441 per month, you could actually get a £30,000 Audi TT Coupe for £434 per month with the same deposit and contract terms.*

This is because PCP costs are based around the difference between the initial list price and the expected value of the car at the end of the contract. That means a car that loses value rapidly can cost just as much per month as one with a higher price that is worth more when the contract ends.

Therefore, it's always worth comparing like-for-like finance costs for several models to see which is the best value and most appealing for your budget.

Audi TT finance

However, be aware that a car with a higher list price normally costs more overall if you make the optional final payment to buy it. 

A low total amount payable by customer figure

If you want to own the car at the end of the contract it’s worth working out the total amount payable by customer. This is the amount you will pay overall if you choose to buy the car when the contract ends.

Do this by adding the deposit, the monthly payment amount multiplied by the number of payments and the optional final payment together – plus any fees charged to sign up for the finance scheme or purchase the car. Compare this total cost with the list price and you can see how much of a premium you have to pay for the finance.

Hyundai i30 PCP finance

While the Citroen above will cost more per month than the Audi if you hand both back at the end of the contract, you’d have paid nearly £9,000 more in total if you bought the German car at the end of the contract compared with the C4. 

If the total amount payable by customer figure is less than the list price, you're winning. This happens when the deposit contribution and any other discounts outweigh the interest charges.

Flexibility: PCP lets you purchase car or hand it back

PCP finance differs from PCH leasing – where you have to return the car at the end of the contract – by giving you options.

Citroen C1 PCP finance

You can either buy your car outright, hand it back at the end or effectively trade it in for another car, using any equity – that's any value left in the car over the remaining balance owed – to put towards your next car.

You may not plan to keep the car, but this flexibility means that you’re covered if your circumstances change during the contract and you don't want to hand it back. 

Volkswagen Golf PCP finance

Similarly, there's no expectation that you will buy the car as with Hire Purchase schemes, where your monthly payments are higher than with an equivalent PCP setup.

Fuel, insurance, servicing or other freebies thrown in

Whatever car you go for, you’ll have to dig further into your pocket to fund fuel, insurance, servicing and other running costs – unless these are thrown into the finance plan.

Some offers provide better value than others, so whatever extras are included, it’s worth totting up the total cost to you and seeing how it compares with rival models or cheaper deals that don’t include the same freebies.

If the deal you're looking at gives you free insurance for a year, for instance – but you only typically pay £250 for your policy – and it costs £500 more in larger monthly payments than the standard deal without 'free' insurance, you're better off going for the standard offer.

A reasonable mileage allowance included

Car companies use several tricks to shrink their headline monthly PCP figures. One of these is by offering a low mileage allowance. Exceed this and return the car at the end of the contract and the company will hit you with a charge for every single mile you cover over this, meaning you could end up paying far more than you expect overall.

This means it's very important to consider how many miles you're likely to cover. Once you've got a good idea, make sure that every quote you get is for this mileage, so you can directly compare them.

While you could get a Jaguar F-Pace 20d AWD R-Sport for £526 per month if you agree to cover less than 6,000 miles per year, for instance, this jumps to £624 if you expect to cover an average of 20,000 miles per year.*

Be aware that excess mileage charges for passing the agreed mileage cap are likely to be much higher than simply paying a slightly increased monthly cost for a higher-mileage contract, so it's wise to be conservative when estimating your mileage.

If in doubt go for a slightly higher mileage cap than you expect to cover.

Want to find out more about car finance? Take a look at the links below:

Car finance explained: what is PCP?
PCP car finance: when to put down a deposit
Finding cheap car finance: our insider tips
Calculating car finance: how to get the sums right
The seven deadly sins of car finance

*Deals are correct at time of publication. Everyone’s financial circumstances are different and credit is not always available – Parkers cannot recommend a deal for you specifically. These deals are indicative examples of some packages available this week.