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How to spot the best PCP car finance deals

  • Our guide to finding the best PCP car finance deals
  • Key factors you need to consider, such as APR rates
  • Tips and pointers, and advice on used car finance

Written by Lewis Kingston Published: 1 January 2024 Updated: 1 February 2024

You’ve probably seen lots of tempting finance deals if you’re browsing websites or dealerships for a new car. However, many don’t actually represent good value for money. This is why it’s essential to do some homework, so you know how to spot the best PCP car finance deals.

When it comes to finding the best deals available, there’s lots of help out there. Our aforementioned finance deals page, for example, lists the top offers we’ve seen. This allows you to quickly get an idea of what’s available for your budget.

However, the car you’re interested in might not be available, or you might find what looks like a good deal somewhere else. So, we’ve put together this guide to help you identify what’s worth your attention when it comes to finding a great car finance deal.

Don’t forget we can help you understand all of the jargon relating to car finance, too. So whether it’s a guide to PCP or an explanation of Hire Purchase, we’re here for you as well.

Questions to ask yourself first

Ideally, and at the very least, you need to ask yourself three key questions before you start looking for deals.

  1. How much deposit can you really afford?
    Remember, reducing your upfront cost will see the monthly payments – and interest charges, depending on APR rates – go up.
  2. What’s your monthly budget?
    Figure out your fixed costs every month and work back to see how much you can afford to fork out, assuming your circumstances don’t change.
  3. How long do I want the contract to last?
    A longer contract will have lower monthly payments but the interest costs will go up and the commitment will be more significant.

Once you’ve figured out the answers to these questions, stick to them. Even ‘Just another £50 per month’ adds up to an additional £600 per year.

How to spot the best PCP finance deals 2024
There’s lots of information out there that will help you easily find a good PCP deal.

What you need to know about APR

The APR figure basically tells you the cost of the finance. The lower the APR, the less money you’ll pay in interest. People often want to find the deals with the lowest APR, and there are plenty out there.

In fact, there are often plenty of 0% APR car finance deals around. At a very basic level, these types of arrangements ensure you’ll pay no interest to the lender for your PCP deal. Generally, 0% APR deals are great value because you’ll never pay more than the cash price of the car.

That doesn’t mean you should discount deals that have a higher APR figure attached to them. Many companies will offer cars with deposit contributions, which can total thousands of pounds. These can counter the interest resulting from the higher APR, sometimes to the extent that you could come out with a better-value deal overall.

The way to figure this out for yourself is to work out the total cost of the car, including any interest, and compare it to the car’s list price. You can also use this method to compare the overall cost of one deal with other deals. Most offers, if you look at the details, should state these numbers.

How to spot the best PCP finance deals 2024
It’s important to keep a close eye on the APR rate, deposit, and total amount payable of any deal.

Low- or no-deposit PCP car finance deals

For many buyers, securing a deal with a low, or even zero, deposit is a crucial part of what makes the best PCP deals the best. With higher monthly payments it’s possible to spread the cost of an initial payment over the course of the contract. This softens the blow and getting keys to a new car for a very low up-front cost. 

These deals are usually on cars that don’t cost much to start with, and aim to attract younger buyers who don’t necessarily have the capital to buy a car outright or offer several thousand pounds towards a deposit.

The snag is, predictably, those higher monthly costs. Consequently, you need to be confident that you can support them. And, if you’re not on a 0% APR finance deal, you’ll also be incurring higher interest charges because you’re financing more of the total cost of the car.

You need to manage your expectations, though. Most premium manufacturers, such as BMW and Mercedes, are unlikely to offer zero-deposit deals, and any deal offered will typically involve higher monthly rates and APR percentages.

Factoring in discounts and dealer contributions

With dealer contributions, varying APR, and some manufacturers throwing in free fuel among other benefits, judging what’s the best value car finance deal for you can be a minefield. A good figure to look for is the ‘total amount payable’ sum included alongside the offer.

This will show you exactly what you’ll end up spending on the car, in the long run. It will include factors such as interest charges, ‘finance facility’ and ‘option to purchase’ fees.

If you’re being offered any discounts, contributions or savings, and if they’re not included already, deduct these from the total amount payment to see how much you’ll have to pay overall.

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.

Keep an eye out for deals, even if they have an unappealing APR attached, with big deposit contributions. This is because the contribution can be significant enough to cancel out the interest incurred by the deal. It can also sometimes even mean you’ll pay less for the car through finance than if you bought it outright.

How to spot the best PCP finance deals 2024
Make a beeline for deals offering big deposit contributions, as they can represent a great deal.

Mileage limits

When it comes to car finance, your mileage is one of the fundamental factors affecting how big your monthly bills are. If you exceed the quoted annual mileage of the contract, you’ll end up paying an additional mileage charge – and it’s easy to rack up a big bill, if you’re not careful.

Additional mileage charges can vary from as low as 4p per mile, all the way up to 15p per mile. For instance, if you have an 8,000-mile-per-year contract but cover 30,000 miles each year, based on a 7.6p per mile excess charge, it could see you nearly £1,700 worse off than if you’d just paid the increased monthly price for the higher-mileage deal.

Condition charges and modifications

With many drivers choosing to upgrade to a new model at the end of their PCP scheme, the condition of the returned car is very important. If the car is damaged and hasn’t been serviced properly, substantial charges can be incurred. Manufacturers should, however, accept vehicles returned with fair wear and tear for their age.

If the car isn’t up to scratch and you’re happy to keep it, you may be better off making the final payment to buy it. This way, you won’t be stung with additional fees. Alternatively, getting quotes to get any damage fixed may be wise, so you can establish whether you’re better off putting damage right or paying repair fees to the manufacturer.

And remember, if you take out a PCP deal then the lending company remains the owner until the balance of the car is paid in full. This means they can place many restrictions on the deal to keep their asset in tip-top shape. This includes where and how often you service and maintain the car, and what modifications you make.

Thinking about modifications? Always ask the finance company first. It could end up costing you dearly when it comes to the end of the contract if you don’t. We have a full guide to modifying a car on PCP if you need it.

Take all of the above into account, though, and you should end up with a great-value finance deal that meets all of your requirements, and one that won’t provide any surprises later.

How to spot the best PCP finance deals 2024
Ford’s popular Puma is one of many cars offered with 0% APR PCP finance.

When to upgrade your PCP deal for the best value

We all like to feel special and, when you get the phone call two years into your carefully selected PCP contract with an exclusive offer to upgrade, most of us are keen to hear what the deal is.

Unfortunately, almost all finance companies will be set up to contact customers who are in the final third of their PCP agreement. And, somewhat unsurprisingly, the deal they offer you will almost always be more expensive than your current contract.

Yes, you’re getting another new car, but remember they are calling because they want you back in the showroom to get more money out of you. It won’t necessarily be a good deal, regardless of how tempting it sounds, and you need to remember that the power to make that decision is in your hands. There is, after all, always room to manoeuvre and haggle.

If you’re considering the early upgrade option, make sure the lender gives you a full breakdown of the value of your current car now you’re ending the contract early and how much you have paid to date. This will give you a full picture of any negative or positive equity in your current car that could be passed over.

Spotting the best finance deals on used cars

While used cars are cheaper than new ones in terms of cash, when it comes to used car finance you need to be wary of the interest you pay. The APR is generally far higher than a new car deal, and you’re less likely to secure a deposit contribution against the cost of the car.

Furthermore, extra servicing and maintenance will be required, and this could end up being costly. It’ll pay to delve deep into any warranty offered, too. You need to to make sure it’s worth the money and covers the common costly repairs that the car might suffer.

When haggling for the best PCP deal on a used car, always make sure the car is priced fairly – a Parkers car valuation can help you here – and check the offer isn’t being scuppered by high APR charges that make it worse value.