How to spot the best PCP car finance deals

  • Parkers guide to finding the best Personal Contract Purchase finance deals
  • Deposits and APR rates are important
  • Used cars covered 

Give a man a fish, and you feed him for a day. Teach him how to fish, and you feed him for a lifetime. This well-trodden proverb is usually associated with more profound things than car deals, but there's no escaping the meaning behind it can be applied here.

Pages designed to show you the best deals around, like our very own Dealwatch, may host a few of the best deals around, but they can't possibly cover everything out there.

2019 Kia Niro PHEV

Sadly, spotting the best Personal Contract Purchase (PCP) deal isn’t always as straightforward as it could be. Car companies often offer different deals on versions of the same car, which makes it a bit of a minefield. For example, a vehicle they’re struggling to shift might be offered with a considerably lower APR than the better or more popular models.

However, here at Parkers we’re here to help, and we have a huge amount of advice to impart.

Have a read through the following and you may be surprised with how much you can save by following our guide of how to spot the best PCP car finance deals.

>> What is PCP?

Questions to ask yourself first

Broadly, even before you get to the stage of looking for deals, you need to ask yourself three questions.

1) How much deposit can you really afford? Remember, reducing your upfront cost will see the monthly payments 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.

3) How long do I want the contract to last? The longer the contract, the lower the monthly payments.

Once you've figured out the answers to this question, stick to them. Even 'just another £50 per month' adds up to an additional £600 per year.

APR rates

The lower the APR rate, the less money you'll pay in interest. People often want to find the deals with the lowest APR rates, and there are plenty out there.

In fact, there are 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 over the course of your PCP. Generally 0% APR deals are great value because you'll never pay more than the cash price of the car.

However. Car companies are trying to redress the balance somewhat by offering deposit contributions to deals that do include an APR rate. The bottom line is that you could pay some interest and still come out with the better-value deal when all’s said and done.

PCP car finance car be seriously confusing, so let Parkers help by explaining all the key jargon and finding you the best offers - be it cash, PCP or hire purchase

The way to figure this out for yourself is to work out the total cost of the car, including any interest rates, and compare deals.

>> All of the 0% APR manufacturer-backed deals

Low deposits

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, softening the blow and getting keys in your hand for a very low up-front cost.

There are often some of the best PCP finance deals available if you do your research and shop around

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.

If you want a new car but don't have the savings to put down a deposit, the good news is that it is possible to buy a new car and drive away from a dealership without paying a penny upfront. You need to manage your expectations, though; most premium manufacturers like Audi and BMW are unlikely to offer zero-deposit deals, and most come with higher APR percentages too.

>> A full list of the manufacturer-backed no deposit car finance deals

>> No deposit 0% APR deals

Discounts and dealer contributions

With dealer contributions, varying APR, and some manufacturers throwing in free fuel among other benefits, judging the best value deal for you can be a minefield. A good figure to look for is the 'total amount payable' sum that should be published alongside the offer.

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.

Mileage limits, condition charges, and modifications

After you take into account car price and depreciation, mileage is one of the fundamental factors affecting how big your monthly bills are.

Additional mileage charges vary from as low as 4p, 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 £1,500 worse off than if you'd just paid the increased monthly price for the higher mileage over the course of a finance deal.

With many drivers choosing to upgrade to a new model at the end of their PCP scheme, the condition of the car being handed back is very important. If the car is covered in dents and hasn't been serviced, you're likely to incur substantial charges. However, manufacturers should 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, as 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.

2019 BMW 1 Series

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, including where and how often you service and maintain the car, and what modifications you make.

If you've got your heart set on modifying your car, always ask the lender's permission first. It could end up costing you dearly when it comes to the end of the contract if you don't.

>> Everything you need to know about modifying a car on PCP

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 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 the deal they offer you will almost always be more expensive than your current contract.

Yes you're getting another brand new car, but remember they are calling because they want you back in the showroom to sell you another car, the power is still in your hands and there's room to 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, 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 fairly costly.

If you're looking for the best used PCP car finance, it's reasonable to expect they'll clear your car first...

It’ll pay to delve deep into any warranty offered – ensure it includes any consumables that are likely to go wrong.

When you’re haggling for the best PCP deal on a used car, always make sure the car is priced fairly and you’re not being scuppered by high APR charges that make it worse value.

>> Check how much a used car is worth

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