City car finance costs soar 25% ahead of Brexit

  • Costs for cheapest cars are going up fastest
  • One model up from £76/month to £113/month
  • Many drivers priced out of the market

You’d expect city cars to be the most affordable vehicles on the road, but PCP finance costs for the UK’s cheapest cars are increasing faster than any other type of car, Parkers car finance research reveals, potentially pricing thousands of drivers out of a new car.

Costs are increasing so quickly that drivers with a city car on finance could find themselves unable to afford the same car next time around. A Suzuki Celerio that cost £76 per month just two years ago would now set you back £113 per month if you signed up for an identical contract.*

Car dealership

Costs for the six city cars covered in the 14-car Parkers research report have rocketed by 25% on average, with only one of these models reducing in monthly cost over the two-year research period.*

This comes in the wake of the UK’s vote to leave the EU, a move that has seen the value of the pound plummet, increasing the cost of many imported cars and UK-built models that rely on a significant proportion of EU-supplied parts.

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Suzuki Celerio: monthly payments up 48% in two years

Suzuki Celerio PCP finance

The Celerio used to be one of the UK’s cheapest cars, with cash prices starting at £6,999 in early 2017 and finance costs coming in at £76 per month for a four-year contract with a £2,000 deposit and a 6,000-mile-per-year allowance.*

Since then, cash prices have leapt dramatically to £8,999, with a subsequent increase in the monthly payment to £113 (with identical contract terms). That’s a monthly payment jump of 48% – a far greater rise than the 29% cash price increase, showing the disproportionate impact upon the majority of new car drivers who finance their vehicles.

All in all, this means a driver signing up to a Suzuki Celerio PCP finance contract in 2019 would be £1,752 worse off compared with someone who financed the same car two years ago.

Peugeot 108: 34% cost rise with very high interest charges

Peugeot 108 PCP finance

Another city car to rocket in cost is the Peugeot 108, which rose from £126 per month two years ago to £168 per month now (on a three-year contract with a £1,800 deposit and 6,000-mile-per-year allowance). That’s a rise of more than a third, equating to £1,536 higher costs in the economic uncertainty following the Brexit referendum.*

Worse than this, the same car would have set you back just £90 per month in mid-2016. That means this car has increased in cost enormously – to the tune of 88%. That’s not far off twice the price in less than three years; all this despite the cash price rising by a relatively low 12.5%.

Demonstrating the importance of shopping around, this entry-level Peugeot comes with enormous 9.9% APR interest charges that significantly inflate how much you have to pay.

Fiat Panda: 28% monthly payment hike

Fiat Panda PCP finance

Generally the older a car, the better the finance deals, but PCP costs for the seven-year old Fiat Panda keep rising. All this despite being the same car that was panned for a zero-star crash safety rating in December 2018.

While monthly payments came in at £119 in early 2017 (on a four-year contract with a £329 deposit and 6,000-mile-per-year allowance), the same car would now set you back £153 per month. That’s a hefty 28% rise, despite the cash price only rising by 8%.*

As a result, opting for a Fiat Panda now would make you £1,580 worse off compared with someone who signed the contract two years ago.

Hyundai i10: finance costs up by £1,067

Hyundai i10 PCP finance

The i10 has long been one of the best value city cars, but a series of price hikes – seeing the list price spiralling from £8,995 all the way up to £11,195 now – mean monthly payments are up by 25%.

That means that an i10 that would have cost £91 per month two years ago is now £113 per month (four-year contract, £2,000 deposit, 6,000-mile-per-year allowance). Yes, the i10 is still an affordable car, but you’ll need to find far more money to put one on the drive now.*

Overall finance costs have increased by well over £1,000 for a 2019 customer compared with a driver who picked up the keys in early 2017.

Vauxhall Viva: 21% monthly payment rise

Vauxhall Viva PCP finance

Vauxhall’s cheapest car has also leapt in cost, with monthly payments rising from £90 to £109 in less than two years (on a four-year, 5,000-mile-per-year contract with a £2,650 deposit). Explaining the increase in costs are a cash price that has risen from £9,315 to £10,480 and slightly higher interest charges.*

The net result is a £892 higher overall bill to finance the Viva for four years and hand back at the end of the contract, compared with someone who signed the contract in early 2017.

Fiat 500: 7.1% LOWER costs for popular city car

Fiat 500 PCP finance

Fear not; not all city cars have dramatically increased in cost. The Fiat 500 – despite still being very popular – is better value to finance now than it was two years ago.

Yes, the 500 has been around since 2008 – an age in car years – but it still sells well and finance costs are better value now than ever. Thank a substantial £1,750 deposit contribution discount and slightly stronger residual values – which help to reduce your monthly payments.

As a result, sign up for a Fiat 500 and monthly payments have tumbled from £175 two years ago to £163 now on a four-year contract with a £1,070 deposit and a 6,000-mile-per-year allowance.*

Prepare for Brexit: save money now, don’t use your whole budget

With huge uncertainty barely a month ahead of the scheduled Brexit date of 29 March, it’s wise to get your finances in order now. If you’re toying with financing a new car in the next month or two, it’s a good idea to get finance quotes now. Some quotes are valid on the day, until the end of the financial ‘quarter’, which currently runs until 31 March, or may last for a month.

We’d recommend getting a handful of quotes on the type of cars you’re considering and choosing two or three models that suit your needs and your budget. Then talk to these dealers to understand how long they will honour any quote for.

PCP finance Brexit

If you know they’ll honour quotes for a week, for instance, make sure to get a set of new finance quotes – with like-for-like finance terms so you can make fair comparisons – a couple of days before 29 March. Whether Brexit goes ahead as currently planned, is delayed or any other outcome, having printed finance quotes is the best way to secure these deals for a couple more days.

It is possible quotes for certain cars after 29 March could prove cheaper, so getting before and after quotes will help you to see which is better value for you. With so much uncertainty surrounding Brexit, the wider UK economy and the cost of products such as cars, however, it’s wise to put a little money aside every month, so you’ve got some money spare, if you need to replace your current car and costs are higher than you expected. In the meantime, find out how much you can afford to borrow with the Parkers car finance calculator.

As always, make sure you haggle to get the best price. Many drivers are used to negotiating when paying cash, and you can haggle in exactly the same way with finance deals. Check out the Parkers guide to how to haggle on car finance deals to ensure you get the car you want for a price you can afford.

* Parkers research January 2017 to February 2019: manufacturer PCP finance offers using like-for-like finance terms