A friend of mine was looking at a Mini John Cooper Works recently — he saw a PCP deal advertised. £279 deposit, £279 a month. In fairness, not a bad deal.
Here’s the issue though.
This deal, and his current deal, were advertised with abnormally low monthly payments for the value of the car. This is great if you’re leasing but if you’re on a PCP throughout the term of the contract, you are almost always in negative equity.
And here’s the stinger, who actually holds their car till the end of their PCP deal?
Not many.
Two years in you get twitchy, see a deal and change your car. Dealers are also prompted to call you around two years to try and get repeat business. In my friend’s situation, he had £2.8k of negative equity to clear before stepping into his nice new Mini.
£2.8k! Over two years!
Payments on his current car were £300 a month, on a £17k PCP deal. Two years in and £2,800 spread over those 24 months is an extra £117 a month so the true monthly cost was £417 over two years.
And guess what? If you don’t have £2,800 to clear the finance they will sell you another car, on PCP, rolling that negative equity into a new deal, giving you zero discount on your new purchase, disguising where the negative equity has gone. Not being deceitful of course, just setting up another PCP deal with more negative equity to come. The PCP rut.
By contrast, I’ve just helped a mate into a brand new £40,000 Mercedes GLC 220d AMG Line for £407 a month. More than double the value of car for less a month. You can currently lease a £17k Honda Jazz 1.3 i-vtec nav for £150 a month, no deposit. Ok, that might not be to your taste but are you catching onto this leasing thing yet?