Quick question on PCP. I do 25k a year so I've been getting PCP quotes for 25k a year. A dealer told me today that if I actually quoted my figure at say 10k it would obviously lower the monthly figure and it wouldn't matter that I was doing 25k as I plan to change cars before the 4 years is up. They said it only matters if you plan to hand the car back at the end of the term.

Is this true? Or is the dealer just trying to sell me a car and let me worry about it later on?

Quick question on PCP. I do 25k a year so I've been getting PCP quotes for 25k a year. A dealer told me today that if I actually quoted my figure at say 10k it would obviously lower the monthly figure and it wouldn't matter that I was doing 25k as I plan to change cars before the 4 years is up. They said it only matters if you plan to hand the car back at the end of the term.

Is this true? Or is the dealer just trying to sell me a car and let me worry about it later on?

Probably the latter

Quick question on PCP. I do 25k a year so I've been getting PCP quotes for 25k a year. A dealer told me today that if I actually quoted my figure at say 10k it would obviously lower the monthly figure and it wouldn't matter that I was doing 25k as I plan to change cars before the 4 years is up. They said it only matters if you plan to hand the car back at the end of the term.

Is this true? Or is the dealer just trying to sell me a car and let me worry about it later on?

It is true. The mileage will only directly matter if you hand it back at the final term and have exceeded to contracted amount - you will then have to pay the excess pence/mile charge.

If you change early it doesn't matter what mileage you have done, you will get a trade in price based on the age/condition/mileage etc. obviously the higher the miles the less the car will potentially be worth come trade in.

Probably the latter

 

It does matter.   In a simplistic way, PCP works like this:

Car costs £10,000, you say you will do 10,000 miles a year

 

Finance Company says car will be worth £3,000 after 3 years so, on a 0% interest no deposit scheme will calculate monthly payments to collect £7,000 over 4 years at £146 a month 

 

In a wonderful world, your talk about changing your car 3 years and 9 months later and the dealer tells you "Great News!   Your car is worth £3900 as a part-ex so you have £900 to put towards your new car!"

 

If, however, you return your car with 75,000 recorded miles, then the car could be worth substantially less than the agreed "Guaranteed Future Value"  and, if you read the small print, you will see that the GFV is based upon a vehicle returned in good condition with the agreed mileage.    In a worst case scenario, you could be in negative equity, meaning you could be asked to pay a substantial amount to change your car.   If you "simply walk away", as they advertise, they will come after you for excess mileage charges, costs to repair scuffed alloys, valeting costs and anything else their little heads can think of!    

I think it does pay to be reasonably honest with mileage, although the dealers may be able to "lose" a few thousand.   Asking them to turn a blind eye to 60,000 miles is a bit tough!

As a footnote, I really wouldn't expect a V.A.G. Dealer to be advocating understating your mileage.   V.A.G. dealers should not be interested in making a quick sale - they are expected to secure your business for the rest of your natural life!   The German Car Manufacturer's owners' aim is for you to say you have received "Outstanding Excellence" from your V.A.G. dealer on every occasion you come into contact with them, and that your car is a shining example of "Outstanding Excellence" in manufacture.   For this reason, their salesmen should not be interested in just getting another car out of the showroom door, but should be honest and up front with you so that he retains your brand loyalty for life!   It's serves no useful purpose to make his job hard, or the job of another dealer's salesman next to impossible, four years down the track!

Edited 23 December, 201411 yr by bealine

I agree. I couldn't get my head around it either...that why I thought I would ask the group

It does matter.   In a simplistic way, PCP works like this:

Car costs £10,000, you say you will do 10,000 miles a year

 

Finance Company says car will be worth £3,000 after 3 years so, on a 0% interest no deposit scheme will calculate monthly payments to collect £7,000 over 4 years at £146 a month 

 

In a wonderful world, your talk about changing your car 3 years and 9 months later and the dealer tells you "Great News!   Your car is worth £3900 as a part-ex so you have £900 to put towards your new car!"

 

If, however, you return your car with 75,000 recorded miles, then the car could be worth substantially less than the agreed "Guaranteed Future Value"  and, if you read the small print, you will see that the GFV is based upon a vehicle returned in good condition with the agreed mileage.    In a worst case scenario, you could be in negative equity, meaning you could be asked to pay a substantial amount to change your car.   If you "simply walk away", as they advertise, they will come after you for excess mileage charges, costs to repair scuffed alloys, valeting costs and anything else their little heads can think of!    

I think it does pay to be reasonably honest with mileage, although the dealers may be able to "lose" a few thousand.   Asking them to turn a blind eye to 60,000 miles is a bit tough!

As a footnote, I really wouldn't expect a V.A.G. Dealer to be advocating understating your mileage.   V.A.G. dealers should not be interested in making a quick sale - they are expected to secure your business for the rest of your natural life!   The German Car Manufacturer's owners' aim is for you to say you have received "Outstanding Excellence" from your V.A.G. dealer on every occasion you come into contact with them, and that your car is a shining example of "Outstanding Excellence" in manufacture.   For this reason, their salesmen should not be interested in just getting another car out of the showroom door, but should be honest and up front with you so that he retains your brand loyalty for life!   It's serves no useful purpose to make his job hard, or the job of another dealer's salesman next to impossible, four years down the track!

I think you've missed the point. It's fairly obvious if you return the car at the end and have exceeded the contract mileage you will pay a mileage penalty. But that's not what the OP was asking, he was wondering what would happen if he wanted to trade it in and change cars early.

In that scenario MGFVs and mileage limits mean absolutely nothing. All that matters is how much the car is worth at that point in time vs how much is owed on the outstanding finance. The dealer will give you a trade in value the same as any other car, what you agreed on the PCP is irrelevant. The only factor to be aware of is if you have done a lot of miles then the trade in value will be low and so you are less likely to have any equity to roll over onto another deal.... If your payments have also been on the low side by deliberately underestimating the mileage then you are also likely have a large finance settlement to make.

MGFV and mileage limit only ever comes into play when trying to hand the car back to the finance company at the end. In any situation where you are trading in against another car it doesn't have any bearing. :-)

If you under quote the mileage you'll pay less every month.

So when you part exchange it early and clear the finance you'll be in even more negative equity.

As it'll be high mileage and worth less than a similar car with 10k miles per year instead of 25K.

And you'll have more outstanding.

Potential financial time bomb IMO.

Is it worth the future risk to lower monthly payments now?

It is true. The mileage will only directly matter if you hand it back at the final term and have exceeded to contracted amount - you will then have to pay the excess pence/mile charge.

If you change early it doesn't matter what mileage you have done, you will get a trade in price based on the age/condition/mileage etc. obviously the higher the miles the less the car will potentially be worth come trade in.

 

But if you want to change a car after two years and it's done 60k instead of the 20k that they were expecting for example, then it's value wil be quite a bit lower meaning that you may not have equity to clear the outstanding finance.

 

The manufacturers aren't idiots and don't leave a huge loophole where you can do several times the quoted mileage with no consequences.

The difference really is whether you want to spend the money during the term of the PCP or wait to see the outcome at the end and have little or no equity. The OP might decide that he want's to keep monthly payments down and doesn't want to pay a large deposit and as long as he knows the risks then that might be the right thing to do for him. He might also be anticipating a change of circumstances that means he can absorb the cost at the end (promotion at work, new job, etc.)

 

It's worth getting a few quotes with different mileage options to see what difference it makes to the gfv. That way you can work out what would be the best combination for your circumstances.

But if you want to change a car after two years and it's done 60k instead of the 20k that they were expecting for example, then it's value wil be quite a bit lower meaning that you may not have equity to clear the outstanding finance.

The manufacturers aren't idiots and don't leave a huge loophole where you can do several times the quoted mileage with no consequences.

That's what I said isn't it? Lol

That's what I said isn't it? Lol

 

No, you said it doesn't matter, then went on to explain why it does matter.

No, you said it doesn't matter, then went on to explain why it does matter.

Maybe I missed my calling and should have been a Politician ;-)

It does matter, but most PCP schemes geared to ensure plenty of equity, which is of course in the interest of the retailer. If your circumstances change part way through the contract, as mine did, it's best to change as soon as you can obviously.

As far as I can tell high mileage PCP's aren't very good value for money.

 

I do 30K a year and have looked at PCP's a few times over the years.

 

So far it's been better for me to buy nearly new with a straight forward low interest bank loan and run it into the ground, which given my mileage is usually about the same time as a longer PCP (5 years?).

 

The only issue is I don't get the full three year warranty.

 

PCP's have come close though - when the manufacturer is offering 0% and a healthy deposit contribution of around £2K.

Edited 26 December, 201411 yr by silver1011

A 5 year HP would be a similar monthly payment.

Get a car that is 6 months old then it is still warrantied for a while and has lost the initial depreciation and you can do as many miles as you like.

If your circumstances change your not liable for damage (This can be expensive if you give the car back as they will charge you for any little thing at full dealer price) and excess miles.

Good luck

C

It does matter, but most PCP schemes geared to ensure plenty of equity, which is of course in the interest of the retailer. If your circumstances change part way through the contract, as mine did, it's best to change as soon as you can obviously.

 

Due to the way a new car depreciates heavilly as soon as you drive it the balance is not over the term.

So anyone planning to trade in early needs to be aware that with a minimal deposit you will be in negative equity.

You build the equity near the end of the term.

Due to the way a new car depreciates heavilly as soon as you drive it the balance is not over the term.

So anyone planning to trade in early needs to be aware that with a minimal deposit you will be in negative equity.

You build the equity near the end of the term.

I have had 3 PCP cars and only one has given a small (few hundred pounds) equity at the end the others required £700 and £1500 to clear the negative equity in the cars not too far from the end of the contract.

It is not the best solution but it can work for some if you change cars after 2 years 10 months every time then you may get some money back. If you change your mind early then you will be paying for it big style.

Just to clarify it won't be a new car purchase but probably one that is 3-4 years old. HP works out really expensive as I change cars every 2-3 years roughly. So really only want smaller monthly payments as its unlikely I will want the car at the end of the term. In the event I do I guess I would just take a loan out for the gfv and keep it.

In a nutshell Chris, you're dealers talking out of his 4rse. As explained above, the GFV on a car with 30k miles as opposed to one with 75k will be far greater.

 

As you are looking to change the car every 2/3 years, to achieve lower monthly payments by reducing the contracted mileage would be sacrilege, you will just pay through the nose at the end.

 

If you was sitting here saying that you was going to buy the car outright at the end, different story, you could run the car on 25, 30, 50k a year and it would not matter as you would be buying it outright anyway, but as this is not the case, personally you will be up the proverbial creek come changeover time.

 

With regards to a PCP on a 3/4 year old car, what is the car? It must be some hefty chuck of metal to be able to offset an amount at the end. Would it be wise to have a PCP on (what will be) a ~7 year old car at the end? I can see the benefit on new cars, even 1 year old cars (but then I would, I'm a car dealer  ) I just can't see it on anything older.

 

To skip back to the initial point though, YES, BLOODY HELL YES, the mileage will make a difference if you are chopping it in at the end.

 

To skip back to the initial point though, YES, BLOODY HELL YES, the mileage will make a difference if you are chopping it in at the end.

I don't think the OP had any intention of going to the end. His plan was to have a 4-yr PCP and change after 2years? Obviously doing a lot of miles with lower monthlies will be putting him in more danger of significant negative equity at his planned changeover point but I don't think it may necessarily be as bad as trying to hand back a starship-enterprise mileage motor after 4-years having specced a minuscule mileage on the contract lol. Depends a lot on the depreciation of the car in question and how much discount was obtained upfront too I guess.

Personally I don't think PCP is necessarily the best way of paying for a new car if you are doing a huge mileage.

To be fair if you are having to grossly underestimate the mileage in order to lower the monthlies enough to buy the car I'd question if someone could really honestly afford the it in the first place.... :-)

I don't think the OP had any intention of going to the end. His plan was to have a 4-yr PCP and change after 2years? Obviously doing a lot of miles with lower monthlies will be putting him in more danger of significant negative equity at his planned changeover point but I don't think it may necessarily be as bad as trying to hand back a starship-enterprise mileage motor after 4-years having specced a minuscule mileage on the contract lol. Depends a lot on the depreciation of the car in question and how much discount was obtained upfront too I guess.

Personally I don't think PCP is necessarily the best way of paying for a new car if you are doing a huge mileage.

To be fair if you are having to grossly underestimate the mileage in order to lower the monthlies enough to buy the car I'd question if someone could really honestly afford the it in the first place.... :-)

I've seen a couple of horrors over the last few years. Intergalactic mileage but contracted to poodling up to Sainsburys and back twice a week!!

The car in question is bugging me still, for it to be possible to PCP surely that end payment has got to be substantial for, at present a 3/4 year old car. So we must be looking at a used car that's what 20 grand plus?? Agree with the your last paragraph completely Tom. Sorry Chris, but this has got horror story written all over it.

Agreed and thankfully a)it was over budget and the salesman feeding me the "give a lower mileage" wasn't the business manager who warned against it. Which I had pretty much concluded. They did say that you could give or take a bit but not like Mr salesman suggested.

The car in question is a Jag XJL. 2011 vintage coming in upwards of 26k. My budget is 20-28, the dealership were trying to flog me a 37k jobbie! Lol!

Ahhh, Mr Customer, its only another 10 grand...... FFS.

Nice bit of kit

Yep, a couple of thousand, but bu66er me senseless, 40k+ difference, the salesmans a complete numpty.

Is a personal lease better with a high mileage driver?

Ahhh, Mr Customer, its only another 10 grand...... FFS.

Exactly. I even said, I don't want to spend that much. It had the rear seat entertainment pack (8.5k option) and some other things I'm not interested in..wouldn't listen though!

Found another which is coming in at £550 a month..still too much but a step in the right direction!