Used Car Finance - How to Find the Best Used Car PCP Deals
How to Find the Best Used Car PCP Deals
Used car finance can be a minefield, and it’s easy to end up with a PCP deal which is more expensive than it needed to be. In this post, the used car finance experts at DCC offer advice on what to look for when considering PCP plans for used vehicles and what to avoid, helping you ensure you get the best deal available.
What is a PCP Finance Deal?
PCP stands for Personal Contract Purchase. If you decide to buy a used car using a PCP financing deal, you will either pay a small deposit or sometimes no deposit at the start of the agreement, then monthly instalments until the end of the agreement, often three or five years. The length of the agreement can be flexible in most instances, meaning you can tailor your agreement to the period or monthly rate you want to achieve.
When you take out your PCP, the lender will agree a minimum future value on the car. The GMFV, or guaranteed minimum future value, is what the vehicle will be worth at the end of the agreed period. This is dependent upon you sticking to the mileage agreed at the start and ensuring the car is well maintained at the end of the agreement. If you go over your mileage allowance or the vehicle is not in good condition by the end of the repayment period, you may incur additional charges.
When you come to the end of your agreement, you will have three choices:
- Pay the final fee and own the car outright - the agreement has ended, and the car is yours
- Hand the car back - return the car and walk away
- Part exchange it - use the GMFV of the car as a part exchange against another used car
The third option is the most common, as it allows the owner to change or upgrade their used car every few years with no major financial outlay.
Is PCP a Good Idea for Used Cars?
PCP is a popular and affordable choice for used car owners looking to keep monthly costs down, and those looking to change or upgrade their car every few years.
PCP deals generally offer lower monthly payments than HP deals which makes them an attractive option for all kinds of car owners. On the other hand, the flexibility offered by a PCP gives you a range of choices at the end of the agreement, so if life changes or you change your mind about keeping or replacing the car, you will have different options available to you.
Last but not least, because the finance offering is tailored to be flexible, the used car dealership offering the financing can build a finance agreement around you over a range of years or monthly payment targets to get a deal you are comfortable with and that you can ensure is affordable.
How to Find the Best PCP Offers in Used Cars
When looking for the best used car PCP deals and rates, you will find quite a variation in offerings from dealer to dealer and there are several factors to consider.
Look around and compare deals - Make sure you research a range of finance options before committing to one. Bear in mind, some dealers will have better deals than others against certain vehicles, and interest rates can vary by quite a large degree.
Understanding interest rates - Ensure you understand the range of rates available to you for your next used car purchase to make sure you get a good deal.
Annual APR is the most common and straightforward way to explain the cost of your used car finance over the agreement's lifetime. Although the typical scenario is to get the yearly APR figure in your quote, some dealerships might present you with a monthly APR instead to make it look more appealing, and this is where most first-time used car buyers could get confused when opting for this type of deal.
Monthly APR figures may seem low at first but added up over a year may be very high. Therefore, to avoid surprises down the line, make sure you always ask for annual figures.
Flat rate interest
Flat rate interest deals mean you pay interest on the whole amount from the start of your agreement to the end. This format may appear a better deal, but that doesn't mean it is.
Bear in mind that while APR figures consider the deal's total cost, including fees and administration charges, flat rate deals do not. On the other hand, unlike APR, where you only pay interest on the outstanding balance, with a flat fee, you always pay the same regardless of how much you have already paid.
No deal option is particularly better than the other, and it will all depend on the offer you get from the dealership. Nevertheless, it is vital to ensure that you fully understand the cost of the entire deal before you sign.
Part exchange your vehicle - Many used car dealerships will allow you to part-exchange your current car against a used car they have for sale. This can help reduce initial cost and may even cover the deposit in some instances. This can save you time and hassle by not having to sell your existing car and not needing to raise the capital to pay a deposit. Stay realistic about what your part exchange vehicle will be worth. Used car dealerships have large overheads to cover which private buyers do not. Your car will not be worth as much in part exchange as it would be in the classifieds, but the hassle saved and used car finance offers available can more than compensate for the financial difference in many instances.
What to Avoid When Looking for a PCP Deal on Used Cars
Too good to be true - If you find a used car PCP deal which appears too good to be true, you definitely should take it as a red flag. If less scrupulous dealers pique your interest with a used car PCP offer that appears incredibly cheap at first glance, it is likely that the cost is made up for elsewhere in the deal and you will pay for it in fees, adjusted interest, or a higher initial vehicle value. To avoid this type of situations, read our practical guide to buying a used car to ensure you understand every element to consider when buying a used vehicle before signing any deal.
Check dealer reviews - Look at the Google reviews of the used car dealerships you speak to, as well as checking trusted sites with review sections like AutoTrader to get a feel for the kind of experience previous used car customers have had. Look out for red flags such as customers paying more than they thought they had agreed to, not understanding the terms of their PCP, and poor customer service.
Don’t underestimate your mileage - Before you speak to your used car finance manager make sure you have a clear idea of how many miles you are doing, and how many you are likely to do over the course of the agreement. For example, do you have a baby on the way? Are you looking for a new job? Are you planning on moving? All these things can have a bearing on the number of miles you do.
All PCP deals will calculate the GMFV in large part on your mileage. Therefore, if you underestimate how many miles you are likely to do, you may find yourself subject to a costly fee or reduced value at the other end of your repayment period to compensate for the reduced GMFV due to a higher mileage vehicle.
Used Car PCP Deals in Portsmouth and Southampton
If you are looking for used car finance and want peace of mind that you have a great deal, contact DCC today. We are an AA-approved used car dealership offering a range of used cars available with finance options at our Hampshire showrooms in Southampton, Fareham and Waterlooville.
Need a free consultation or would like to book a test drive? Get in touch today.