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Part of the appeal of PCP car finance is that the finance company guarantees the minimum value of the car in future, so if the value dips more than expected then you can walk away without paying anything.
\nBut the finance company will put some restrictions on how you use the car to try and ensure that their future value prediction is met.
\nThese requirements will often include:
\nThe finance company sets these restrictions because they want to retain as much of the value of the car as possible.
\nIf you don’t stick to all these restrictions, then (in the finance company’s mind) the car will be worth less. So, they will either not honour the guaranteed future value or they will make you pay a penalty fee.
\nThe service regime is an interesting condition.
\nWe all know that if you don’t keep up with the manufacturer’s service plan then it will be worth less when you come to sell it.
\nEU competition rules mean that manufacturers cannot cancel a new car’s warranty if the car is serviced correctly by an independent garage, rather than an official dealer. But this consumer rights protection doesn’t exist for PCP finance deals.
\nSo, the finance company can force you to use the main dealer, even though it is likely to be more expensive.
\nIf the only difference between two three-year-old cars is that one has been serviced at an independent garage and one has been serviced with a main dealer, the gap between the real-world value of these cars is going to be very small.
\nBut this doesn’t matter to the finance company. And it could mean that you spend hundreds more than you need to each year on having your car serviced.
\nBefore you get a PCP deal, you should make sure you read the contract carefully and see what kinds of restrictions the finance company puts on your guaranteed future value.
\nIf you are confused about anything, make sure you get to the bottom of it with the finance company. For example, you can ask for examples of what would be considered ‘normal wear and tear’ and what would be considered more serious damage.
\nYou should also make sure you know what kind of dealers you can use for servicing and double check whether you can use an independent garage.
\nUltimately, if you think that you are going to buy the car for the guaranteed future value after the PCP period, then it doesn’t matter where you get the vehicle serviced.
\nIn this case, you can save yourself a few hundred pounds by getting your vehicle serviced with a local independent garage, which is almost always cheaper than a main dealer or a big chain.
\nThere are lots of other ways that you can buy your next car, with different benefits and drawbacks. We will talk about a few of them and the restrictions on servicing below.
\nHire purchase – With hire purchase, you are essentially borrowing against the cost of a car. You pay a deposit and monthly payments with interest. You don’t own the car until you make the final payment, but you can get the car serviced with whoever you like.
\nPersonal Contract Hire – With this kind of agreement, you are basically leasing the car from a finance company. The car never belongs to you and you need to give it back after the agreement, but the best thing about this is that servicing and maintenance costs are included in the monthly price.
\nDuffy Motors is an independent garage in Manchester City Centre. To book your next MOT or service, get in touch today. Call: 0161 834 4168.
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