PCPs: A Short Term Solution That’s Too Good To Be True

One of the key advantages of Personal Contract Purchases, often shortened to simply PCPs, is that you ultimately pay less for a brand new luxury vehicle than you would for an old second-hand model. By allowing you to pay in bite-size monthly instalments over an allotted period of time, at the end of which you have to return the car, PCPs are regularly touted as a more cost-effective way of buying a car. In many ways, it sounds too good to be true—and over a long period of time it is.

PCP payments are low because they do not amount for the full price of the car. You are only paying for the privilege of driving it for a short period of time—usually between two and four years. After that point, drivers must pay the remaining cost of the vehicle, which will generally be too much for customers that opted into PCP to begin with. Alternatively, to continue driving, you have to opt into a new contract, which is what most road users do.

The problem here is that while PCPs offer short-term savings, you will have to constantly make monthly repayments for as long as you wish to drive. Over decades, or even a lifetime, you are going to end up paying much with a Personal Contract Purchase than you would buying a second hand car. You could probably even buy a decent mid-range vehicle for less than what a decade of PCP would cost you. Most vehicle owners don’t know they have been been missold pcp and lately we seen the independent blogs like www.pcpmissold.co.uk chase the FCA for updates on this.

This problem is being accelerated by the falling prices of used cars. Since the mayor of London Sadiq Khan has effectively banned older diesel cars from Central London, with wider punishments expected to hit other areas in the next few years such as parking premiums, the used car market has been in free fall. Some worry that many old diesel cars will be essentially worthless in ten years time, and prices are falling as a result.

The success of PCP relies on high used car prices—firms eventually sell most of the cars that people purchase on the second hand market. Therefore, falling prices may lead to a crisis in which drivers find themselves having to walk away or cough up much more cash to remain behind the wheel once their repayment period has ended.