What_Car_UK_-_August_2020

40 August 2020 whatcar.com

FINANCE

FIGHTS

BACK

Cash has historically been the best way to get a good deal on

a new car, but our research reveals that in some cases you

could be more than £10,000 better off buying on nance

Claire Evans

[email protected]

I REMEMBER MY father walking into our local

Ford showroom in the 1980s with a briefcase

full of cash and leaving as the proud owner of a

new, metallic bronze 3.0-litre Capri. Car buying

has changed a lot since then, though. Personal

contract purchase (PCP) finance has become

the most popular way to buy a new car; 75%

of new cars were bought using it last year.

With a PCP deal, part of the car’s price is

deferred until the end of the deal, and buyers

have three choices when payments end: make a

large ‘balloon’ payment to own the car outright,

use any equity left in the car as a deposit on

a new car, or simply hand the car back to the

dealer and walk away.

Buying on a PCP deal lets you buy a more

expensive car than traditional forms of finance,

such as hire purchase, because it offers lower

monthly payments. And in some cases there’s

an even more compelling reason to choose

this type of finance. Thanks to manufacturer-

backed incentives, such as dealer deposit

contributions and zero per cent finance, it

can be cheaper than buying with cash – even

when you take into account the final ‘balloon’

payment at the end of a PCP deal.

’Of the cars scrutinised,

14% cost less overall on

PCP than if theywere

bought with cash’

“Buying on finance works out cheaper when

the car maker’s deposit contribution is greater

than the maximum discount offered for a

cash purchase – as indicated by our Target

Price saving – and the finance interest rate is

either zero or low enough not to cancel out that

saving,” explains Pat Hoy, head of our Target

Price mystery shopping team.

“There are two reasons why some cars are

cheaper on finance. First, it’s a good way for car

makers to offer a discount without making it

blatantly obvious that they’re working to boost

sales of a given model. Second, car makers like

to get people to buy using one of their PCP

deals because they can look forward to repeat

business when finance agreements end.

“Consumers should work out the total

amount payable for a car, both as a cash deal

and on finance, and compare the two before

buying to ensure they pay the lowest price.”

To help with your new car research, we’ve

looked at all the incentives currently offered

on new cars by manufacturers, to pinpoint the

models for which finance is the best option.

Although 83% of nearly 6000 cars

scrutinised by our Target Price experts were

cheaper to buy using cash, 14% of them cost

less if you took out a finance package instead.

And while some of the savings are only a few

hundred pounds, others are up to £10,000.

Only cars that have scored at least three stars

in What Car?’s rigorous road tests are included

in our round-up. All savings are based on a

four-year PCP deal with a 15% deposit and a

limit of 10,000 miles per year.

If you do opt to buy on finance, it’s worth

checking the small print to make sure you can

pay it off early without incurring penalties that

could outweigh your saving.

It’s worth paying for at least £100 of the

car on a credit card, because credit card use

gives you protection under Section 75 of the

Consumer Credit Act 1974. If there’s a problem,

this law will cover the cost up to £30,000.

Choosing a hire purchase or PCP deal gives

you added protection if the car develops a

fault, because the finance provider and car

manufacturer are jointly liable to fix it and

refund your payments where appropriate.

DEALS