What_Car_UK_-_August_2020

44 August 2020 whatcar.com

THREE LETTERS HAVE come to dominate the

car fi nance market in recent years: PCP. They

stand for personal contract purchase, which is

by far the most popular way to fi nance a new

car. However, traditional hire purchase (HP)

still holds appeal for some car buyers.

The main benefi t of a PCP deal over HP

is that a substantial portion of the amount

borrowed is left until the end of the loan.

With an HP deal, you’ll pay equal monthly

payments, typically over three or four years,

but with a PCP deal you’ll pay a series of

smaller monthly payments, with a larger

payment at the end of the agreement that’s

often referred to as a balloon payment, or the

minimum guaranteed future value (MGFV).

The car is usually worth more than the MGFV,

so if you don’t want to buy it outright, you can

use the equity as a deposit for your next car.

There are drawbacks with PCP deals, though.

The one that catches many people out is the

annual mileage limit. A PCP agreement is

drawn up on the assumption you will cover

a certain number of miles each year and no

more. That’s important, because the mileage

is used to calculate the MGFV. Go over the

mileage limit and you’ll be hit with penalty

charges. With HP, there is no mileage limit.

CHOOSE A PCP DEAL IF...

● Low monthly payments are all-important.

● You’re not sure what you will want to do at

the end of the agreement.

● The PCP comes with a big manufacturer

deposit contribution and a lower interest rate

than for HP, making it cheaper overall.

CHOOSE HP IF...

● You’re sure you want to keep the car at the

end of the  nance term.

● You can afford higher monthly payments.

● You’ve compared the PCP and HP deals on

the car and HP offers a lower total cost.

Of the two main ways to  nance a car purchase, which should you go for?

PCP VERSUS HIRE PURCHASE

SCANFOR

A GREATDEAL

ONTHISCAR

£

SAVE £10,247

BMW7 Series

WHATCAR?SAYS

Model M760 Li

List price £141,710

Cash Target Price £128,696

Total  nance cost £118 , 4 4 9

The 7 Series is a strong contender in the luxury

car class, with sharp handling, strong engines

and a brilliant infotainment system. Whichever

7 Series you go for, you’ll save money by buying

on fi nance, with a benefi t of more than £6000

on the entry-level 730d. If you opt for the

fl agship M760Li, you’ll save more than £10,000.

BIG SAVER

Despite its huge

size, diesel versions of

the 7 Series can of cially

return up to 44.8mpg,

making it more

ef cient than its

main rivals.

Every 7 Series is spacious,

and long-wheelbase versions

are even more accommodating

LUXURY CARS