PCP - mileage limit

PopeUK

Hello!

I know this topic has been done to death, I've had a look through some previous posts and wondering if anyone has any advice on this particular situation.

My current car is on a PCP agreement over 36 months with an allowed mileage of 8000 per year. This mileage was more than enough when I bought the car last March, however in September I started a new job which has resulted in a 80 mile a day round commute. I'm approaching 11k miles already, the majority of that since September. I calculate at this rate I will be over double the allowance by the end of the term.

My understanding, as confirmed by other posts here, is that the excess mileage should only be an issue should I choose to return the vehicle at the end of the agreement. However, on the last couple of occasions that I've been on a PCP, I've traded the car in at the 2 - 2.5 year point as the value of the car at that time has been roughly equal to the settlement figure. My worry is because the mileage will be so high, I'll never reach a point that it is worthwhile trading in and I'll be forced to essentially pay the final balloon payment (which would require a loan). I don't really want to be in a position where I'm having to take out a loan to buy a car that I've been using for three years already.

I know that this is the drawback of PCPs - attractive at the start but potentially expensive in the long term. Up until now they have always worked well for me though due to my relatively low mileage.

My question is, is there anything I could or should be doing now to soften the blow in a couple of years time, or are my hands tied and I'll just need to take the hit?


Chris

bowlhead99

If you don't want to have to later take out a loan to buy a 3-yr old car with 48k miles on it for the price of a 3-yr old car with 24k miles on it...

a) pay the penalty and return the car. The penalty is a charge for wear and tear and you have been wear and tearing it at 16k miles but only paying for 8kpa as you go along. So use the extra money you are getting from your new job 40 miles from home, to start saving in a high interest bank account towards the penalty. You don't have to buy the car if you don't want it and are willing to pay the penalty.

b) change your attitude about buying the car. A 3 year old car with 48k miles on the clock will probably be good for another 150k miles and could last you a decade. With the money from your lucrative new job 40 miles from home, you can start saving now so that you don't need to take out such a big loan when it comes time to buy it.

c) Buy or PCP a second car to drive to work two days a week and do your weekend errands. Then you are only doing the original contracted mileage on the first car and can give that back in line with your original plan without penalty. If your finances don't stretch to buying another new car, buy an older one, or get it using a loan.

d) Go back to the finance company and ask if they would be willing to restructure the contract so that you pay them more money every month and they adjust the allowable mileage level and close-out value. It is always worth asking, even if the answer isn't what you want to hear.

e) Perform better at work or change jobs with the aim of greater financial reward to allow you to better afford the extra costs that the long commute is incurring.

Some of the above are more tongue-in-cheek than others but I think they are all potential solutions to your problem.

WellKnownSid

bowlhead99 wrote: »

Some of the above are more tongue-in-cheek than others but I think they are all potential solutions to your problem.

You missed:

f) if as you near the end of the contract you have paid at least 50% of the total finance, and if the contract allows it, then voluntarily terminate the agreement - which prevents the finance house charging for the excess mileage as the contract never ran its course.

Personally, I've only ever taken out one PCP deal - over 20 years ago now - and under similar circumstances chose option (b) - which meant I didn't even need a loan at the end of it. Ran the car for another year before selling privately for £2k more than the balloon payment and bought a Puma.

dcouponzzzz

You both missed "get a new job closer to home or move home closer to your job." If you rent in the same area then you can cycle in and only use your car for supermarket runs. Or hand it back and pay an early settlement and buy a banger

motorguy

Look at the excess mileage charge, work out how much you'll be over per year by the end of the term, and divide by the months remaining then DD that amount per month into a savings account.

That way you'll have all your options open.

Simples.

motorguy

dcouponzzzz wrote: »

You both missed "get a new job closer to home or move home closer to your job." If you rent in the same area then you can cycle in and only use your car for supermarket runs. Or hand it back and pay an early settlement and buy a banger

I dont think i'd ever move home for a job. A 40 mile each way commute is perfectly doable.

I did a 45 miles each way commute for two years for a lot more money and better career prospects than i'd have got locally without having to uproot my family and lose my social circle.

Ant555

How much is the excess charge per mile on your contract

24,000 miles at 6p per mile is £1,440 whereas 24,000 miles at 2p per mile is 'only' £480. It might make a difference to your calculations.

PopeUK

Thanks for the replies!


I think that buying the car at the end may be a reasonable option, to be honest I look after the car and make sure it's well maintained so as you say bowlhead99, it will still have good few miles left in it. And then when I do decide to get a new car later on, I will have something to trade in. Sadly, lucrative, my new job is not!


Selfishly, my main issue is I get fed up of cars quite quickly and like to change them every few years - really need to get out of this mindset though.

Ant555 wrote: »

How much is the excess charge per mile on your contract

24,000 miles at 6p per mile is £1,440 whereas 24,000 miles at 2p per mile is 'only' £480. It might make a difference to your calculations.

I will need to double check this but I'm sure it's something like 8p or 9p per mile! Stupidly I didn't even consider this at the time, although that was because I was comfortable that 8000 miles would be plenty.


Thanks again all

macman

If you don't want the car after 3 years (though why is beyond me, because even with 48K on the clock, it'll still be in warranty until you sell it), then buy it and immediately sell it on.
The whole PCP model depends on people buying a new vehicle every 3 years and thereby avoiding the balloon payment, but being locked into yet a further round of monthly payments.

dcouponzzzz

I would up and move anywhere in the world for any job myself, would you consider it if the alternative was a 7.5k balloon payment in a year or so? :P

I have a 75 mile round trip currently for work, stupidly when I signed off on my mortgage 4 years ago I didn't notice a 5% early payment fee all the way up until Dec 2016, at which point I'll be selling up, selling the car, renting near work and using public transport. Then looking anywhere in the world for a new job, I'm thinking Gibraltar :beer: takes a lot of anti-brainwashing to realise you don't have to live where you grew up, and any excuses not to move are very rarely good ones!

neilmcl

macman wrote: »

If you don't want the car after 3 years (though why is beyond me, because even with 48K on the clock, it'll still be in warranty until you sell it),

Why would it still be under warranty after 3 years until he sells it? Most dealer supplied warranties on new cars are only for 3 years.