PCP - Miles don't matter

flyingstart

Hi there,

I've seen this topic vaguely before but want clear clarification and opinions on this.

I'm looking to buy a new car, and when at the garage, Lookers, in order to meet my budget the car salesman has told me he'll lower the milage on the PCP contract. The salesman insisted 'it doesn't matter about the milage unless you terminate your contract!'. He carried on assuring me, 'in a couple years time when you hand your car back, whether it's to us or anyone else, we won't even bother checking the milage. Even if you want to pay the balloon payment. The only time you'll incur excess mile charges is if you end your contract'.

I challenged him point blank asking whether this was salesman talk and he literally said that he's been doing it for years and the milage doesn't matter.

I haven't entered into a PCP contract yet. I'm a bit vary of this - what do you say? Is there truth in what the guy is saying or should I be cautious?

Thank you

AdrianC

He's right - the only time it matters is when the contract ends, and you hand the car back.

And they won't check when you buy the car for the balloon, whether you buy it to keep or whether you PX it elsewhere (which is effectively the same thing, as far as the financier is concerned).

So unless you pay the balloon, you end the contract by handing the car back. End of term, VT, px within the same finance scheme... And then it does matter.

Look, if it REALLY didn't matter, why would a higher mileage PCP cost more? Why would there be a figure for excess mileage?

He's not actually directly lying, but he's certainly failing the "truth, whole truth, nothing but the truth" test...

foxy-stoat

When the contract ends or it gets terminated by VT or if you suffer a total loss......grey area at best, I wouldn't want to sign up to a PCP contract with an annual limit of 6,000 miles a year when clearly I will be driving 12,000 miles a year, no matter want the sales person said.

lopsyfa

The salesman is wrong. The only time the mileage will not matter is if you pay the balloon and own the car. Otherwise, at the end of the contract, you will be billed for the excess mileage either directly if you simply give them the car or indirectly if you part exchange since the value of the car will be lower. They can usually hide this charge if you do part exchange since the two deals will be lumped together.

Some cases of this below:
https://forums.moneysavingexpert.com/discussion/5958278
https://forums.moneysavingexpert.com/discussion/5922738
https://forums.moneysavingexpert.com/discussion/5180860

Ask whether the salesman can write this statement into your finance current and he will quickly back down.

flyingstart

Thank you all for the comprehensive replies.

I totally see where people are coming from and it's easy to be 'lured' in with the idea you could save yourself unto £15 a month really (which is a considerable amount when the car is £150/60 a month).

It's a tricky grey area I think, something which I can see why a lot of people fall for.

motorguy

lopsyfa wrote: »

The salesman is wrong. The only time the mileage will not matter is if you pay the balloon and own the car. Otherwise, at the end of the contract, you will be billed for the excess mileage either directly if you simply give them the car or indirectly if you part exchange since the value of the car will be lower. They can usually hide this charge if you do part exchange since the two deals will be lumped together.

Some cases of this below:
https://forums.moneysavingexpert.com/discussion/5958278
https://forums.moneysavingexpert.com/discussion/5922738
https://forums.moneysavingexpert.com/discussion/5180860

Ask whether the salesman can write this statement into your finance current and he will quickly back down.

How many people either :-

• Pay the balloon?
• Actually hand the car back?

Very few i would say.

And yes, the car will have a lower trade in value with higher miles, but the mileage clause itself is irrelevant unless you VT / hand the car back.

All of those links are to a VT scenario so not typically relevant to someone running the car for say 3 years then trading in

AdrianC

motorguy wrote: »

How many people either :-

• Pay the balloon?
• Actually hand the car back?

Very few i would say.

I'd say 100%, since there ain't no other options.

Robby1988

Here is the thing, the 'Guaranteed Future Value' of the car (the balloon payment) is calculated partly based on how many miles the car will have on the clock when you get to the end of your deal. Therefore, if you set your mileage allowance at say 18,000 miles over a 36 month term but then in fact do 36,000, you will find yourself in a situation where the car is worth quite a lot less than what you still owe to settle the finance at the end of your term. IE. you will be in a fair amount of negative equity.

This only doesn't matter if you pay off the balloon payment to own the car. Otherwise, if you don't have the money to pay the balloon payment the dealer has you over a barrel because handing the car back and walking away will incur you a whopping big excess mileage bill. The only good option will be to take out another finance agreement on a new car (which is what they want), however that negative equity in your old car will get rolled into the new deal ultimately costing you more.

Insist the mileage is set accurately, unless of course you don't mind getting stuck forever in the PCP trap.

loskie

Of course they matter, he is treating you like an idiot. Ask him to put it in writing backed up by the dealer principal.

https://www.moneyadviceservice.org.uk/en/articles/financing-buying-car-personal-contract-purchase-pcp

motorguy

AdrianC wrote: »

I'd say 100%, since there ain't no other options.

Really? So people dont ever

• Part exchange the car in advance of the final payment being due
• Part exchange the car when the final payment is due

Neither of which involve the person actually paying the balloon.

Which was my point.

motorguy

Robby1988 wrote: »

Here is the thing, the 'Guaranteed Future Value' of the car (the balloon payment) is calculated partly based on how many miles the car will have on the clock when you get to the end of your deal. Therefore, if you set your mileage allowance at say 18,000 miles over a 36 month term but then in fact do 36,000, you will find yourself in a situation where the car is worth quite a lot less than what you still owe to settle the finance at the end of your term. IE. you will be in a fair amount of negative equity.

This only doesn't matter if you pay off the balloon payment to own the car. Otherwise, if you don't have the money to pay the balloon payment the dealer has you over a barrel because handing the car back and walking away will incur you a whopping big excess mileage bill. The only good option will be to take out another finance agreement on a new car (which is what they want), however that negative equity in your old car will get rolled into the new deal ultimately costing you more.

Insist the mileage is set accurately, unless of course you don't mind getting stuck forever in the PCP trap.

The actual value of the car with excess miles on it may be only slightly less than [or equal to, or more than for that matter] than the GFV of the car - which is always set at the worst of the worst case scenarios.

So if someone is feeling lucky, they can opt for a lower miles PCP deal and save on the payments, and hope that the impact later is nil or negligable when the trade value of the car is set against the settlement figure / GFV of the car (depending on when they deal)