Help With PCP Mileage Cap for New Car

Jamiehughes1998

I took out a PCP deal in Sep 2021 for a brand new Citroen C1 for £165/month with only 6000 miles (I was told that if you take the lower miles then if you go over it the excess charge will still usually be less that the bump in monthly price for taking a higher milage cap). I've recently started a new job which requires me to commute far so my miles have went up ALOT. I've done a calculation and it looks like I could be charged up to £1200 for the excess miles when my contact is up after 3/4 years (based on my average projected miles). I am just wondering if there is anything i could do to try and avoid this or any advice that could help. I hope you can help 

KimJongUn88

What do you expect people to say?  You're going to go over the annual mileage that you've agreed from the outset.

How long is the contract for? Surely an extra £300/£400 a year is still less than opting for the higher mileage from the outset?

neilmcl

Just ring up the finance provider and tell them what you're new mileage is likely to be and they'll adjust your monthlies to suit.

Jamiehughes1998

My contract is for 4 years but when I bought it the dealership said i could trade it in after 3. A friend told me that that if I trade in my car early ie. after 3 years then they don't care about the excess mileage and wont charge you, is this true? I think it will probs work out cheaper to keep the current mileage and just pay the excess fee but I would obviously like to avoid paying it at all 

daveyjp

Two ways.

Buy the car rather than trade it.

Terminate the PCP once you have paid 50% of the amount owed, which on a 4 year term will be about 40 months in.  This is a 'who blinks first' strategy, but there is case law to back up the argument that early termination means no excess mileage charges can be demanded as the end of the PCP contractual term has not been reached.

Mercedes-Benz Financial Services (UK) Limited v Cahalane (Willesden County Court, 26 February 2018)

DrEskimo

Jamiehughes1998 said:

My contract is for 4 years but when I bought it the dealership said i could trade it in after 3. A friend told me that that if I trade in my car early ie. after 3 years then they don't care about the excess mileage and wont charge you, is this true? I think it will probs work out cheaper to keep the current mileage and just pay the excess fee but I would obviously like to avoid paying it at all 

The excess mileage fee is only payable if you return the car to the finance company at the end of the term (and perhaps arguably if you VT, but as above this is a grey area...). 

At any point during the contract, you are free to trade the car in, settle the finance and buy another car. This is absolutely no different to if you had no finance outstanding.

Of course the cost to do this will depend on what price you can get on the car as a trade value, and how much finance is still owing on the car. The price you get offered as a trade value will take into consideration the age and mileage of the car.

neilmcl

Jamiehughes1998 said:

My contract is for 4 years but when I bought it the dealership said i could trade it in after 3. A friend told me that that if I trade in my car early ie. after 3 years then they don't care about the excess mileage and wont charge you, is this true? I think it will probs work out cheaper to keep the current mileage and just pay the excess fee but I would obviously like to avoid paying it at all 

The finance company won't care but the dealer's trade-in value will be much less due to the higher mileage so you'll end up paying for it in the end, maybe even more so than simply paying the excess mileage. If you keep the car then the excess mileage charge is irrelevant. 

Ectophile

daveyjp said:

Two ways.

Buy the car rather than trade it.

Terminate the PCP once you have paid 50% of the amount owed, which on a 4 year term will be about 40 months in.  This is a 'who blinks first' strategy, but there is case law to back up the argument that early termination means no excess mileage charges can be demanded as the end of the PCP contractual term has not been reached.

Mercedes-Benz Financial Services (UK) Limited v Cahalane (Willesden County Court, 26 February 2018)

But that rather depends on the exact wording of the finance agreement.  https://www.weightmans.com/insights/the-pitfalls-of-relying-on-consumer-forums-for-legal-advice-a-cautionary-tale-about-excess-mileage-clauses-in-hire-purchase-agreements/

Herzlos

You've still got 3.5 years left on the contract so I wouldn't worry about it until you come to hand it back. If you do hand it back then you pay the £1200 mileage fee, but if you buy the car you won't. You also have no idea what'll happen to your mileage in that time - maybe another lockdown will knock it down to 0, maybe you'll move somewhere with a shorter commute and so on.

You can theoretically change the car at any time, but it'll cost you more the newer the car is, there's nothing magic about the 3 year point beyond sales patter.

Goudy

You're not the first to be in this position. The first thing to do it don't panic or worry but plan.

Your options are clear at the end of any PCP contract.
You can hand it back and pay the mileage and any damage beyond normal wear and tear.
Pay the GFV and keep it.
Trade it in and hopefully close the gap between trade in value and GFV.

First thing to do is wait until your contract is closer to finishing, say around 3 months before the final payment is due.
This will give you better figures to work out the excess mileage and any other charges above normal wear and tear.

In the mean time, if you can ferret away a small monthly saving, this will help later.

When you are three months away you should have a better idea of the likely charges that should help you decide what to do.

The cost of handing it back might be more or less, but £1200 is your current figure. (your savings pot should help)

You can pay the GFV and keep it (again your pot of savings should help towards that)

If you trade it in on a new car, you could break even (ie the trade in covers the GFV), or it could cost you more or less than the other two options, but dealers will be well aware of the situation so shopping around and haggling hard will pay dividends.
Just be up front and tell them you need to close the gap or you're not doing business. they might not, but others might.
You need to be sharp with the figures here as the dealer might try rolling some of the old loan into the new deal.

If it turns out you can only close the gap between trade in value and the GFV to say half, you're £600 better off and have a small savings pot to cover it.
If you can't, then pay the GFV and keep it or pay the excess and hand it back.

On the few times I've taken out a PCP and carried it on to the end, I've always under estimated my mileage to get the cheapest deal and managed to close the gap between GFV and trade in value just by shopping around and haggling and then used the few quid ferreted away towards a deposit on the new car.

As written, the dealers will be well aware of the situation, to do business on a new car you need to close that £1200 gap and as long as the trade it in not a complete wreck, there's always some movement in their trade in values, you just need to get it out of one of them.
By doing this early (3 months before the end) it gives them a hint you've planned what to do and are savvy enough not to leave this to the last minute and have plenty of time to explore over dealers.

facade

£1200 after 42 more months works out at £28.57 per month. If you can save £30 a month in a separate account, or in a piggy bank you can more than cover it.

Would raising the mileage allowance cost less than £30 a month?

As advised above, if it turns out that you don't do the mileage, or you trade in the car then you will have money left over, if you raise the mileage limit, you will be committed to the extra payments whether you actually use the mileage or not.