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Let me give you a scenario. You buy a car for £10,000 which you finance over 3 years either by HP or a personal loan, either way you own the vehicle at the end of the 3 years after paying back the £10,000 along with the interest charges. You then sell the car for its market value. I, on the other hand, decide to buy exactly the same car for £10,000 but finance it using a Personal Contract Purchase (PCP). The man in the dealership has told me that there is a final figure allowed on the car of £4,000 which I can either pay to own it or simply hand the car back to the finance company at the end of the 3 year lease. Now why would I do this? Well the man in the dealership said that the car should be worth about £5,000 so I could part exchange the car and should still have about £1,000 to put down on the next car. I also only pay back the difference between the cost of the car (£10,000) and the final guaranteed future value (£4,000). In other words I only pay back £6,000 plus the interest charges. Are you with me so far? OK so let’s assume that the car is worth £5,000 after 3 years. If you bought the car on HP or a personal loan the car would have cost a net figure of £5,000 (cost of £10,000 less resale figure of £5,000). So the net cost to you would have been £5,000. However, I paid the same price but took the option to buy the car at the end of the lease for £4,000 and part exchange it for £5,000. So I paid a total of £6,000 (purchase price of £10,000 less the figure I had to pay of £4,000) but when I part exchanged the car I made a £1,000 profit so the net cost to me was the same as you – £5,000 (£6,000 – £1,000 profit). But my monthly repayments were about £80 less than yours helping my cash flow. Did you follow that? Now it would appear that PCP’s have got Mr David Millward, transport editor for the Daily Telegraph in a bit of a lather because like many writers on the subject of car finance he is clueless and has steered people completely in the wrong direction, not meant as a pun! I’ll apply my simple example to his logic. Let’s say you and I enter into our respective deals as shown above. But at the end of 3 years and given the dire situation in the used car market, our cars are only worth £2,000. You need a new car so you part exchange the car for £2,000. My finance company says ‘Mr Hill you can either buy the car for £4,000 or simply hand it back to us, what would you like to do?’ Now it would seem that even though I have been running my car for three years and the warranty is about to run out making it a good time to sell I would actually like to own my car, according to Mr Millward, the twerp, and would therefore be ‘forced’ to pay £2,000 more than the car is worth! No Mr Millward I would simply hand the car back to the finance company with a big smile on my face as I have just saved myself £2,000. The total cost to my good friend here who bought the car on HP or personal loan is £8,000 (cost of car of £10,000 less the part exchange value of £2,000) whilst the cost to me was £6,000 (cost of car of £10,000 less the guaranteed resale value of £4,000) and I was still paying around £80 less per month! There are interest charges to add into both calculations but I’m sure you get my point. Mr Millward you are not only a prize twit you should be reported for misleading the public. In his example he made out that a situation whereby a Volvo XC90 taken on a 2 year PCP with a final guaranteed residual value of £18,775 and a true value of  £12,600 is a bad thing for the person with the PCP. Are you bloody nuts Mr Millward? That is brilliant news because it means that the huge loss is being carried by the finance company and not the consumer! If the daft bugger had bought the car and was trying to sell it 2 years later he would be carrying the loss of £6,175 not the funder. I despair of the National Press and their uneducated advice given to the public and small businesses, even worse is that people read their articles and believe them! By Graham Hill