End Of Lease Charges Could Be 30% Higher With PCP Than PCH
Friday, 15. March 2019
One of the fears when taking out either a Personal Contract Purchase (PCP) or Personal Contract Hire (PCH) is the fear of end of lease charges. The Financial Conduct Authority (FCA) issued its report on finance offered by car dealers last week.
The report was frankly poor and certainly lacking in content. It concentrated upon the commission taken out by dealers through inflated APR’s but the real problems that consumers face are far wider than overstated APR’s which you can always walk away from.
End of lease charges can be unexpected and excessive when you take out a PCP compared to a PCH agreement. Many have taken out a PCP with expectations of buying the car at the end of the agreement only to find that the final balloon payment is much greater than the car is worth.
According to themoneysavingexpert.com 80% of cars on PCP are handed back at the end of the agreement. It is only then that they realise the implications. Believing that you will own the car at the end of the agreement you may have the first service at a main dealer but knowing that having the car serviced at any service centre or garage would ensure that the warranty is unaffected you could look to save money and have the car serviced at your local garage. After all you will own the car.
However, it’s only when you hand the car back that you realise that there are charges and penalties because you weren’t expecting to do so. And as consumers find out far too late the PCP agreement is very complex with a huge number of vague terms and conditions. For example it will say, ‘the car must be maintained in line with manufacturer’s recommendations’.
You may believe this to mean that the car must be serviced every 10,000 miles using either manufacturer’s parts or parts equivalent to manufacturer’s parts. However, the manufacturer’s recommendations will always include: ‘Have the car serviced at a main dealer’. So if you don’t you could end up with a charge. And I’ve seen charges of up to £1,800. I’ve also seen excess mileage charges of 6 pence per mile on PCH but 15 pence per mile on a PCP on the same car.
The FCA had a great opportunity to make PCP much more transparent but concentrated on the commission taken by car dealers – sad. By Graham Hill
