I’m a bit credit averse generally, but the EV’s coming of age has wiped away any lingering doubts about using PCP in my mind.
The rate of technical progress is mind-boggling. With charging speeds doubling, game-changing solid state batteries poised to come on the market and no doubt more around the corner we may not know about yet, today’s EV will be well behind the curve in three years, so who can really predict the rate of depreciation?
For the uninitiated, personal contract purchase (PCP) is one of the most popular ways of financing a car, usually involving a deposit, maybe with a ‘deposit contribution’ from a manufacturer as a sweetener, a fixed repayment term and agreed mileage.
At the end of the term there’s a guaranteed future value which means you can either hand it back, pay a final lump sum to own it outright, or re-finance the balance.
The guaranteed future value avoids the danger with outright ownership of taking an unexpected hit when trading in or selling privately. I usually find it tough to get the price I’d like when I sell, although it could just be that I’m just rubbish at selling cars.
PCP has been controversial in the past and some people view it as a poisoned chalice, “if it looks too good to be true, it probably is,” kind of thing.
The catch is, that starting again with another new car when your time’s up means paying another deposit, and that can be too convenient to overlook at the start. I finally decided the best approach is to put the money away for that deposit and treat the true cost of buying as the sum of the monthly repayments and the savings for the next deposit.
Having come to the conclusion I didn’t really need the X5 40d M-Sport I was driving anymore (and was fed up £100 a pop fill-ups) I worked out that over three years, including home charging at 16.5p per kWh, I’d save a staggering £5,000 on insurance, road tax and fuel by replacing it with a medium size EV.
I don’t want to own an EV outright though, and although I never thought I’d say this, the finance companies are more than welcome to the interest we pay them.