Business uncertainty and the collapse of the pound since 2016 has resulted in motorists paying nearly £100 more each month for their cars, according to data published by Parkers.
Sterling has tumbled in value from more than 1.3 euros to the pound in May 2016 to around €1.11 today, which has resulted in the personal contract purchase (PCP) finance cost for numerous cars, many of which are imported from Europe, to rocket up in cost. Over the length of a contract, car buyers will end up paying as much as £4,606 more for their vehicle, a rise of 49 per cent.
Back in February, Chris Loyd, of Parkers, told the Independent: “Parkers research reveals that costs are increasing so fast that drivers who are tied into finance contracts currently may not be able to afford to finance the same car next time around (assuming the same contract terms).
“A Fiat Panda city car that would have set you back £119 per month two years ago is now £153 per month for new customers – despite being one of the oldest small cars still on sale and scoring an abysmal zero-star safety rating.”
More than 90 percent of new cars are bought with some form of finance in the UK according to What Car magazine, with PCP one of the most popular options alongside hire purchase schemes, and personal loans for buying a car.
PCP deals are popular as they offer buyers a way to pay less upfront and lower monthly costs. However, you do not own the car at the end of the contract unless you pay a substantial balloon payment, you will pay additional fees if you drive more miles than expected or scratch the car’s paintwork, and the overall cost is generally the highest of all the forms of car finance.
For a slightly higher upfront fee and monthly costs, buyers can instead opt for a hire purchase agreement, where there are no additional fees for mileage or scratches and no balloon fee. However, buyers will again not own the car until the final payment has been made.
The final option for car finance is a personal loan, which will generally be the cheapest way to buy a car over the length of the contract, which is generally with a bank or financial institution rather than directly with a manufacturer or car dealership, but with higher monthly payments.
As the UK prepares for another “Brexit day” on 31 October, motorists looking to buy a new car are advised to shop around for quotes to see whether they will be better off buying pre or post-Brexit. Manufacturers honour their deals for different lengths of time, and so a quote received in the next three weeks may be honoured by the car company whether the politicians choose to take the UK out of the European Union or opt for a further delay, giving consumers the chance to sit on the fence and then choose the best value deal whatever happens.