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Can anyone kindly explain how a PCP works? its the first time i'm considering getting a car on finance and from what i understand so far:

I pay a deposit amount towards the car

I pay the set monthly amounts for the months in the contract e.g. 36 months

At the end of the 36months i pay the agreed guaranteed future value and keep the car

Is it as simple as that? or is there more to it? i dont understand the 10k milage restriction. why is that imposed if i plan to pay the final amount and keep the car at the end? and how is this 10k per year milage monitored?

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Can anyone kindly explain how a PCP works? its the first time i'm considering getting a car on finance and from what i understand so far:

I pay a deposit amount towards the car

I pay the set monthly amounts for the months in the contract e.g. 36 months

At the end of the 36months i pay the agreed guaranteed future value and keep the car

Is it as simple as that? or is there more to it? i dont understand the 10k milage restriction. why is that imposed if i plan to pay the final amount and keep the car at the end? and how is this 10k per year milage monitored?

Yep I think that's pretty much how it works. I think the 10k mileage thing is if you decide to give the car back after 3 years instead of paying the final balloon payment they want to have it with reasonable mileage. We've only ever had one car on a PCP and it was never monitored, and as we bought the car at the end they never knew what the mileage was. I think it's only an issue if you return the car.

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From my understanding, most PCPs end with three options - (1) you buy the car for the GMFV, (2) you hand the car back and (3) you use the car in a part exchange for another one and any equity in the deal is all good for you. The mileage (and condition) becomes an issue if you try option (2) - anything over what you agreed and anything more that "reasonable" wear and tear (my words) can incur cost as part of the hand back.

I believe most PCPs are now regulated under the consumer credit agreement which means they also have a hand back clause when 50% of the outstanding finance has been paid - worth checking out to make sure you fully understand what you're getting yourself into!

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Parthiban and Jezzer are both correct in what they say. You mention the 10k miles, this tends to be the default mileage that they use when working out the costs. The higher the anticipated mileage the lower the guaranteed residual, and thus the monthly payment is higher. They are now covered under the consumer credit act which enables you to hand the car back after 50% has been paid. I'm not sure about the mileage position though, check the small print.

I have bought a number of vehicles under PCP and have never ended up in the position where on p/x the value gives me additionial equity towards the next purchase, even when I deliberately overstated the anticipated mileage at ouset.

The wear and tear issue if you do hand back can be problematic. I handed back my Merc CLK which was in tip top condition. Merc finance tried to stripe me for £600+. They ended up months later with £150 ish.

There is nothing wrong with PCP and you don't have to use Lexus's offering. I used a broker, Jigsaw finance and their deal was better than the Lexus's.

As in all these things, tread carefully.

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