Nine out of ten new cars and vans purchased in the UK are funded with car finance.
Personal Contract Hire (PCH) or Leasing is a very popular option to many companies. It’s just like renting a car or van for an extended period of time. Then, at the end of your contract, you simply return the vehicle to the finance company and either walk away, or get another new one.
PCP (Personal Contract Purchase) is the most popular type of car and van finance in the UK, and it’s increasingly being offered for used vehicle purchases. The main difference between PCH and PCP is that you get the added option to buy the vehicle outright at the end of the contract.
The monthly payments on a PCP or PCH deal only cover the value that the car/van is expected to lose during the agreement – the difference between the initial price and its predicted value at the end of the contract.
The difference between a vehicle’s starting price and its estimated value after a period of time is known as depreciation.
The depreciation is predicted based on usage limits that you choose when taking out the finance agreement – for example, the lower your mileage limit, the less your vehicle will lose in value, so the lower your monthly payments will be.
If you exceed these agreed limits however, you can expect to be stung with some pretty hefty charges. This applies to PCH leasing, as well as PCP (as long as you don’t buy it outright at the end).
So what are the 3 main reasons people are penalised when handing back a leased car or van?
We’re glad you asked…
The amount you pay for exceeding your mileage agreement varies wildly depending on what car or van you have and what finance company you use.
For instance, Ford charge between 4p and 10p per mile – dependant on model. VW is similar (4p-8p per additional mile), with BMW and Audi being somewhat more. We’ve seen charges as high as 72p/mile on some high-end cars like Bentleys and Maseratis.
Drive your Quattroporte 1,000 miles a year (or 3 miles per day) more than you signed up for over a three-year deal at 72p/mile and you’ll have a £2,160 bill when you hand it back!
AVOID EXCESS MILEAGE CHARGES.
SELL YOUR VEHICLE TO WEBUYFLEET INSTEAD
If your car or van shows more than ‘normal’ wear and tear, you will likely have to pay a penalty, which – let’s face it – is pretty inevitable for a working vehicle!
Any major scratches, dents, windscreen chips, marks or smells on the interior, scraped alloys, low tyre tread, decals or sticker residue… – the list goes on – will all lead to unwanted charges that can quickly become very pricey.
To avoid these charges it is important that you have any issues fixed before handing the car back (which is time consuming and also has its own costs associated with it). Basically, you can spend your money in one place or somewhere else. YOU just have to take the time to work out which is the most cost effective for you.
AVOID EXPENSIVE & TIME CONSUMING REPAIRS.
SELL YOUR VEHICLE TO WEBUYFLEET INSTEAD
It’s not just how good the car looks when you return it, it’s how well it is running too.
Many vans, cars and trucks have set servicing intervals. Others have variable intervals that the car’s computer will notify you of when needed.
The finance company will want to see that your vehicle has been serviced on time, every time, by a reputable main dealer.
If it hasn’t, it is likely to reduce the vehicles resale value, which – you guessed it – will be passed on to you as a penalty charge.
This is by no means an exhaustive list of all the things you could be charged for, but they are the most common reasons people are penalised.
It’s important to note, in addition to these charges, many finance companies are also pretty cautious when working out how much the car will be worth at the end of the contract – using a figure that is less than they expect the car to actually be worth.
This means that even if you have no penalty charges, you are still paying more of the depreciation cost than is strictly necessary when you hand back to the lease company.
Well… you can increase your estimated mileage over the course of your contract (increasing your monthly fees at the same time), ensure you are super-careful at all times (and hope nobody dinks your door while you’re in Tesco), get all damage repaired (at your expense) before the contract expires and pay the exorbitant rates to have your leased vehicle serviced at a main dealer for 2-5 years.
Alternatively, you could simply sell your car to us at the end of your contract.
We will always give a fair market value for the vehicle in the exact condition it is in.
NO CHARGES. NO HIDDEN COSTS.
We’ll even handle all the paperwork AND collect for FREE from anywhere within the UK mainland.
You could SAVE thousands of pounds for each and every vehicle in your fleet, as well as saving you the time and hassle of returning them yourselves.
What are you waiting for?
Get in touch today to find out how much you could SAVE: