Five CHECKS to do before you buy a car

June 8, 2017

CHECK you are clear about PCP agreements

If you are buying a new or second-hand car from a dealer, they may offer to arrange the finance for you.  This will usually take the form of a Personal Contract Plan (PCP). As well as being convenient, PCPs can also appear affordable but the devil is in the detail so make sure you fully understand what you are signing up for by reading the terms and conditions of your contract.

A PCP is an agreement between you and the finance company where you will make monthly repayments to the finance company for at least three years. It usually involves three payment stages:

1. Paying a deposit – this is normally 10-30% of the value of the car
2. Paying monthly repayments – which are usually relatively small
3. Paying a large final payment – this may be called the “guaranteed minimum future value” (GMFV) or “balloon payment”

With a PCP you are not the legal owner of the car, so you cannot sell it if you run into problems making your repayments. The contract can also include commitments from you on things like annual mileage and maximum mileage allowed.  For instance, there’ll usually be a mileage restriction in the region of 15,000 to 20,000 km per year. If you go over this it will affect the final value of the car and you may have to pay a penalty.

Find out more about the pros and cons of PCP.

There are other ways to pay for your car including a personal loan, hire purchase and cash or savings.

CHECK you know what happens at the end of your PCP agreement

When you come to the end of a PCP contract you typically have three options:

• You can pay the final payment – a large once-off payment – and keep the car. This final payment, known as the Guaranteed Minimum Future Value (GMFV), is set at the beginning of the agreement, based on the finance company’s estimate of the future value of the car. You could end up paying an amount higher than what the car is worth at the end of the agreement depending on the future value of second-hand cars.
• You can hand back the car and make no further payments. You no longer owe anything but also don’t have a car.
• You can trade in the car for a new one and enter a new PCP agreement. You may have some built up equity from your previous PCP agreement that you can bring into a new PCP agreement as a deposit. This depends on what the dealer determines the current market value of your car to be at the end of your agreement. It is not guaranteed that this will be the same as the Guaranteed Minimum Future Value given at the start of the agreement, so, if the value of the car has dropped you may need to pay more money to the dealer enter the new agreement.

CHECK the physical condition of the car

Unless you know a lot about cars you should get your car independently checked by a mechanic.  You can also use our car buyer’s checklist to help you know exactly what you should be looking for. It will also help you keep track and compare different cars easily. If you are buying from a dealer, you should get a warranty for the car. However, this is dependent on the age and price of the car. If the car is reasonably new and the dealer is not willing to give you a warranty, this should be a cause for concern.

CHECK the history of the car

There are a number of companies who can check the history of a car for you for a small fee. When you get the report, you will be able to see:

• if the car was ever written-off
• the true mileage of the car, which may help you to work out if the car has been clocked. Clocking means changing the genuine odometer reading of the car in order to make the car seem like it has been driven less than it actually has. Spotting a car that has been clocked can be tricky so check the car’s documented history and have it looked at by a competent mechanic to be on the safe side
• the number of previous owners
• if there is outstanding finance on it

CHECK your rights if things go wrong

When you buy from a dealer, the car should be:

• Of merchantable quality – it should be of reasonable, acceptable quality given the age and history of the car
• Fit for the purpose intended and roadworthy
• As described – it should match the description given verbally or in an advertisement

It is an offence for a dealer to provide misleading information about the car including its history, specification and any repair work needed. A dealer must not give you misleading information about themselves such as any authorisation they claim to have, their after sales service or any code of practice in place. It is also an offence under consumer law for a dealer to withhold information when selling a car.

If you buy a car from a private seller and discover a problem, there may be little you can do beyond taking a civil case through the courts. Because of this you should be very careful when buying from a private seller and you really need to be aware of what you’re buying. Remember, a private seller may not have all the answers, so it is important for you to have the car checked by a mechanic.

Return to News