Buy, Lease, PCP, GFV – Jargon busted.

Car search animationWe have been asked to produce a guide to customers who are ‘considering their options’ or plan to leave the Scheme due to the car they want not being available or feeling they may be better off financially not leasing a car through the Scheme. In order to gain parity with the Scheme you will need to finance a car purchase or personal lease, arrange insurance and factor in the cost of servicing (best value is buying fixed servicing when buying the car). This may seem daunting but it does not need to be. The growth of personal leases and low cost repayment schemes can look very appealing so let’s look deeper into the options.

Buying a Car

Getting the best deal on the price of a car is paramount and the good news is that you no longer have to go toe to toe with the salesman and their invisible manager to thrash out a discount, there is a new car comparison tool run by Carwow where you enter the car you are interested in and they offer dealerships nationwide to send you their best price along with any finance deals that are on offer and enticements they can offer, the beauty of the system is that you are in control and have the option to take up their offer or not, they claim the average saving is £3000, in our test within 5 minutes we had been offered a £700 discount on a Citroen Cactus.

Purchase Method

Once you have the best price you have the option fund the purchase with a personal loan, many lenders will take into consideration your mobility payments when considering you for approval, this online calculator will give you a quote and a guide (shop around and do not go with the first quote) but you will need an excellent credit rating to gain reasonable repayment terms. Car Loans 4 U

Manufacturers offer in house methods to finance a car purchase, these can be very competitive and the interest rates are often better than a personal loan, some are even at 0% without a deposit, Mazda are running such a scheme presently on their Mazda 3, but the norm is that in order to get a better interest rate you will need to put a sizeable deposit down, Citroen for example require a 40% deposit to get 0% on the Cactus or a 10% discount will give a 4.9% rate, presently they offer a £1000 contribution against some models when finance is taken out. This method, called a PCP (Personal Contract Purchase) is broken into three segments, deposit, monthly payments, usually 36 ie 3 years and a GFV (Guaranteed Future Value). The GFV is around 35-40% of the cost price and can be settled at the end of the monthly payment period to buy the car outright or you can negotiate a new PCP and use any value left in the car against a deposit on a new car. PCP’s have been attributed as the main reason car sales are so buoyant presently, around three quarters of cars sold are through PCP, the advantage being low monthly repayments, but the reality is you are only paying off the depreciation.


Car deprecation graph


Put simply depreciation is the difference between the price you pay for a car and the price you receive when selling, it is the single biggest factor affecting running costs adding more to cost per mile than fuel. Cars depreciate at an alarming rate, usually 30% of the value has gone in the first year and if you do 10,000 miles a year, the average car will have lost around 60% of its value by the end of its third year. The option exists to lease a car, which is basically a long term hire arrangement, you never own the car.


Personal Lease

If finding a deposit is an issue or a loan simply not for you then a personal lease may be the answer, particularly so if you only are a low mileage user as prices rocket when the annual mileage rises over 10 000. The best offers are found on cars that depreciate the slowest, namely BMW, Audi, Mercedes and Land Rover, the payments are for a set period and you will have to pay a few months upfront, examples are 23+3 or 35+6 at £200, this being the number of months the lease runs for and the initial payment, in the 23+3 lease the first payment will be £600 followed by 23 monthly payments of £200. The personal lease is an extension of the Business lease and make sure the prices you are quoted include VAT.



VAT Free Purchase

Motability do not pay VAT on any of the cars they buy and if you, or a person in the car, are a wheelchair user then you will qualify for a VAT free purchase providing adaptations are made that are ‘permanent and substantial’ for example a hoist, swivel seat or driving adaptations to enable the wheelchair user drive the vehicle. More information and the downloadable forms required to be signed by yourself and the dealer can be found here: VAT Free car purchase


If you are an existing Motability customer then you have been insured by a fleet insurance policy and have not built up a no claims bonus in your own name, but not all is lost as some insurers will accept a letter from your present company (RSA) as proof of no claims and honour the discount. As there is no box on the price comparison site for this information we would recommend getting a quote and then calling the insurer to see if they will accept it. Companies that have been compliant include Churchill, LV and More Than. It is illegal for a car insurance company to charge you extra because of a disability unless they can prove it’s justified as stated in the Equality Act 2010, there is a Disabled specialist insurance company called Fish Insurance, they can be contacted on 0800 088 3050. It is worth doing a price comparison with as you may be surprised how competitive the pricing actually is.


We hope this information is of benefit to you.  The car industry, on the back of the rise of PCP’s, is buoyant, resale values are high and the new cars being delivered are way superior to the models they replace. We have to say that we have spent a long time studying the market, the deals and the options available to customers and it is our opinion that the PIP / DLA payment of £56.75 per week goes further within the the Motability Scheme than on the open market, we understand that choice is being eroded at the top end of the market particularly for Automatic cars and that in some cases the only option is to leave the Scheme.