End of PCP options

There are a few options during/when a PCP deal term is about to finish. 

In my wife's case:
We bought her car on a PCP deal for 24 months:
https://omarsguidelines.blogspot.com/2020/10/my-wifes-experience-of-driving-test-and.html

After 24 months, we paid the balloon payment and kept the car. We then used it to part exchange it for a new car for her:
https://omarsguidelines.blogspot.com/2023/02/my-experience-of-buying-our-4th-car-in.html

In my case:
I bought a car on PCP in 2017:
https://omarsguidelines.blogspot.com/2017/01/my-guideline-on-buying-reliable-car-in.html

Part exchanged it in 2019 and upgraded:
https://omarsguidelines.blogspot.com/2019/09/my-experience-of-buying-car-on-pcp-deal.html
And I refinanced the same car in 2023. 

This car was on a 4 year PCP deal, ending in October, 2023. In 2022, I received a call from Audi stating that the cars value was equivalent to the outstanding finance - so I could either return it , upgrade it to another car. 
This could also be done at any dealership with any brand. As I did not find a better option for that monthly PCP, I decided to keep my current car. 

In 2023, I had a look at my cars value and the remaining payment and I was actually in 5 to 6k positive equity. Which essentially meant that if I part exchanged the car with the oustanding finance, that would equate to 5 to 6k. 
Or if i sold it to a dealership and paid off the finance, I would pocket 5 to 6k. 

I started looking at various options:
BMW 5 series - new generation had just been released

Mercedes E class - new generation had just been released
The previous generations were nice cars but looked outdated. And both new models were extremely expensive. 
The current Audi A6 was the same as I had. Plus it was due for a new model in 2024. 
 

So despite a 5 to 6k deposit, I could not get a good deal. 

On autotrader, I got a general idea of what I could get with a 5 to 6k deposit:
BMW 
1,2,3 series 

Mercedes

A, CLA, current generation basic spec C class 

Audi 

A1,A3,A4,A5,A6 
Q2,Q3,Q5

Most of these cars are due for an upgrade soon. 

Hence I decided to refinance my car and this is the finance deal I got with Audi financial services:
477 a month 

6,000 balloon payment 

As there was no way I could get a decent upgrade ( current gen C class premium plus, E class , 5 series new models), I decided to go ahead with the refinance. 

So here are some myths 

1. You HAVE to keep the car till the end of the PCP deal. 
My car was at a 'zero equity' value 2 to 3 years into my 4 year PCP and I could have part exchanged the car at that point. I could have even paid the outstanding finance and bought the car off at any point from the finance company. 

2. You HAVE to return the car to the dealership you bought it from. 

Mercedes, BMW were happy to buy my car and pay Audi Financial services the outstanding finance. 

BUT 

Here are some things which are true:
1. Cars in the UK depreciate fast

2. They will hold 50% of the value in 2 to 4 years

3. The cost of cars is only going to increase HOWEVER keep an eye on good deals as they do come out from time to time as mentioned here:
https://omarsguidelines.blogspot.com/2023/02/my-experience-of-buying-our-4th-car-in.html

4.You will loose money at the end of the PCP deal. 
However my car with the oustanding finance was worth 5 to 6k - so if I sold it privately and paid off the oustanding finance, I would still pocket 5 to 6k. 

Some other tips:

1. Negotiate as much as possible with the dealership - as you can see, they earn a massive profit from PCP deals 

2. Be aware of how much you can afford - this is a depreciating asset 

3. The costs of cars are going up. 

An Audi A3 in 2023 costs the same as an Audi A6 used to in 2020. So you may need to consider a smaller car. 

4. There are always cheaper and equally reliable brands like Toyota, Ford, etc. 

5. If you intend to keep your car, do try to get manufacturers warranty. For Audi, they have an all in one package and it cost me 33 GBP per month for '19 plate Audi A6
This is a 24-month plan that includes two Services, two MOTs, 24-months' Roadside Assistance supported by the AA and up to 24-months' Warranty.

How much do delaerships earn:
Audi A3 which I bought on a PCP in 2017:
price of car: 20k 
Deposit: 4k
Monthly: 240 
after 2 years ( paid around 10k)
Part exchanged for Audi A6 - they bought the A3 with outstanding finance , sold the A3 for 16k 
As you can see, the dealership earned a considerable profit from this PCP finance deal. 

So is PCP worth it?
For me, yes. I could not afford to buy any of these cars on cash.