One of the fundamental factors affecting the size of your monthly payments with PCP car finance is your annual mileage. The more miles you cover, the higher your monthly bill. However, because you’re paying off the value of the car more quickly, you’ll pay less overall if you buy it at the end of the contract.
Should you exceed the agreed mileage limit, however, you’re likely to be stung with an excess mileage charge for every additional mile – if you choose to return the car rather than buy it outright. These fines vary wildly from less than 5p per mile to more than 30p per mile.
Therefore, it’s worth finding out exactly how much you could be charged before deciding upon a PCP plan – as, if your circumstances change and you cover more miles than allowed, you could face a large bill should you decide to hand the car back.
Check whether quoted excess mileage charges include VAT
Typical excess mileage charges stand around the 10p per mile mark, though some brands charge less than 5p per mile. Consequently, you could be much worse off exceeding the mileage cap with some PCP schemes than others.
These charges vary by model too, so it’s always worth checking the exact figure for any agreement you’re considering before parting with any money. Be aware that some figures are quoted without VAT applied too, so you’ll have to add 20 percent to the quoted figure.
Excess mileage charges could cost you thousands
Audi currently charges a reasonable 4.32p per mile on the A1 1.0 TFSI SE, but even so, breaking this limit will cost you much more than simply paying for a higher mileage plan in the first place. Sign up for a 5,000-mile-per-year plan and cover an average of 10,000 miles per year and you’ll end up £248.30 worse off than if you’d paid the £11.42 higher monthly payment for a 10,000-mile-per-year agreement.*
n the case of the Audi A6 2.0 TDI Ultra SE you’ll pay exactly the same per month, whether you opt for a 5,000- or 10,000-mile-per-year PCP. Cover the higher-mileage when you’ve signed up to a contract based on the lower figure, however, and you’ll be out of pocket to the tune of £1,080.*
Be realistic when estimating your mileage
Mazda, meanwhile, ties customers into a 14.9p-per-mile excess mileage charge with its CX-5 off-roader. Commit to a 6,000-mile-per-year contract but cover 10,000 miles each year and you’ll have to pay an additional £1,335.48.*
You might think that you’ve got a reasonably good idea of how many miles you’ll cover, but leaving a little leeway is wise, as the additional costs from a higher-mileage contract are likely to pale into insignificance compared with potential excess mileage charges.
Come to the end of your contract with 36,000 miles on the clock rather than 30,000 miles with the CX-5 and you’ll have to pay £653.52 in excess mileage charges if you return the car. The higher-mileage contract on the other hand, would have cost just £240.48 more.
High-mileage contracts mean lower overall cost to buy the car
Another happy side effect of opting for a higher-mileage agreement is that you’ll pay slightly less in total, should you buy the car outright. Go for a Citroen C4 Picasso 1.6 HDI 120 Exclusive and you can save £214.84 by signing up for a 30,000-mile-per-year contract over a 6,000-mile-per-year one.*
Admittedly, you’ll have to stomach much larger monthly costs if you do this – an additional £77.06 per month – but paying more during the scheme means a £2,989 lower final payment to take ownership of the car.