Jargon Buster....
Deposit
The sum you give to the dealer up front as a contribution to the new car.
Trade in
The value the dealer gives you for your old car
Make sure you understand the true value of your car. Use https://www.parkers.co.uk/carvaluation to check your cars value before you go searching for a new car.
Balloon / Guaranteed Future Minimum Value GFMV / Final Payment
The Balloon payment is the final payment you need to make to buy the car.
It is very easy to ignore this value and think 'everything will be ok!! ' in 4 years time when your deal completes. This is a very tempting thing to do to get that new car you want today but this is one value which can be manipulated by the dealer to boost profit in the deal. It can leave you in negative equity and facing a loss of several thousand piunds if you were given a high balloon payment. To judge what this should be you should look at the same model as you are buying but 4 years older and look at thier tradein value. It would then be sensible to ensure your final payment is a fair bit lower than this to ensure that you retain some value and manage your risk of being in negative equity.
Again use the Parkers valuation tool to look at older models to see what value you may be left with in 4 years time.
Interest rate
This is the amount you pay on the borrowed amaount as part of the deal. Often rates are better for new cars as opposed to second hand, so always factor this is if you are considering nearly new. If you are buying nearly new at a lower rate and less depreciation, you may get a better deal all round.
Principal sum
The principal sum is the amount of money you borrow.
List price
This is the price of the car as advertised by a dealer.
PCP Loan Period
The period is normally 24,36 or 48 months although can go to 60 months. It is very easy for a dealer to extend the term by a few months to achieve you monthly budget. Beware of 49 months for example which the customer generally thinks of 4 years but is another 3 months of income on the deal.
Initial Payment
The initial payment is always a hidden cost. Dealers may make you pay 2,3 or 4, months upfront and people often just expect to take this hit. A one off payment is easily forgottonb but is a key piece of value for the dealer.
Discount
This is the amount a dealer gives you off the list price. ALWAYS negotiate a discount as they expect to give this to you. Even brands like Porsche - 'who never give discounts !! ' actually will if you phone around a number of dealers.
Use CarWOW to find the best price in the country for the new car you are trying to buy. Then use this to negotiate with your dealer.
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