The popularity of PCP car finance has allowed car manufacturers to be rather sneaky when it comes to forcing you to have your car maintained by their dealer service network, something that many car buyers are unaware of.
Today’s article comes after we received a question from a reader via Twitter: “I have a car on PCP, do I have to use the dealer service centre for all services or can I use an independent garage?”
We have previously discussed your car servicing rights, which allow you to have your car serviced outside the manufacturer dealer network without losing your warranty, but there is another issue to consider if your car is financed using a PCP.
Part of the attraction of PCP car finance is that the finance company will guarantee that the value of the car at the end of the term will at least cover the outstanding settlement figure. This is called the Guaranteed (Minimum) Future Value (GFV or GMFV) and it means that your worst-case scenario should be that you can simply give the car back with nothing more to pay.
However, the GFV is dependent on three requirements that you must meet:
- You must not exceed your agreed mileage over the duration of the term
- The car must not require any repairs beyond normal wear and tear
- You must have the car serviced in accordance with your contract
It’s the last item that we are concerned with today. The GFV is a value based on a car with no damage, limited mileage and a full service history. In most cases, this specifically means a full manufacturer service history – although you need to check the wording of your contract to be certain.
In most cases, if you do not have a FULL manufacturer service history (on time, every time, by an official dealership), then the finance company can either refuse to honour the GFV or charge you a hefty penalty fee.
What is a dealer service history worth?
Their argument is simple: the GFV is based on a car with a perfect service history, and a car with a full manufacturer service history is worth more than one with an incomplete history, or with services done elsewhere. To some extent, this is true. However, the penalties that finance companies are able to apply seem excessively harsh, especially since a dealer service is not necessarily a better service than one performed by a good independent garage.
Some manufacturer finance companies will charge you more than £1,000 if even one service is not in accordance with the official requirements (even if it is done by the dealer but not done on time), with the charges ratcheting up quickly if multiple services are not done by the book. This seems disproportionate to the real effect on a used car’s value, especially if servicing is done by a qualified garage but not strictly by the wording of the PCP agreement.
What if I don’t want to give the car back at the end of the term?
If you are not claiming the GFV at the end of the agreement (ie – if you are not giving the car back to the finance company), then you don’t have to worry about where you have it serviced. So if you want to settle the outstanding finance and keep the car, or sell it privately, or part-exchange it for something else, you can have your car serviced wherever you like and the only downside will be a slightly diminished resale value.
However, if your car is worth less than its settlement figure (negative equity), you won’t have the security of the GFV to cover you. This means that you will have to pay the negative equity out of your own pocket. With national used car values continually sliding downwards each year, you run the very real risk of having to cough up thousands of pounds to clear your finance because you have invalidated your GFV.
You should also read: What are your options at the end of a PCP?
Be aware of what you are signing up for!
This scenario is cropping up more and more around the country, and part of the problem is that the terms and conditions have not been explained by the dealer at the point of sale.
The other problem, as we have alluded to in previous articles, is that buyers are notoriously lazy when it comes to reading contracts before signing them. The result is that a customer is not aware that they can no longer claim their GFV, and it ends up costing them dearly.
This article was originally published in August 2015, and most recently updated in May 2021.
