Sarah Pennells is a personal finance journalist and the face behind SavvyWoman.co.uk. We think she does a great job at explaining financial subjects in a very clear and accessible manner. You can find her column below where she writes about the latest financial news, and helps you get more from your money.
PCP could they be the next mis-selling scandal?
Last year over 80% of new cars were sold using car finance deals provided by the dealer or manufacturer, but one group of finance brokers is warning that personal contract plans (PCP) could be the next mis-selling scandal.
It’s estimated that in 2015, one million cars were bought using PCPs but the National Association of Commercial Finance Brokers is warning that there may be two reasons why PCPs could have been mis-sold. So, what are PCPs and what’s the problem with them?
Personal contract plans are a form of hire purchase (HP). But, unlike HP, where you normally pay a larger deposit and then equal monthly payments, with a PCP you pay a low (or sometimes, no) deposit, relatively low monthly payments, compared to the value of the car you’re buying and then a large final payment if you want to buy the car.
SAVVY TIP: The final payment can be 25% or more of the purchase price of the car.
The problem is that, if you don’t have the money to make the final payment, you have to hand the car back and walk away or take out another finance agreement to buy another car.
SAVVY TIP: If you’re the kind of person who likes to have a new car every few years, a PCP may work for you. That’s because the final payment effectively guarantees the value of the car at the end of the finance deal. But watch out for any mileage restrictions – if you drive more than you agreed at the outset you could be hit with penalties.
If you’re thinking of buying a new car:
- Firstly, ask yourself if you need to buy new. Most cars lose some of their value (and it could be a big chunk!) the moment you drive them off the forecourt. Buying a newish second-hand car could be a savvier move.
- Consider taking out a personal loan instead of a PCP. If you have a good credit score you could get a loan charging less than 4% interest (on amounts above £7,500). The monthly payments will be higher but there’s no balloon payment at the end.
- Bear in mind that car manufacturers and dealers love PCP deals because it encourages people to buy a more expensive car than they would otherwise and it encourages more people to trade up again at the end of the PCP term.
Women charged less than men for car repairs
Staying with the motoring them, it’s often said that car repair garages aren’t the most welcoming places for women and some female customers say they’ve been overcharged or persuaded to buy for things they don’t need. But new research from an insurance company show that women get charged less than men – on average 13% less – for repairs.
The insurer used mystery shopping to get quotes from 100 independent garages and found that men were quoted an average of £106 for a minor service while women were quoted £94. Men aged 60 and over were quoted the highest price – an average of 32% more. Oddly, women with dark or red hair got a better deal than blondes…!
New safety net for energy customers
If you’ve switched energy supplier and have decided to go with one of the smaller, independent companies, have you worried about what would happen to any money you’re owed if the company went bust?
Very few energy companies have gone bust so far, but the energy regulator Ofgem wants to toughen up the rules so that people who switch supplier don’t lose any money their account is in credit by.
Under the plans, the cost of paying back any money owed to customers if a supplier went bust would be paid by all gas and electricity customers. At the moment, these are just proposals but we’ll know later in the year if they’re likely to go ahead.
Cash better than shares?
Most investment experts tell you that over the longer term, it’s better to invest your money than to save it. But new research by financial journalist Paul Lewis shows that, in most five year periods since 1995, if you’d had your money in the best buy one year cash savings account, you’d do better than if you’d invested in a fund that tracks the FTSE 100 index.
And, of course, if you invest, there is also the risk that you could lose money. The research found that the risk of losing money was approximately one in four if you invested for between one and five years.
In order to beat the FTSE 100, you’d have to move your savings into the best buy one year savings account, and move it again at the end of each year.
SAVVY TIP: Personally, I wouldn’t advise someone to invest for just five years as I think a ten year period is the minimum you should consider. I’d also not recommend investing solely in a FTSE 100 tracker because I think it’s too risky – because many of the biggest companies are in the banking and oil sectors. But investing isn’t risk free and it’s definitely not right for everyone.
How much is that doggy in the window (over a lifetime!)?
If you have a pet you may think of them as part of the family. But have you added up how much your pooch or kitty costs? A finance website has estimated that a small dog could cost over £19,000 over its lifetime, while a cat could cost £12,000. If you want something more budget friendly, a goldfish will cost you just over £900 over its lifetime (but a tortoise, which lives for 75 years on average) would set you back almost £26,000 if you owned it throughout. That’s enough for a deposit on a house!