On 30 September 2020 I bought a Mk4 Jazz SR new from the local Honda dealer. It was on a Honda Finance PCP deal involving a deposit of about 15%, 36 monthly payments and a 'final payment' of just under £10k based on 12,000 miles per annum (although I have only done about 6,000 miles pa). The last monthly instalment will be due this September and I shall need to exercise my options under the PCP agreement.
A couple of days ago the sales manager at the dealer sent me a short email entitled 'Upgrade car'. It simply invited me to let him have consent to seek a settlement figure from Honda Finance and 'we would then see what we can do for you'. I take this as code for ' see how we can sell you a new, more expensive, car and keep you paying money.'
Under the PCP agreement I can:
a. return the car at the end of September and walk away. No £10k to find and no more monthly instalments to pay, but also no car. I would have to be crazy or bankrupt to do this, given current secondhand car values. Looking at Jazz models of similar age and mileage for sale on the dealer's website, I estimate that the dealer would pay Honda the £10k settlement figure, and promptly put the car up for sale at £19,995 given its age and mileage;
b. pay the £10k final sum to Honda and own the car, and make no further payments. Even at trade-in values it is probably worth £18k after those first three years, which is exceptionally low depreciation from the total of £22.6k I will have then paid including interest. The car should be good for at least another seven years, will not be under warranty but will have two more years of the free service plan. But it won't be a gleaming new Jazz, much less a gleaming new Civic or HR-V;
c. trade in the car to the dealer for a new Honda. I would not have to find £10k now, but I would have another three years of monthly payments, and another final payment lump sum (unless I start over yet again....). Obviously how much is involved would depend on the cost of the new car, but given that the facelifted Jazz Advance is £27,010, the cheapest Civic is £32,110 and the cheapest HR-V is £30,115, it is evident that even with say £8k equity and a bit of haggling, I would need to finance about between £20k-£24k, which at interest rates at 6.6% (Honda subsidised) will be not far off £300 a month with a final payment rather larger than the current one.
Of course, if I adopt option (b) I shall either have to find the £10k lump sum, or finance it with a personal loan with repayments over three or four years. But I would own the car, and for some years after making the loan repayments I would have no financing costs at all, in contrast to those who have repeated PCP plans and never stop paying. And the car is still in very good condition, with very low mileage. I am by the way in my late sixties and may not be driving (or here to drive) in seven years' time.
Either (b) or (c) are open to me as possibilities in terms of financial resources. My head says (b), save money and keep a car which has been excellent and reliable and is adequate for my daily needs; my heart says (c) and get a shiny new Civic. Do I do what I need, or what I want? I know what my friendly sales manager would say.
