Car finance ‘could cost less than a daily coffee’

Are you one of the thousands who opt for a pricey takeaway coffee – or two – most days of the week? Well, giving up the habit could leave you with enough spare cash to finance a whole new car…

That’s according to automotive consumer advice website Parkers.co.uk, which says car finance deals are usually paid for monthly, while daily expenses such as coffee are rarely calculated like this. After doing the sums, it revealed that a Fiat 500 1.2 S would cost the equivalent of just £4.85 a day to finance.

That’s based on a good-value finance package that sees 47 monthly payments of £141 plus an initial payment of £449. Over four years, that works out at just £4.85 per day.

Parkers compared this with an upmarket high street coffee chain, where a single large iced coffee with a few extras costs £5.05 per day. For those who prefer a flat white, two each day would equal £5.40.

Of course, the price of owning a car isn’t just in the purchase. Insurance, vehicle tax, servicing and maintenance all cost extra – not forgetting fuel, which is the largest expense for most motorists.

The type of finance package Parkers used in its calculation also plays a part. It’s a PCH deal – standing for personal contract hire – and is basically an extended rental period rather than a purchase. At the end of the four-year agreement, you’d be expected to hand the car back, having stuck to an agreed mileage limit and kept the car in good condition.

Other, pricier finance options are available for those who wish to have more of an ownership stake in their vehicle. Personal contract purchase, or PCP, is the most popular vehicle financing method in the UK, and involves buyers financing part of their car’s value – with the remainder left at the end to pay as a lump sum should they wish to keep hold of the car.

There’s also hire purchase (HP), which simply breaks the full price of the car up over an agreed period. Both PCP and HP usually attract a level of interest on top of the price of the car.