For many families in the UK, owning a car is a necessity. Our public transport is underdeveloped for the modern world, many live rurally with no access to other means of transport. Having a car is a requirement for many.
However, cars are a method of transportation and should be viewed as such. The rise in car finance (namely PCPs) has seen this change with the car fast becoming a status symbol for many. However, with the meteoric rise in car finance, expensive cars have become widespread.
But did you know this method of financing that car can have a profound impact on financial stability and overall quality of life?
Since their introduction in 2008 PCPs have seen a huge growth in popularity. The consumer car finance market is the largest of the UK consumer credit markets accounting for 36% of the total value of outstanding consumer credit contracts at the end of September 2024
One of the most common financing methods is a Personal Contract Purchase (PCP), where consumers pay a deposit and monthly payments for a brand-new vehicle, often upgrading to another new model every three years.
But what is the opportunity cost of this? What are you potentially leaving on the table? Have you ever zoomed out and wondered what would be if you broke the chain and kept a car longer? Let’s explore the true cost of your PCP vs a Second-Hand used car.
PCP vs. Second-Hand Used Car: The 12-Year Comparison
To highlight the difference in costs, let’s compare the two options over a 12-year period. This gives us a strong enough segment of data to work with. For representation purposes, I’ve focused on the lower end of the family PCP market (Nissan Qashqai) but even here the data is compelling.
The study compares a brand-new car every 3 years vs a 5-year-old car and keeping it for 6 years (11 years old).
PCP Option
- Purchase price of a brand-new family car: £27,500
- Initial deposit: £2,750 per agreement (every 3 years)
- Monthly payments: £430 for 36 months
- At the end of each agreement, the car is returned and a new agreement begins
Total cost over 12 years:
- Deposits: £2,750 × 4 agreements = £11,000
- Monthly payments: £430 × 36 months × 4 = £61,920
- Total PCP cost over 12 years:£72,920
Second-Hand Option
- Purchase a five-year-old car outright every six years
- Estimated cost: £15,000
- Sell after six years at 50% depreciation (resale value £7,500)
- Buy another five-year-old car for £15,000, using resale value towards the cost
Total cost over 12 years:
- First car: £15,000 – £7,500 = £7,500
- Second car: £15,000 – £7,500 = £7,500
- Maintenance allowance: £500 per year for 12 years = £6,000
- Total second-hand car cost over 12 years: £21,000
The Cost Difference: £51,920 Saved
By choosing to buy second-hand rather than committing to PCP agreements, families can save approximately £51,920 over 12 years. This is based upon a lower-end family car vs an upper-end (Think Audi Q7 starting at £70,000 at the time of writing).
But what could this money be used for instead? Have you ever stopped and thought about where that money could be going or how you could be using it versus having a car? It might not have even crossed your mind and that’s ok. I’ve been there, I’ve had a heavily financed car and at the time it felt like a sign of progress, something everyone was doing so why shouldn’t I be?
But what else could YOU be doing with the money? Let’s explore how your money can work for you once you remove the monthly PCP hold from around you.
Example Cars & Alternatives
City Cars
| New Model | New Price (£) | Used Alternative | Used Price (£) | Savings (£) |
|---|---|---|---|---|
| Fiat 500 | 15,000 | Hyundai i10 (2019) | 7,000 | 8,000 |
| Toyota Aygo | 14,500 | Kia Picanto (2019) | 6,800 | 7,700 |
| Volkswagen up! | 14,000 | SEAT Mii (2019) | 6,500 | 7,500 |
| Renault Twingo | 13,500 | Peugeot 108 (2019) | 6,200 | 7,300 |
| Suzuki Celerio | 12,500 | Citroën C1 (2019) | 6,000 | 6,500 |
| Kia Picanto | 13,000 | Toyota Aygo (2019) | 6,500 | 6,500 |
| Hyundai i10 | 13,500 | Fiat Panda (2019) | 6,700 | 6,800 |
| Peugeot 108 | 14,000 | Renault Twingo (2019) | 6,300 | 7,700 |
| Citroën C1 | 13,000 | Suzuki Alto (2019) | 6,200 | 6,800 |
| SEAT Mii | 13,500 | Volkswagen up! (2019) | 6,500 | 7,000 |
Hatchbacks
| New Model | New Price (£) | Used Alternative | Used Price (£) | Savings (£) |
|---|---|---|---|---|
| Volkswagen Golf | 25,000 | Ford Focus (2019) | 13,500 | 11,500 |
| Ford Focus | 24,000 | Vauxhall Astra (2019) | 13,000 | 11,000 |
| Audi A3 | 28,000 | SEAT Leon (2019) | 14,500 | 13,500 |
| BMW 1 Series | 27,000 | Mercedes-Benz A-Class (2019) | 15,500 | 11,500 |
| Mercedes-Benz A-Class | 29,000 | BMW 1 Series (2019) | 15,800 | 13,200 |
| Toyota Corolla | 23,500 | Honda Civic (2019) | 13,500 | 10,000 |
| Honda Civic | 24,500 | Mazda 3 (2019) | 13,200 | 11,300 |
| Mazda 3 | 23,000 | Toyota Corolla (2019) | 13,700 | 9,300 |
| Vauxhall Astra | 22,000 | Volkswagen Golf (2019) | 14,000 | 8,000 |
| SEAT Leon | 23,500 | Audi A3 (2019) | 14,800 | 8,700 |
Estates
| New Model | New Price (£) | Used Alternative | Used Price (£) | Savings (£) |
|---|---|---|---|---|
| Skoda Octavia Estate | 27,000 | Ford Mondeo Estate (2018) | 13,500 | 13,500 |
| Volkswagen Passat Estate | 30,000 | Skoda Superb Estate (2018) | 14,500 | 15,500 |
| Ford Mondeo Estate | 28,000 | Vauxhall Insignia Sports Tourer (2018) | 13,000 | 15,000 |
| BMW 3 Series Touring | 38,000 | Audi A4 Avant (2018) | 17,500 | 20,500 |
| Audi A4 Avant | 36,000 | Mercedes-Benz C-Class Estate (2018) | 17,000 | 19,000 |
| Mercedes-Benz C-Class Estate | 37,500 | BMW 3 Series Touring (2018) | 17,800 | 19,700 |
| Volvo V60 | 35,000 | Mazda6 Tourer (2018) | 15,500 | 19,500 |
| Mazda6 Tourer | 28,500 | Toyota Avensis Touring Sports (2018) | 13,500 | 15,000 |
| Peugeot 508 SW | 31,000 | Renault Talisman Estate (2018) | 14,000 | 17,000 |
| Kia Ceed Sportswagon | 24,000 | Hyundai i30 Tourer (2018) | 12,500 | 11,500 |
SUVs
| New Model | New Price (£) | Used Alternative | Used Price (£) | Savings (£) |
|---|---|---|---|---|
| Nissan Qashqai | 30,000 | Kia Sportage (2019) | 16,500 | 13,500 |
| Hyundai Tucson | 32,000 | Peugeot 3008 (2019) | 17,500 | 14,500 |
| Toyota RAV4 | 34,000 | Honda CR-V (2018) | 18,000 | 16,000 |
| Kia Sportage | 28,000 | Nissan Qashqai (2019) | 16,000 | 12,000 |
| Peugeot 3008 | 29,500 | Hyundai Tucson (2019) | 17,000 | 12,500 |
| Honda CR-V | 33,000 | Toyota RAV4 (2018) | 18,200 | 14,800 |
| Ford Kuga | 31,000 | Mazda CX-5 (2019) | 17,500 | 13,500 |
| Mazda CX-5 | 30,000 | Ford Kuga (2019) | 17,000 | 13,000 |
| Volkswagen Tiguan | 33,500 | SEAT Ateca (2019) | 16,800 | 16,700 |
| Renault Kadjar | 27,500 | Mitsubishi Outlander (2019) | 15,500 | 12,000 |
Note: Prices are approximate and can vary based on condition, mileage, and market factors.
By considering well-maintained used alternatives, families can enjoy similar features and performance while allocating the savings towards other financial goals, such as investments, holidays, or home improvements.
For a more personalised comparison, consider using online car valuation tools or visiting dealerships to assess the current prices of specific models you’re interested in.
Alternative Ways to Use the Savings
Investing in an ISA
If a family invested the monthly savings difference from not taking on a PCP into a tax-free stocks and shares ISA at an average return of 8% per year, the investment would start at zero and grow progressively over 12 years.
By contributing the savings incrementally each month, this approach could result in an accumulated balance of approximately £75,193 by the end of the period, even after accounting for the £7,500 withdrawal at the six-year mark to purchase the second second-hand car.
Below is an estimated growth table of the ISA investment over 12 years, showing the impact of monthly contributions and withdrawals:
| Year | Estimated ISA Balance (£) |
| 1 | 4,200 |
| 2 | 9,800 |
| 3 | 16,500 |
| 4 | 24,300 |
| 5 | 33,200 |
| 6 | 43,500 (before withdrawal) |
| Car Withdrawl | 36,000 (after £7,500 withdrawal for second-hand car purchase) |
| 7 | 38,880 |
| 8 | 44,270 |
| 9 | 50,440 |
| 10 | 57,500 |
| 11 | 65,560 |
| 12 | 75,193 |
This could be life-changing—enabling early retirement, helping children with university fees, or securing a mortgage deposit.
Boosting Pension Contributions
Many people opt for an expensive PCP deal through a salary sacrifice scheme, but redirecting these savings into additional pension contributions could make a significant impact on long-term financial security.
Assuming a 40-year-old has an average pension balance of £50,000, and instead of a PCP, they contribute the monthly savings difference into their pension, with an average return of 7% per year, their pension could grow substantially over 12 years.
Below is an estimated projection of how the pension could grow with these additional contributions:
| Year | Estimated Pension Balance (£) |
| 1 | 58,250 |
| 2 | 67,100 |
| 3 | 76,600 |
| 4 | 86,800 |
| 5 | 97,750 |
| 6 | 109,500 |
| 7 | 122,100 |
| 8 | 135,650 |
| 9 | 150,200 |
| 10 | 165,850 |
| 11 | 182,650 |
| 12 | 197,024 |
This could make a considerable difference in retirement, allowing for earlier financial independence or a more comfortable lifestyle in later years.
Transforming Family Holidays
Many families dream of luxurious getaways but struggle with budgeting for them. Here’s how the savings could be allocated for travel:
- Camping in the South of France: A two-week camping holiday for a family of four can cost around £2,000 per year, including travel.
- Disneyland Paris: A five-day trip with park tickets, accommodation, and travel can cost approximately £2,500.
- A road trip through Europe: With fuel, accommodation, and food, this could be done for around £3,500 per trip.
- A once-in-a-lifetime adventure: Visiting Asia, the US, or Australia, with flights and accommodation, could be covered by a portion of the savings.
In my opinion, travel is the antithesis of everything else. It provides perspective, balance and removes the routine. Whereas a new car will get old and forgotten, those memories from travel will remain.
Reducing Working Hours
Most people work to afford their car—ironic when you consider that a significant part of their income goes towards financing it. In the UK, the average income salary is £30,000 per year. Reducing work hours by even one day per week could result in:
- More time spent with family
- A healthier work-life balance
- Less reliance on childcare costs
By saving £51,920 over 12 years, a family could afford to reduce their work hours without a significant financial hit.
Taking Unpaid Parental Leave
Many parents don’t realise that in the UK, they’re entitled to unpaid parental leave—up to 18 weeks per child before their 18th birthday. By leveraging the savings from not having a car finance deal, parents could take summers off to spend with their children while they’re on school holidays. As a family, we do this and travel through Europe. We’ve met numerous families doing the same.
For instance, a parent earning £30,000 annually would lose approximately £2,500 per month by taking unpaid leave. With £51,920 saved, they could take at least 20 months off over 12 years—priceless time spent with family.
My friend over at Dad On Fire (financial independence blog) has written about this extensively as a way for families to have more time together while maintaining their careers. It’s genius and should be talked about more. Read his post for more information.
Home Renovations and Improvements
Many families put off home improvements due to financial constraints or they remortgage taking on my debt and locking themselves into work for longer. The savings from removing car finance could fund:
- A new kitchen (£15,000–£25,000)
- A loft conversion (£40,000)
- A garden transformation (£10,000–£15,000)
Obviously, these are just brief examples but life can be enhanced in ways in which a car cannot. A new kitchen diner could transform your family life or a loft conversion could add much-needed additional space to the property. These are also appreciating assets so in theory should add value.
Experiencing Life Differently
Instead of working to finance a car, families could use the savings for:
- Hobbies and passions: Learning an instrument, joining a sports club, or taking photography classes
- A campervan conversion: Turning a van into a mobile home for spontaneous adventures (£10,000–£20,000)
- Supporting children’s extracurricular activities: Paying for gymnastics, dance, football, or other passions without financial stress.
Having the financial flexibility to contribute to the growth of new skills and experiences vs a car is a really strong way to use your money for a greater outcome. Imagine having the freedom for your children to partake in numerous activities outside of school or taking up a hobby yourself.
Conclusion: Making a Smarter Financial Choice
For many UK families, the decision between a PCP-financed car and a second-hand used car purchase is more than just about driving a newer model—it’s about long-term financial well-being.
When everyone around you is regularly changing their cars it can be seen as the thing you just ‘do’ but by doing so you are limiting your financial freedom and your ability to create other opportunities for yourself. We drive a 5-year-old car and it hasn’t skipped a beat in our time of ownership. We have also driven across Europe on several occasions.
Opting for a reliable second-hand car could result in savings of over £51,920 in 12 years, which, when invested, could grow to over £75,193, even after accounting for the necessary withdrawal of £7,500 at the six-year mark to purchase a replacement car.
The impact? Less financial stress, greater opportunities for family experiences, and more freedom to work and live on your own terms.Before committing to another PCP contract, ask yourself: Is driving a brand-new car every three years really worth the cost or could you break the mould and experience a life without those monthly payments?
Photo by CHUTTERSNAP on Unsplash
Last Updated on March 20, 2025 by Ryan
Hello. I am Ryan and along with my wife Beth and our two children Matilda and Barney, we love all things cycling and exploring. We spend our weekends exploring fun places to cycle and discover and wanted to help other people do the same too. There’s no better way to travel than via bike and it’s an amazing activity for the whole family to enjoy.