To make the deal attractive, car dealers sometimes make a full or part contribution to the cash deposit. This helps in reducing the upfront cash deposit required by the customer.
Dealer contribution is another name for a discount. In this case, the dealer makes a contribution to the client's deposit to make the deal more affordable for the client. This contribution helps car buyers who may have cash constraints, or the ones who are looking for a minimal upfront payment.
Let's look at some current deals in the market.
One car dealer is offering the Jaguar XF Luxury 2.2D at a price of £32,945 and a deposit of £6,999. They are also offering a contribution of £3,424 to the deposit. So, the buyer has to pay only £3,575 as a deposit.
Ford S-Max Zetec 2.0 TDCi has a cash price of £24,635 and a deposit of £6,808. As part of the deal, the dealer is making a contribution of £1,500. This will reduce the customer's deposit contribution to £5,308.
Dealer contribution can reduce the total principal owed and, subsequently, the monthly PCP loan payment.
In the case of the Jaguar XF Luxury 2.2D, the monthly payment is £287 without the dealer contribution. Car loan term is 48 months; annual interest rate is 4.9%, and GMFV is £13,456. When you include the dealer contribution of £3,424, the monthly payment comes down to around £208.
Moreover, with the Ford S-Max, excluding the dealer contribution, the monthly payment is £319.92. Loan term is 23 months; annual interest rate is 4.2%, and GMFV is £10,769. Including dealer contribution, the monthly payment is reduced to £251.93.
You need to look at all the other factors, along with the dealer contribution, to find out the best deal. Some smart dealers may provide a contribution to make the deal look attractive. But other factors such as car price, interest rate, or GMFV may make the deal less profitable to you. So, it is good to also look at the car price, monthly payment, total to be repaid and the total amount borrowed.
To know which deal is the most beneficial, you can use our PCP calculator to compare different PCP deals with or without dealer contribution.
Sometimes a dealer may offer you a contribution that is lower than the contribution the manufacturer is offering. For instance, Mazda is offering a contribution of £500 on its website, but a Mazda dealer may offer you a contribution of £250. Therefore, we recommend you to reconfirm the amount of dealer contribution from the car manufacturer's website.