Why residual values matter so much on PCP
On a PCP you finance the difference between the price today and the Guaranteed Minimum Future Value. A high GMFV means a smaller amount financed and a lower monthly payment. A conservative GMFV means the opposite.
So when lenders become cautious about what a vehicle will be worth, PCP payments rise even if the interest rate has not moved at all.
What has happened with EVs
Electric vehicle values have been more volatile than petrol and diesel equivalents. Rapid improvements in range and charging, changing supply, and shifting incentives have all made the three-year-out picture harder to call.
Lenders respond to uncertainty by being conservative, which is rational — but it narrows the monthly-payment advantage PCP usually has over hire purchase.
What this means if you are buying
- Price hire purchase and PCP side by side on an EV rather than assuming PCP wins.
- Remember that a guaranteed value transfers depreciation risk to the lender — worth something in a volatile market.
- On a used EV, check battery state of health and whether the warranty transfers.
- Work out your real running costs. Home charging changes the picture completely.