Car PCP and deposits on them
Discussion
Or if you want a real life example as opposed to me putting figures in a calculator, friend of mine recently purchased a 640d,
Car = 36,106
Deposit = 13,500
37 x = 376.14
GMFV = 17,365
TAP to own the car = 44,782 (8676 in interest)
Due to his deposit being so high I suggested he went with a HP route, he eventually settled on 48 months:
Car = 36,106
Deposit = 13,500
48 x = 529
TAP to own the car = 38,892 (5890 cheaper than PCP in interest)
Car = 36,106
Deposit = 13,500
37 x = 376.14
GMFV = 17,365
TAP to own the car = 44,782 (8676 in interest)
Due to his deposit being so high I suggested he went with a HP route, he eventually settled on 48 months:
Car = 36,106
Deposit = 13,500
48 x = 529
TAP to own the car = 38,892 (5890 cheaper than PCP in interest)
After_Shock said:
Other than banging your head in theory yes they will except for the fact they may not be in the same financial position due to not saving the monthly payment difference over the term of the loan.
Gee, why are you still struggling with this??In your example, (ignoring other savings) the deposit to be carried forward to the next car is car value - GMFV, equals £16,000 (say) - £14,400 (in both scenarios) = £1,600.
So in both cases the deposit to carry forward is the same. The people paying the larger deposit have not lost anything (and will have gained on the interest saved). In your example they'll actually have an extra £1,640 towards the next deposit.
After_Shock said:
As you say they can do what they want with the money but 'if' they have not saved it as they should have done they may now suddenly have a 500 quid deposit and not a few grand they would have hoped. This is what happens.
See above.After_Shock said:
APR is misleading for many reasons, its affected by too many factors so to focus on that especially in PCP deals is foolish as its lowered by off setting a large payment to the end for example.
APR represents the actual cost of borrowing the money, so is the most important interest rate.After_Shock said:
Ive done a quick PCP calculation to give you the idea of savings from an actual example:
1. The low deposit route:
Car = 30k brand new
GMFV after 36 months = 14,400k
Deposit = 1k
36 Payments = 579 per month
TAP = 36,244 To own the car at the end
2. Higher deposit route:
Car = 30k
GMFV after 36 months = 14,400k
Deposit = 8k
36 Payments = 339 per month
TAP = 34,604 To own the car at the end
Saving for putting in a 8k deposit to start with in interest terms = 1,640 over 3 years.
Your examples are flawed as the interest rate is different between the two examples - 9.77% APR in example 1 and 8.64% APR in example 2, so the two quotes are not directly comparable.1. The low deposit route:
Car = 30k brand new
GMFV after 36 months = 14,400k
Deposit = 1k
36 Payments = 579 per month
TAP = 36,244 To own the car at the end
2. Higher deposit route:
Car = 30k
GMFV after 36 months = 14,400k
Deposit = 8k
36 Payments = 339 per month
TAP = 34,604 To own the car at the end
Saving for putting in a 8k deposit to start with in interest terms = 1,640 over 3 years.
After_Shock said:
3. Higher deposit on a HP over same term based on the same advertised rate of interest:
Car = 30k
Deposit = 8k
36 Payments = 666
TAP = 31,980 To own the car at the end.
It's not the same rate of interest - this quote is 5.82% APR.Car = 30k
Deposit = 8k
36 Payments = 666
TAP = 31,980 To own the car at the end.
After_Shock said:
O.k the monthly payment is higher but due to having no GMFV at the end generating interest the actual interest savings by putting a high deposit into a HP deal are much greater. The interest saving between the two PCP deals is not vast but is of course a saving, but for high deposits I always suggest HP, unless of course the person cant afford that particular car on a HP route and needs PCP to get the payments way down over the same time period.
Particularly when the figures you quote are based on vastly different rates of interest.....!!!After_Shock said:
Everyones different, everyones circumstances are different its purely personal choice. But in saving interest terms PCP is not the route to go.
Paying less interest is better than paying more interest, regardless of the type of finance you use.HTH
sidicks said:
After_Shock said:
Yes of course put in a 500 quid deposit = the exact same monthly payment as putting in 5k, magic money trees and cash fairies excluded.
Im fully aware funnily enough it reduces the monthly payment.
So why do you keep wittering on about the deposit being 'lost' / 'thrown away' etc etc??Im fully aware funnily enough it reduces the monthly payment.
My brother, who is contracts manager and I would say reasonably financially aware, did it - p/x'd his wife's car, then got to the end of the PCP and found it was under water. So the whole value of his wife's old car had "vanished". My admin assistant paid a cash deposit and insists she was assured she would get it back, as if it was a security deposit on something you rent.
After_Shock said:
Or if you want a real life example as opposed to me putting figures in a calculator, friend of mine recently purchased a 640d,
Car = 36,106
Deposit = 13,500
37 x = 376.14
GMFV = 17,365
TAP to own the car = 44,782 (8676 in interest)
Due to his deposit being so high I suggested he went with a HP route, he eventually settled on 48 months:
Car = 36,106
Deposit = 13,500
48 x = 529
TAP to own the car = 38,892 (5890 cheaper than PCP in interest)
I assume you failed to explain that the interest being charged in the first example was an extortionate 14.8% compared with 6.0% APR in the second example....Car = 36,106
Deposit = 13,500
37 x = 376.14
GMFV = 17,365
TAP to own the car = 44,782 (8676 in interest)
Due to his deposit being so high I suggested he went with a HP route, he eventually settled on 48 months:
Car = 36,106
Deposit = 13,500
48 x = 529
TAP to own the car = 38,892 (5890 cheaper than PCP in interest)
Sheepshanks said:
He's doing that because in the real world outside of the powerfully built company directors of PH who of course would probably use the deposit to buy a BTL and then use the surplus rent to pay the monthly PCP, people do see the deposit as "lost".
But it isn't lost, so they are wrong.Sheepshanks said:
My brother, who is contracts manager and I would say reasonably financially aware, did it - p/x'd his wife's car, then got to the end of the PCP and found it was under water. So the whole value of his wife's old car had "vanished". My admin assistant paid a cash deposit and insists she was assured she would get it back, as if it was a security deposit on something you rent.
Poor advice from the salesman doesn't change the facts...Sheepshanks said:
He's doing that because in the real world outside of the powerfully built company directors of PH who of course would probably use the deposit to buy a BTL and then use the surplus rent to pay the monthly PCP, people do see the deposit as "lost".
My brother, who is contracts manager and I would say reasonably financially aware, did it - p/x'd his wife's car, then got to the end of the PCP and found it was under water. So the whole value of his wife's old car had "vanished". My admin assistant paid a cash deposit and insists she was assured she would get it back, as if it was a security deposit on something you rent.
I can see the Term 'Deposit' causing a lot of confusion for large portions of the general public, as in their mind a 'Deposit' is something that is refundable (subject to conditions). It would be better if it was called a Down Payment, I think this would actually help a large majority of people understand these types of deals a little bit better.My brother, who is contracts manager and I would say reasonably financially aware, did it - p/x'd his wife's car, then got to the end of the PCP and found it was under water. So the whole value of his wife's old car had "vanished". My admin assistant paid a cash deposit and insists she was assured she would get it back, as if it was a security deposit on something you rent.
Edited by TheHound on Sunday 8th March 16:36
sidicks said:
I assume you failed to explain that the interest being charged in the first example was an extortionate 14.8% compared with 6.0% APR in the second example....
Not in the slightest, that's the great advantage of PCP, you pay more interest. Hence why he went with a HP which is suited to a higher deposit. Its a real world example, im sure I have the picture of the quote on my phone if you want to see it.I think you have read the APR bullsh*t book and are consumed by its greatness. Putting a GMFV at the end reduces the quoted APR, just like putting a payment holiday in reduces the APR, its affected by how the money is repaid.
Im not failing to get anything at all, im simply trying to get across the point that paying a high deposit is more beneficial on a HP agreement which you simply refuse to accept. The APR is never going to be the same on a PCP to HP deal due to the way the money is repaid.
Sheepshanks said:
Yes, but in the real world car salespeople have to deal with that.
What is a bit odd is them worrying about the next deal in 3yrs time - they're rarely in the job that long.
Those of us who are actually do worry about it in the time as its very good to be able to get a customer from one car to the next and sell them another.What is a bit odd is them worrying about the next deal in 3yrs time - they're rarely in the job that long.
Thanks for putting a real world example into the mix, as I have seen many a time from customers.
After_Shock said:
Not in the slightest, that's the great advantage of PCP, you pay more interest.
Priceless! Big advantage for you, you mean?!
After_Shock said:
Hence why he went with a HP which is suited to a higher deposit. Its a real world example, im sure I have the picture of the quote on my phone if you want to see it.
It's not directly comparable for the reasons set out previously.After_Shock said:
I think you have read the APR bullsh*t book and are consumed by its greatness.
You continue to demonstrate your lack of understanding about APR.After_Shock said:
Putting a GMFV at the end reduces the quoted APR, just like putting a payment holiday in reduces the APR, its affected by how the money is repaid.
The APR is the true cost that you are being charged for the borrowing.Moving the GMFV might affect that APR that comes out of your computer, but that's because you are fixated by keeping the fixed rate the same, as if that is a meaningful number. If you understand finance you'd realise this, but for obvious reasons the computer programs a car salesman uses to generate quotes has limited options to prevent the less well-informed from doing the wrong thing!!
After_Shock said:
Im not failing to get anything at all, im simply trying to get across the point that paying a high deposit is more beneficial on a HP agreement which you simply refuse to accept.
I have said no such thing.After_Shock said:
The APR is never going to be the same on a PCP to HP deal due to the way the money is repaid.
See above - I've already provided quotes that have identical APRs (deliberately) to demonstrate the key points under discussion. Also, Silentbrown provided quotes from VW 'Solutions' which had different repayment profiles but the same APR.I'm sorry you don't understand how finance / compound interest works!
Edited by sidicks on Sunday 8th March 17:56
After_Shock said:
Those of us who are actually do worry about it in the time as its very good to be able to get a customer from one car to the next and sell them another.
At last you are finally admitting that your priority is to sell another car, not provide the best advice for your customer. Nothing wrong with that, but it does explain your previous claims / advice).
Glad im here to amuse you, your arrogance is the opposite.
You clearly don't like anyone involved in the motor trade due to your comments, I actually don't get paid on finance so no ironically more interest is of no interest what so ever to me. Its actually less beneficial as when the customer comes to change the car the less they pay in interest over 1, 2 or 3 years etc makes it easier for them to change and easier for me to sell them another car.
So your saying a 3 year PCP deal with the same APR you will repay the same interest as a HP deal with the same APR?
Regrettably in the real world not based in your mathematical theoretical one getting the same APR rate for both examples is not exactly easy, hence when my mate gets a quote from BMW finance on a PCP its a high rate and for a HP rate its vastly different.
The total amount payable is the true cost for what your paying not a percentage rating, add all the numbers up to get the 'total' that's the important number.
You clearly don't like anyone involved in the motor trade due to your comments, I actually don't get paid on finance so no ironically more interest is of no interest what so ever to me. Its actually less beneficial as when the customer comes to change the car the less they pay in interest over 1, 2 or 3 years etc makes it easier for them to change and easier for me to sell them another car.
So your saying a 3 year PCP deal with the same APR you will repay the same interest as a HP deal with the same APR?
Regrettably in the real world not based in your mathematical theoretical one getting the same APR rate for both examples is not exactly easy, hence when my mate gets a quote from BMW finance on a PCP its a high rate and for a HP rate its vastly different.
The total amount payable is the true cost for what your paying not a percentage rating, add all the numbers up to get the 'total' that's the important number.
sidicks said:
At last you are finally admitting that your priority is to sell another car, not provide the best advice for your customer. Nothing wrong with that, but it does explain your previous claims / advice).
Well exactly the last thing you want to do is put someone in a position where they cant afford to buy another car, so 'wanting' to have them in a position to buy another car in however many years is a bad thing and not in the customers interest how exactly?After_Shock said:
Glad im here to amuse you, your arrogance is the opposite.
You mistake arrogance for confidence in what I'm talking about (due to extensive training)...After_Shock said:
You clearly don't like anyone involved in the motor trade due to your comments,
I have no problem with anyone in the motor trade, except when they try to deceive customers about things they clearly don't fully understand.After_Shock said:
I actually don't get paid on finance so no ironically more interest is of no interest what so ever to me. Its actually less beneficial as when the customer comes to change the car the less they pay in interest over 1, 2 or 3 years etc makes it easier for them to change and easier for me to sell them another car.
In which case why don't you persuade them to pay less interest on a PCP by increasing their deposit....
After_Shock said:
So your saying a 3 year PCP deal with the same APR you will repay the same interest as a HP deal with the same APR?
I'm saying nothing of the sort.After_Shock said:
Regrettably in the real world not based in your mathematical theoretical one getting the same APR rate for both examples is not exactly easy, hence when my mate gets a quote from BMW finance on a PCP its a high rate and for a HP rate its vastly different.
That's when you need to speak to an expert, not a salesman operating a computer program he doesn't fully understand!After_Shock said:
The total amount payable is the true cost for what your paying not a percentage rating, add all the numbers up to get the 'total' that's the important number.
It's important, but not a good measure for which quote provides the best 'value'.The true cost (for comparison purposes) is the APR as it reflects the amount borrowed and the timing of payments. Of course there might be good reasons for choosing one quote over another, even if it has a higher APR, but it IS undeniably providing worse value.
Edited by sidicks on Sunday 8th March 17:50
After_Shock said:
sidicks said:
At last you are finally admitting that your priority is to sell another car, not provide the best advice for your customer. Nothing wrong with that, but it does explain your previous claims / advice).
Well exactly the last thing you want to do is put someone in a position where they cant afford to buy another car, so 'wanting' to have them in a position to buy another car in however many years is a bad thing and not in the customers interest how exactly?sidicks said:
Surely paying more interest (as you appear to recommend) means they are less likely to be able to afford to buy another car, not more...
Im suggest putting larger deposits into HP not PCP in order to save money on interest, not as you state so no. Im also saying if customer have a large sum to start with don't put it all into a PCP, keep some of it back for the next one, another person on here has also chipped in and said why. Circumstances change and you don't know whats around the corner and that cash might be gone putting people in an awkward position come when the PCP is over, again in the customers interest.So lets say you are an expert which you profess to be, can you get me a APR rated PCP deal in the open market that will cost me less over the same period of time as a HP deal putting the same deposit in over the same amount of time? Just asking for some advice you see as the idiot typing on a computer system appears to be ripping people off without knowing.
How can APR be the true cost (factoring in PCP/HP) if the total amount payable is different between the two but for examples sake the PCP deal gives a lower APR but actually costs more in total?
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