Car PCP and deposits on them

[Ari]

After_Shock said:

Ford used to yes you are correct, it was offered throughout the PAG group but was dropped as no one took it, hence his example which I fully understand the point he is trying to make is simply not available in a PCP world which is what he is refusing to understand. Its great giving examples that don't exist to prove a point however in the real world if those examples are simply not available why are they relevant.

For exactly the reason I explained above, he's trying to make the point easier for you to understand.

Just like if you were trying to explain to someone that it is harder to park a big car than a small one - if they really weren't getting it you could exaggerate the point by saying 'imagine how hard it is to park a really big vehicle like a bus'. At that point the penny may drop that, yes, larger vehicles are harder to park, or they might say 'that's irrelevant, I can't drive a bus'.

At which point I guess you'd have to make a judgement as to whether their real intentions were to understand the subject being discussed or to argue their corner irrespective of the facts.

[silentbrown]

sidicks said:

QED. Let's move on...

Not so fast...

Extrapolating from the "smaller deposit is best" view, I thought "what's the smallest deposit possible?". Not a zero deposit (that's too easy) but a negative one!

Just imagine : You visit the dealership, pick up a brand new car AND are given a large wodge of notes. And, better yet, the same thing happens again in three years time! No need for a deposit *ever*.

Customers would love it, salesmen would love it. Payday lenders would be out of business. Yes, the monthly payment would be somewhat higher, but I'm sure you'd get used to that. And, as we've been told, the more cash they give you back ,the less the PCP will cost. Brilliant!

[Sheepshanks]

silentbrown said:

Just imagine : You visit the dealership, pick up a brand new car AND are given a large wodge of notes. And, better yet, the same thing happens again in three years time! No need for a deposit *ever*.

OK, not "large" but I was offered my £500 initial ordering deposit back when we collected the Jazz a few months ago - as it was on a 0% £0 customer deposit PCP deal, with £500 contribution from Honda.

Annoying really, I didn't want the faff of a PCP but the only way to get the £500 contribution was to take the PCP.

[Ari]

silentbrown said:

Not so fast...

Extrapolating from the "smaller deposit is best" view, I thought "what's the smallest deposit possible?". Not a zero deposit (that's too easy) but a negative one!

Just imagine : You visit the dealership, pick up a brand new car AND are given a large wodge of notes. And, better yet, the same thing happens again in three years time! No need for a deposit *ever*.

Customers would love it, salesmen would love it. Payday lenders would be out of business. Yes, the monthly payment would be somewhat higher, but I'm sure you'd get used to that. And, as we've been told, the more cash they give you back ,the less the PCP will cost. Brilliant!

Hey, I think you've cracked it!

Free cars for all!

[markwm]

Good read this thread

I have a quote in front of me from BMW which has PCP and HP side by side. OTR Price of the car £58,424.20.

HP over 48 months:
48 x £1489.33
Total payable = £71487.84

PCP over 36 months
£2k deposit
35 x 1009.65
GFV = 29096.02
Total Payable = £66,433.77

PCP over 36 months
£20k deposit
35 x 446.17
GFV = 29096.02
Total Payable = £64, 711.97

APR 6.4% written at the quote. Why would anyone take out the HP when presented with these options?

Edited by markwm on Friday 3rd April 03:06

[Mattt]

Well if you want to own the car, and had to finance the balloon at the end of the PCP, I'm sure the HP would then look more appealing.

M3/M4 I'm guessing looking at the numbers? APR now down to 4.9% for Q2 I believe.

[sidicks]

markwm said:

Good read this thread

I have a quote in front of me from BMW which has PCP and HP side by side. OTR Price of the car £58,424.20.

HP over 48 months:
48 x £1489.33
Total payable = £71487.84

PCP over 36 months
£2k deposit
35 x 1009.65
GFV = 29096.02
Total Payable = £66,433.77

PCP over 36 months
£20k deposit
35 x 446.17
GFV = 29096.02
Total Payable = £64, 711.97

APR 6.4% written at the quote.

The APR on the HP quote is around 10.8%

!!!!!

markwm said:

Why would anyone take out the HP when presented with these options?

Indeed - but the interest rate on the HP is almost twice the internet rate on the PCP, so is not really comparing like with like..!!

Edited by sidicks on Friday 3rd April 09:23

[markwm]

it's obvious they want you to take out the PCP, else you have to go elsewhere for a better HP deal. 10.9% is the same rate as for their approved used cars.

[sidicks]

markwm said:

it's obvious they want you to take out the PCP, else you have to go elsewhere for a better HP deal. 10.9% is the same rate as for their approved used cars.

Yep - the crap rate on the HP costs you around £115per month extra than you'd be paying if the HP APR and the PCP APR were the same.

[Sheepshanks]

sidicks said:

Yep - the crap rate on the HP costs you around £115per month extra than you'd be paying if the HP APR and the PCP APR were the same.

It's part of the "scam" to get everyone on PCPs.

[markwm]

The argument I kept reading about using a high deposit was that when you come to exchange the car, you'll be disappointed because you won't have that deposit to put in again so your monthlies will be higher to be in the same class of car. But that argument is based on some unknown assumptions. If I have a large deposit now, who says I won't have earnt another large deposit the next time 3 or 4 years comes around? I think you'd have to be pretty naive to expect to go into the same standard of car after 3 years expecting the same deal without the same deposit.

Last time I bought a new car was in 2007, 49k, paid £25k deposit and the rest financed on balanced payments (which is essentially a pcp deal today). At the end of 3 years, I had enough cash to pay off the baloon, 18k and kept the car another few years.

[Sheepshanks]

markwm said:

The argument I kept reading about using a high deposit was that when you come to exchange the car, you'll be disappointed because you won't have that deposit to put in again so your monthlies will be higher to be in the same class of car. But that argument is based on some unknown assumptions. If I have a large deposit now, who says I won't have earnt another large deposit the next time 3 or 4 years comes around?

Typical scenario is that someone px's their existing car and uses that as the deposit. Then they get to the end of the PCP and the car is worth about the same as the GFV so if they hand it back they walk away with nothing. They perceive that the value they had in the their px has "gone".

To start a new deal on similar terms they've got to find a similar deposit to the previous car's PX value. Many people that do PCPs are living very much month to month - they can't rustle up a few £K for deposit just like that.

[sidicks]

Sheepshanks said:

Typical scenario is that someone px's their existing car and uses that as the deposit. Then they get to the end of the PCP and the car is worth about the same as the GFV so if they hand it back they walk away with nothing. They perceive that the value they had in the their px has "gone".

To start a new deal on similar terms they've got to find a similar deposit to the previous car's PX value. Many people that do PCPs are living very much month to month - they can't rustle up a few £K for deposit just like that.

Those people should do what they can to minimise the interest that they pay...

[markwm]

but PCP's are still popular with higher priced cars, the kind of car you don't really associate with people living 'month to month'.

[Dr Jekyll]

markwm said:

but PCP's are still popular with higher priced cars, the kind of car you don't really associate with people living 'month to month'.

Perhaps we should so associate them though. I've known people going contracting, finding themselves with an extra £2000 a month, and instead of saving it for a decent car raise their spending to match, including a lease or PCP at £800 a month. Then when the contract ends and they are on the bench for 3 months they're in trouble.

[rehab71]

sidicks said:

Sheepshanks said:

Typical scenario is that someone px's their existing car and uses that as the deposit. Then they get to the end of the PCP and the car is worth about the same as the GFV so if they hand it back they walk away with nothing. They perceive that the value they had in the their px has "gone".

To start a new deal on similar terms they've got to find a similar deposit to the previous car's PX value. Many people that do PCPs are living very much month to month - they can't rustle up a few £K for deposit just like that.

Those people should do what they can to minimise the interest that they pay...

They should, but they don't

[sidicks]

rehab71 said:

They should, but they don't

As long as they get accurate advice from the salesman, they can make their own choices....

[Granfondo]

markwm said:

but PCP's are still popular with higher priced cars, the kind of car you don't really associate with people living 'month to month'.

Why do you think over the last 10 or so years expensive cars have become almost the norm?

[Granfondo]

markwm said:

but PCP's are still popular with higher priced cars, the kind of car you don't really associate with people living 'month to month'.

Why do you think over the last 10 or so years expensive cars have become almost the norm?

[Petrolhe4d]

Sheepshanks said:

Your typical PCP buyer, getting a heavily subsidised 3 Series or C Class that they couldn't possibly afford to actually buy, doesn't need convincing about a low deposit. They live life with the bank balance hovering around zero, and paying the minimum off their credit cards every month.

They couldn't give a toss about APR except they know it always looks higher on a PCP.

How very rude. I have a very healthy bank balance thank you and buy on pcp with minimum deposit and use the cash in my pocket to make me money. The saving on an equal APR PCP and HP deal is so minimal it ain't worth worrying about.

My five pence worth.