Thinking of buying a car on PCP (a few questions)

[Deva Link]

waterwonder said:

I don't get why people struggle so much with PCP's or think they're some big con.

If you know what you're doing, they can be a good deal. Although there's 'con' element in that you can quite frequently get a better deal by taking a PCP than you can by paying cash.

There's a reason for this - PCP are designed as "trap" that once you're in, usually the most logical thing to do at 3yrs is hand the car back and start another PCP.

I'm concerned that many people get into PCPs and don't fully understand what they're doing. The OP seemed the think he would owe about £4K less that the GFV at the end of the deal. He thought the interest charge was £500 when it must be several £K. He thought the interest rate was 3.65% when it must be double that.

[sulli]

Buying a car on PCP?

I have bought cars on acid, ecstacy and weed, but never whilst under the influence of PCP. I would imagine that the process would be a little disconcerting for the seller, and may result in them just giving you the car, gratis, and running for the hills.

Worth a go I'd say....

[yellowbentines]

Deva Link said:

It can be expensive to get out of them before the end of the term. I forget the exact way it's worked out now, but if you look at the deal the OP is talking about, the GFV is half the car's list price. With HP you can hand the car back once you've paid half the amount owing and walk away. If the hand back point for a PCP is half the amount borrowed, the OP will never reach that during the term as the GFV is relatively large.

What you're talking about is voluntary termination.

What I was referring to was repaying a PCP deal early, for which there are NO penalties, or mileage charges, or excess wear & tear charges.

You phone finance company & ask for a settlement figure/amount owing, you find new car you like, you ensure that part-ex value for current car covers settlement figure, and you buy new car - it's no more difficult than moving house when you have a mortgage outstanding on the current house!

[jonah35]

Dog Star said:

Funnily enough there's a brand spanking new one of those (mines an AMG sport pack one) sat in my garage right now - got back to it yesterday. It goes like the clappers. Love it.

I cannot for the life of me fathom why I would buy a new one or a used ten grand one when for that kind of money (which appears to be about equal to the depreciation) I can lease a brand spanking new one, give it back and have no worries about stuff going wrong. It's a total no brainer to me.

Yeah the amg sport ones are 299 inc vat.

Op i wouldnt go for the a3 because its a ten year old car now, depretiation will be worse due to new one. Hang on for new shape or go for something else

[Scootersp]

On finance,I say if you balk at the thought of paying/getting a loan for the total cars price then you need to see that the pcp is very little different and look very closely at the deal to see if it's right for you.

[Deva Link]

yellowbentines said:

What you're talking about is voluntary termination.

Yes, sorry the point was that it can be expensive to get out of them if you're in 'distress'.

Changing car of your own accord is fine - the end of contract mileage and damage penalties are irrelevant because you're effectively buying the car and then p/xing it. Obviously the mileage and condition are relevant for the p/x value, so it's not as if you're getting away with anything.

[waterwonder]

Deva Link said:

If you know what you're doing, they can be a good deal. Although there's 'con' element in that you can quite frequently get a better deal by taking a PCP than you can by paying cash.

So how is getting a better deal a con?

Deva Link said:

There's a reason for this - PCP are designed as "trap" that once you're in, usually the most logical thing to do at 3yrs is hand the car back and start another PCP.

Cobblers - it is no more logical than if you'd financed it by any other method or paid cash. I do recognise MFR's like and support it because it encourages people to think about changing after a shorter period of time. The only 'trap'is that interest rates may have gone up which may limit your options but you accept that risk as part of the decision if PCP's are right for you.

Deva Link said:

I'm concerned that many people get into PCPs and don't fully understand what they're doing. The OP seemed the think he would owe about £4K less that the GFV at the end of the deal. He thought the interest charge was £500 when it must be several £K. He thought the interest rate was 3.65% when it must be double that.

I couldn't agree more however the amount of bks that is spouted about them on forums doesn't improve the situation.

Deva Link said:

Yes, sorry the point was that it can be expensive to get out of them if you're in 'distress'.

As opposed to what?

Edited by waterwonder on Sunday 8th July 17:29

[msandford]

Apologies for resurrecting an old thread but I didn't want to start yet another PCP related one.

What is the logic behind 'low deposit is less risky/better' etc? The optional final payment is the same regardless of the deposit. Therefore you are paying the same amount over the term, whether it is no deposit and high monthly payments, or a big deposit and low monthly payments. All of that money comes out of your pocket, difference is that you pay less interest if you cough up more upfront. If the car is worth more than the final payment, you have that amount to walk away with. The deposit doesn't seem to be much of a factor...

Is this correct or am I missing something?

Edited by msandford on Monday 11th February 00:14

[Fox-]

The bigger your deposit the lower the interest you pay. You pay interest on the entire outstanding amount inc the GFV. Bigger deposit = smaller GFV and/or smaller payments = less interest = lower TCO.

[msandford]

So is the optional final payment not always the same? On the examples I have seen (mainly the VW finance calculator on their website), it doesn't matter what deposit you put in, could be £100 or £8000, the final payment is the same. So you are financing the difference one way or another. Big deposit + small payments ~= small deposit + big payments. Except bigger deposit is cheaper overall because of the interest. I just don't get why some people say only put a max of 5% deposit in a PCP, for example. Unless they are talking about the fact that you are going to spend a lump sum you had saved, unless you work it out that your deposit is =~ the value of the car at the end of the term over the final payment. But that is never guaranteed.

Edited by msandford on Monday 11th February 08:43

[Blown2CV]

The thing about the deposit is largely psychological as you pay almost the same over the term regardless of deposit (unless you are talking a huge amount down, then why are you using a PCP?). The issue is if you are trying to adjust the affordability of the payment, you won't get that deposit money back generally at the end, you are just using it to reduce the payments. Yes you pay less interest, but a lot of people think that the profile is the same as standard finance, that you are giving yourself a 'head-start' in some way by whacking a larger deposit down, but on a PCP you will owe the same at the end of the term as if you had put a lower deposit. The money you put into deposit and payments on a PCP should be seen as disposable rather than paying the car off as such. Because you pay the same amount over the term, lots of those who know feel that you may as well just keep your cash, put down low deposit and spread the majority using payments.

Edited by Blown2CV on Monday 11th February 10:32

[Deva Link]

msandford said:

What is the logic behind 'low deposit is less risky/better' etc?

Where are you seeing people say that?

msandford said:

So is the optional final payment not always the same? On the examples I have seen (mainly the VW finance calculator on their website), it doesn't matter what deposit you put in, could be £100 or £8000, the final payment is the same.

It probably can be varied if you're face to face with the guy in the dealership who does finance, but there are a couple of reasons the finance company (which will often be an arm of the manufacturer) wants to keep the final value high:
1) A high final value makes it more likely that you'll roll into another PCP. The point of PCPs is to get you to change cars every 3 yrs so the factory can keep churning them out. The absolute last thing the manufacturer wants is for you to pay the GFV and keep the car.
2) It keeps the point at which the buyer could VT until late into the term.