PCP Experiences Good AND Bad please
Discussion
405dogvan said:
Ashley1987 said:
Yes it has crossed my mind. After all you are funding the depreciation. If you're careful and don't get the last of the old model with a red interior for example. It's still about a fine balance of course.
Absolutely that - BUTFew people are going to choose a nicer spec "because it's cheaper overall" - most people will use PCPs to get a car which is, in all honestly, beyond their means.
It's really, really hard to work out a 'total cost of ownership' when you're looking at a new car and comparing PCPs with purchases - because there are so many variables (mileage, options, depreciation and so on).
A lot of people think a PCP is 'motoring costs struck to the bone' - e.g. your outlay is purely the actual 'cost' of motoring, which is
depreciation (your PCP payment)
maintenance
petrol
insurance
tax
But they forget that dealers (and the PCP providers) are in business to make money - the idea that you're "sharing economies of scale" (as a company leasing a fleet might be) is mildly deluded...
I've only ever once heard of someone giving a car back at the end of a PCP because it's value had dropped more than the residual had been setup for so it wasn't worth paying the balloon - and that was an RS Ford
p.s. mileage - in itself - is a PCP issue because you need to specify it upfront, exceeding it is VERY expensive and, of course, underdoing it is costing you money - and the only thing worse than wasting money is having a car you cannot afford to use
Good Lord I just outed my spreadsheet fetish on the internet
J4CKO said:
I wonder how many people get blinded by "the shiny", that lovely new car for only £400 a month that they could never in a million years actually save up £30,000 for, then realise that on a household budget of 2 grand a month it doesnt really stack up.
I would assume most of these people either get a car allowance for work, get a company car or pay themselves 45p per mile .That way they need a reliable car for work so of the 3 options above its being paid for via work benefits. If you have your own business etc and get 45p per mile , 10,000 miles is £4,500 a year (tax free)
Ashley1987 said:
I'll be designing the most concise of excel spreadsheets to work out all running costs before I make my decision be it pcp hp or pact with the devil.
Nothing wrong with spreadsheets but they don't have a function to tell if your lifestyle will change enormously in the next 2/3 years resulting in much greater/lesser mileages on your car.I've varied, over the years, between 2.5K a year and 35K a year - all based on the job I was doing at the time.
Some PCPs will allow some renegociation if your circumstances change (pay more for more miles - cheaper than the penalty) - none I've ever seen allowed the opposite tho.
jonny70 said:
I would assume most of these people either get a car allowance for work,
Anyone taking a PCP on a car allowance is stark-staring bonkers - a CC will almost always be a cheaper option and won't potentially ruin your credit record if you lose your job (worst case, taxi home from the office - which in my case was once 180 miles!) 
405dogvan said:
Nothing wrong with spreadsheets but they don't have a function to tell if your lifestyle will change enormously in the next 2/3 years resulting in much greater/lesser mileages on your car.
I've varied, over the years, between 2.5K a year and 35K a year - all based on the job I was doing at the time.
Some PCPs will allow some renegociation if your circumstances change (pay more for more miles - cheaper than the penalty) - none I've ever seen allowed the opposite tho.
Yeah I know thats why I feel there needs to be a lot of contingency built into the workings so that a worse case scenario if realised can be worked around. I've varied, over the years, between 2.5K a year and 35K a year - all based on the job I was doing at the time.
Some PCPs will allow some renegociation if your circumstances change (pay more for more miles - cheaper than the penalty) - none I've ever seen allowed the opposite tho.
405dogvan said:
Anyone taking a PCP on a car allowance is stark-staring bonkers - a CC will almost always be a cheaper option and won't potentially ruin your credit record if you lose your job (worst case, taxi home from the office - which in my case was once 180 miles!)
Don't necessarily agree with that. Just need to way up the options. CC vs PCP deal isn't comparable on it's own - you need to know the mileage you will do/ what your company pays for it etc. I could have a much nicer car on a PCP than a company car.A company car is normally more of a commitment that anything - you can't get out of that early unless you quit your job!
panholio said:
405dogvan said:
Anyone taking a PCP on a car allowance is stark-staring bonkers - a CC will almost always be a cheaper option and won't potentially ruin your credit record if you lose your job (worst case, taxi home from the office - which in my case was once 180 miles!)
Don't necessarily agree with that. Just need to way up the options. CC vs PCP deal isn't comparable on it's own - you need to know the mileage you will do/ what your company pays for it etc. I could have a much nicer car on a PCP than a company car.A company car is normally more of a commitment that anything - you can't get out of that early unless you quit your job!
dele said:
Had a 61' plate 335i BMW
Lost my job, didnt have GAP insurance, BMW took the car back and auctioned it off leaving a £10k deficit that ive had to repay for a car that i no longer have and my credit rating is now ruined.
Its literally been the bane of my life for the last year, think VERY long and hard before you pull the trigger, this has been a very expensive and unpleasent experience for myself that could of been avoided if i'd had a backup plan or bought within my means.
Look on the bright side....given the current PPI mis selling scandal, you must be able to boast that you're the only person in the UK who needed PPI and wasn't sold it!!!Lost my job, didnt have GAP insurance, BMW took the car back and auctioned it off leaving a £10k deficit that ive had to repay for a car that i no longer have and my credit rating is now ruined.
Its literally been the bane of my life for the last year, think VERY long and hard before you pull the trigger, this has been a very expensive and unpleasent experience for myself that could of been avoided if i'd had a backup plan or bought within my means.
Edited by dele on Wednesday 5th June 13:55
Still not 100% clear on the workings of PCP after reading the thread.
Would it be fair to say that PCP is basically about borrowing to pay the anticipated depreciation on a car, rather than borrowing to pay for the entire car up front?
So if the car depreciates by more over the term of the deal than the original estimate written into the deal, you are quids in as you just give the car back and have paid less that you would have lost if you had borrowed to buy it outright? (i.e. You have lost less than you would have in depreciation).
If it depreciates by less then it's not a disaster as you can either buy the car at below market value (the GMFV agreed at the start of the deal) or use the 'equity' towards your next deal?
Sounds like a way to constantly drive a new car you otherwise couldn't really afford every three years as long as you can keep up with the finance payments. But you are paying higher monthly payments for the privilege of doing that as well as the loan being essentially 'secured' against the car. Normally secured loans are cheaper.
Given how much depreciation stings (and you'd be paying interest on that depreciation too), not sure I'd want to do that. I bought mine new three years back and when I looked at depreciation on the 3 year mark it made me realise how significant a financial factor it really is, greater than fuel + insurance + tax + servicing combined in my case.
But it would explain why so many people seem to be able to 'afford' expensive new cars.
Would it be fair to say that PCP is basically about borrowing to pay the anticipated depreciation on a car, rather than borrowing to pay for the entire car up front?
So if the car depreciates by more over the term of the deal than the original estimate written into the deal, you are quids in as you just give the car back and have paid less that you would have lost if you had borrowed to buy it outright? (i.e. You have lost less than you would have in depreciation).
If it depreciates by less then it's not a disaster as you can either buy the car at below market value (the GMFV agreed at the start of the deal) or use the 'equity' towards your next deal?
Sounds like a way to constantly drive a new car you otherwise couldn't really afford every three years as long as you can keep up with the finance payments. But you are paying higher monthly payments for the privilege of doing that as well as the loan being essentially 'secured' against the car. Normally secured loans are cheaper.
Given how much depreciation stings (and you'd be paying interest on that depreciation too), not sure I'd want to do that. I bought mine new three years back and when I looked at depreciation on the 3 year mark it made me realise how significant a financial factor it really is, greater than fuel + insurance + tax + servicing combined in my case.
But it would explain why so many people seem to be able to 'afford' expensive new cars.
Lucas Ayde said:
Would it be fair to say that PCP is basically about borrowing to pay the anticipated depreciation on a car, rather than borrowing to pay for the entire car up front?
No, you are still borrowing to pay for the entire car up front and paying interest accordingly. The difference is you are only paying depreciation and interest during the agreement. After that you either pay off the remainder directly, or hand the car back and use the guaranteed value of the car to pay it off.
Lucas Ayde said:
Still not 100% clear on the workings of PCP after reading the thread.
Would it be fair to say that PCP is basically about borrowing to pay the anticipated depreciation on a car, rather than borrowing to pay for the entire car up front?
So if the car depreciates by more over the term of the deal than the original estimate written into the deal, you are quids in as you just give the car back and have paid less that you would have lost if you had borrowed to buy it outright? (i.e. You have lost less than you would have in depreciation).
If it depreciates by less then it's not a disaster as you can either buy the car at below market value (the GMFV agreed at the start of the deal) or use the 'equity' towards your next deal?
Sounds like a way to constantly drive a new car you otherwise couldn't really afford every three years as long as you can keep up with the finance payments. But you are paying higher monthly payments for the privilege of doing that as well as the loan being essentially 'secured' against the car. Normally secured loans are cheaper.
Given how much depreciation stings (and you'd be paying interest on that depreciation too), not sure I'd want to do that. I bought mine new three years back and when I looked at depreciation on the 3 year mark it made me realise how significant a financial factor it really is, greater than fuel + insurance + tax + servicing combined in my case.
But it would explain why so many people seem to be able to 'afford' expensive new cars.
I keep seeing exmples where PCP is "king" because you have a GFMV higher than trade in so say a car costs 20k, GFMV of 10k, trade in would be 8k, are you 2k up? No, because in that time you have spent close to 5k in interest.Would it be fair to say that PCP is basically about borrowing to pay the anticipated depreciation on a car, rather than borrowing to pay for the entire car up front?
So if the car depreciates by more over the term of the deal than the original estimate written into the deal, you are quids in as you just give the car back and have paid less that you would have lost if you had borrowed to buy it outright? (i.e. You have lost less than you would have in depreciation).
If it depreciates by less then it's not a disaster as you can either buy the car at below market value (the GMFV agreed at the start of the deal) or use the 'equity' towards your next deal?
Sounds like a way to constantly drive a new car you otherwise couldn't really afford every three years as long as you can keep up with the finance payments. But you are paying higher monthly payments for the privilege of doing that as well as the loan being essentially 'secured' against the car. Normally secured loans are cheaper.
Given how much depreciation stings (and you'd be paying interest on that depreciation too), not sure I'd want to do that. I bought mine new three years back and when I looked at depreciation on the 3 year mark it made me realise how significant a financial factor it really is, greater than fuel + insurance + tax + servicing combined in my case.
But it would explain why so many people seem to be able to 'afford' expensive new cars.
405dogvan said:
wargriff said:
405dogvan said:
To answer the original point/follow this up - the main difference between a PCP (or any lease/HP) and a bank loan is that in the former they (the creditor) own the car and so they'll seize it the MOMENT you get into trouble, before you do anything like selling it or whatever - wheras in the latter you owe them MONEY - unsecured MONEY - and so they'll work with you to get as much of that back as possible.
There's little incentive for a leaser to let you skip a couple payments - their asset is still depreciating and they know they're deferring the inevitable - wheras a company who's loaned you cash without security has to bargain (end of the day - unsecured loans are just that, they have to work HARD to get their money back even in the current climate of courts allowing them WAY too much latitude IMO)
It's the flipside of the debit vs credit card when you're looking at protection against fraud. The reason credit cards are much better at helping customers with fraud is that the money stolen isn't their customer's, it's THEIRS - that applies in reverse to cars and debt.
Again tho - I'm not against PCPs, it's the total cost you need to look at, and ensuring you have an emergency fund. Don't be drawn-in on a £30K car which appears to be just a couple-of-hundred quid a month - that sounds CHEAP but there's a bit more too it...
They do not recover the vehicle the moment you miss a payment, they have to go through a process. The latter part of this process is to apply to a court for repossession. If you have paid over a third of the monies due under the agreement they have to follow this procedure. Less than this they can act a little quicker.There's little incentive for a leaser to let you skip a couple payments - their asset is still depreciating and they know they're deferring the inevitable - wheras a company who's loaned you cash without security has to bargain (end of the day - unsecured loans are just that, they have to work HARD to get their money back even in the current climate of courts allowing them WAY too much latitude IMO)
It's the flipside of the debit vs credit card when you're looking at protection against fraud. The reason credit cards are much better at helping customers with fraud is that the money stolen isn't their customer's, it's THEIRS - that applies in reverse to cars and debt.
Again tho - I'm not against PCPs, it's the total cost you need to look at, and ensuring you have an emergency fund. Don't be drawn-in on a £30K car which appears to be just a couple-of-hundred quid a month - that sounds CHEAP but there's a bit more too it...
Edited by 405dogvan on Thursday 6th June 16:20
I know of many people who have not kept up payments for more than 4/5 months and still have the car, as mentioned above i'm also aware of some who have the car 12 months later. This applies to PCP or HP, contract hire companies do act faster.
Obviously a lot depends on your circumstances and the vehicle in question - the younger/more expensive the car, the faster they're likely to act (an M5 - pretty quickly, a Corsa, they may come for it next decade)
You have more rights if you use dealer funding as it is a tripartite agreement. You also have termination rights, which help out if you are half way through the contract.
Maybe you should visit a garage, decent helpful one and discuss the contract before you dismiss it. As you will find you have all then benefits of ownership. By this I mean you are free to sell any time and can retain the sale proceeds, minus any settlement.
Happy to talk you through the contracts if it helps. They have a place in the vehicle buying market and work well. People should use what works for them.
Edited by wargriff on Friday 7th June 20:21
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