PCP Experiences Good AND Bad please
Discussion
KTF said:
Exactly, I read somewhere that most high end stuff is bought on finance for this reason as the cash in the bank can be 'invested' to offset the cost of the finance payment each month rather than having it all tied up in a depreciating asset.
I wouldn't go as far as to say most, but plenty is. At the same time there are plenty of folks who would rather just drop the money and have done with it.Bought first car a Clio 1.2 on PCP, deposit was affordable, monthly payments were affordable. Free first years insurance that was going to cost me around £3k made any interest etc. irrelevant and was the right decision at the time.
Excellent experience, I also looked into giving it back after 2 of the 3 year term as I'd bought an S3 and after making 50% of the payments giving it back was no hassle as long as it was in fair condition, it ended up staying in the family as my mum wanted it, finance company were happy to change who was paying the remaining payments.
Excellent experience, I also looked into giving it back after 2 of the 3 year term as I'd bought an S3 and after making 50% of the payments giving it back was no hassle as long as it was in fair condition, it ended up staying in the family as my mum wanted it, finance company were happy to change who was paying the remaining payments.
nonuts said:
Bought first car a Clio 1.2 on PCP, deposit was affordable, monthly payments were affordable. Free first years insurance that was going to cost me around £3k made any interest etc. irrelevant and was the right decision at the time.
Excellent experience, I also looked into giving it back after 2 of the 3 year term as I'd bought an S3 and after making 50% of the payments giving it back was no hassle as long as it was in fair condition, it ended up staying in the family as my mum wanted it, finance company were happy to change who was paying the remaining payments.
Good experience. Thanks. Excellent experience, I also looked into giving it back after 2 of the 3 year term as I'd bought an S3 and after making 50% of the payments giving it back was no hassle as long as it was in fair condition, it ended up staying in the family as my mum wanted it, finance company were happy to change who was paying the remaining payments.
405dogvan said:
The situation with someone losing their job WOULD have been different if they'd taken a conventional, unsecured loan for the value of the car (less deposit).
With a PCP you don't own the car and so have no choice as to what happens if you default - usually the creditor will take the car in return for a low non-negociable sum which is written-off your debt, leaving you with a balance to pay back (often inflated with penalties) - and the appropriate 'failed to pay' marks on your credit history of course.
If you'd taken conventional, unsecured finance on the car, you could have sold it privately when things got rough, most likely for quite a bit more than the PCP company would be offering, and then used the money you recouped to
a - buy a cheap car
b - maintain the payments on the finance until you get back on your feet.
That route leaves no credit record damage and no fines or penalities either. It would, of course, be most costly per month because you're not deferring a chunk of the car's value - and you're OWNING it (after a fashion).
I'm not 100% against PCPs - but if you're taking a PCP you must consider that it's not like a conventional, unsecured loan - you have less latitude and less control and if things go south it can get nasty quite quickly. Those are the downsides to the upside of it putting you into a nice car for a smaller sum.
Whether to go for a PCP or a conventional purchase is another case of 'total cost of ownership' - as with ANY car purchase - only with the added rider than you must consider the 'if it goes south' issue and have a fund put to one side to ride those things out because you have less time to bale before you drown with a PCP.
I may be missing the point but how does me buying my car with an unsecured bank loan leave me in a better place if I cant afford to pay the payment ?With a PCP you don't own the car and so have no choice as to what happens if you default - usually the creditor will take the car in return for a low non-negociable sum which is written-off your debt, leaving you with a balance to pay back (often inflated with penalties) - and the appropriate 'failed to pay' marks on your credit history of course.
If you'd taken conventional, unsecured finance on the car, you could have sold it privately when things got rough, most likely for quite a bit more than the PCP company would be offering, and then used the money you recouped to
a - buy a cheap car
b - maintain the payments on the finance until you get back on your feet.
That route leaves no credit record damage and no fines or penalities either. It would, of course, be most costly per month because you're not deferring a chunk of the car's value - and you're OWNING it (after a fashion).
I'm not 100% against PCPs - but if you're taking a PCP you must consider that it's not like a conventional, unsecured loan - you have less latitude and less control and if things go south it can get nasty quite quickly. Those are the downsides to the upside of it putting you into a nice car for a smaller sum.
Whether to go for a PCP or a conventional purchase is another case of 'total cost of ownership' - as with ANY car purchase - only with the added rider than you must consider the 'if it goes south' issue and have a fund put to one side to ride those things out because you have less time to bale before you drown with a PCP.
Edited by 405dogvan on Wednesday 5th June 19:26
If I dont pay for the PCP/HP the finance company come after the car, im then liable for any outstanding money when its sold. Or I can sell the car myself for market value and be liable for the remainder of the loan.
If I have used a bank loan you are likely to have a similar figure outstanding. The car still has the same market value, its value is not dependant on how you buy it. So your not in any better a position. You can still sell car and continue paying for a car you dont have. The biggest difference would be if you default on the personal loan that is not secured on anything. What do you think the finance company come after to get the money back ? Your assets maybe ?
A PCP suits some purchases, HP some. Cash is not always the best option. Not everyone wants to 'invest' cash into something going down in value every month.
Buy what you can afford, either monthly or outright. If you find yourself without a job it will always be an issue.
Cheburator mk2 said:
LA167 said:
PCP is epic!! It gives you the chance to have a car you wouldn't normally be able to afford and protects you against depreciation. We're all petrolheads here and no doubt own/want to own fast cars outright, but for mainstream/normal/volume cars (whatever you want to call it) why would anyone want to use their own money to pay for it? It is a depreciating asset afterall! 2 scenarios:
Mr X changes his car every 3 years and is a cash buyer and wants a brand new A6 Avant 2.0 TDI S-Line. He gets about a grand off the car from his local dealer and parts with £33,500 of his hard earned cash. Over the next 3 years Mr X is saving for his next car in 3 years time, putting away a healthy amount each month. 3 years later he comes to trade in and gets £17,000 in part exchange. He's lost £15,500 of his own money.
Mr Y also changes his car every 3 years but always does a PCP, he also wants a brand new A6 Avant 2.0 TDI S-Line. He gets the same approximate grand off the list price of the car from his local dealer but also gets to take advantage of the £2,250 that Audi Finance give towards his deposit. He then puts £6,000 of his own money (or equity in his PX) into the deal and pays £399 a month over 3 years. His Guaranteed Minimum Future Value is £14,000 giving him £3,000 of equity when he trades in. With his payments and his initial deposit he's paid approximately £20,000 over the 3 years, hasn't had to save any money for his next car AND has a nice bit of equity as deposit towards his next car!
Why wouldn't you do a PCP, it's the b
ks!
there are a million reasons... Mr X changes his car every 3 years and is a cash buyer and wants a brand new A6 Avant 2.0 TDI S-Line. He gets about a grand off the car from his local dealer and parts with £33,500 of his hard earned cash. Over the next 3 years Mr X is saving for his next car in 3 years time, putting away a healthy amount each month. 3 years later he comes to trade in and gets £17,000 in part exchange. He's lost £15,500 of his own money.
Mr Y also changes his car every 3 years but always does a PCP, he also wants a brand new A6 Avant 2.0 TDI S-Line. He gets the same approximate grand off the list price of the car from his local dealer but also gets to take advantage of the £2,250 that Audi Finance give towards his deposit. He then puts £6,000 of his own money (or equity in his PX) into the deal and pays £399 a month over 3 years. His Guaranteed Minimum Future Value is £14,000 giving him £3,000 of equity when he trades in. With his payments and his initial deposit he's paid approximately £20,000 over the 3 years, hasn't had to save any money for his next car AND has a nice bit of equity as deposit towards his next car!
Why wouldn't you do a PCP, it's the b
ks!Andy665 said:
Example
I was talking to a bloke in a dealership a couple of weeks ago - he was in the process of handing back a 3 year old car, funded using PCP. He thought it was perfect for him - he paid £86k for the car and had a GMFV of £39k - the car was actually valued at £29k.
If he had bought on HP or paid cash he'd have lost £57k in depreciation, having a GMFV meant that he lost £47k, still a silly amount but £10k less than on HP / cash
He was clearly a fairly wealthy bloke and was not only handing the car back but going to buy another - again on PCP
For that customer PCP worked very well
It seems that, interms of financing the purchase, it boils down to this;I was talking to a bloke in a dealership a couple of weeks ago - he was in the process of handing back a 3 year old car, funded using PCP. He thought it was perfect for him - he paid £86k for the car and had a GMFV of £39k - the car was actually valued at £29k.
If he had bought on HP or paid cash he'd have lost £57k in depreciation, having a GMFV meant that he lost £47k, still a silly amount but £10k less than on HP / cash
He was clearly a fairly wealthy bloke and was not only handing the car back but going to buy another - again on PCP
For that customer PCP worked very well
If GMFV > actual Market value then customer "wins"
If GMFV < actual Market Value then Dealership "wins"
Check the APR.
Check the equivalent APR on a bank loan.
I looked at PCP on a BMW.
The monthly payments were £50 less than the bank loan.
But, at then end of three years I would have paid off the bank loan, but would have still owed £5k+ on the PCP - with a guaranteed buy back of about £5k.
Much more than the £1800 extra I would have paid on the loan.
(Maths may be wrong - it's just an example).
My experience was that the salesman was just trying to show how little I could pay per month to 'get into that car'.
I found that PCP was no better than leasing if you want to change in 3 years, but terrible if you wanted to keep the car.
Check the equivalent APR on a bank loan.
I looked at PCP on a BMW.
The monthly payments were £50 less than the bank loan.
But, at then end of three years I would have paid off the bank loan, but would have still owed £5k+ on the PCP - with a guaranteed buy back of about £5k.
Much more than the £1800 extra I would have paid on the loan.
(Maths may be wrong - it's just an example).
My experience was that the salesman was just trying to show how little I could pay per month to 'get into that car'.
I found that PCP was no better than leasing if you want to change in 3 years, but terrible if you wanted to keep the car.
Countdown said:
It seems that, interms of financing the purchase, it boils down to this;
If GMFV > actual Market value then customer "wins"
If GMFV < actual Market Value then Dealership "wins"
But, in theory the car should be worth more than the GMFV and the customer should then be able to trade the car in and put the equity towards another car. So in both examples, the customer wins.If GMFV > actual Market value then customer "wins"
If GMFV < actual Market Value then Dealership "wins"
GMFV > AMV then the customer can walk away knowing that they've not lost the difference between the GMFV and the AMV
GMFV < AMV then the customer has money 'in the pot' to put towards another. The dealer hopes that they buy the same brand again but nothing stopping them going elsewhere and taking that equity with them.
silverous said:
I spoke to a BMW dealer about an X5 recently and he said he could only recall selling one to a "cash" buyer and he thought they probably had finance in place on the cash. I get the sense that a high proportion of high value car purchases are finance these days, rightly or wrongly.
I think every case is different, its a great way to run a car if you are sensible about it but I think here are a lot of people that bite off more than they can really chew. I think even people who would have in the past bought a car cash now do it, its gone the same way as a mobile phone, not many people have £600 spare to buy that Iphone 5 but £40 a month is more palatable, even if it does end up costing you £800i have no need to at the moment but if I did, I would consider it but with the proviso that I could well afford the payments for the duration of the agreement and had a couple of months in hand, just in case.
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.
J4CKO said:
Perhaps it makes sense to not get the flashiest car you can possibly "afford", I.e. pay for assuming nothing else comes up, perhaps have a couple of grand to tide you over, does make me wonder how many of the expensive cars are run one payment away from being repossessed.
lots probablyFrom what I read in these threads about the different financing options... to me it all boils down to: You are funding the depreciation.
If you buy out right, cash and sell in 3 years time. You lose money = the depreciation
If you do a PCP deal or something, you punt up a small deposit and then pay a monthly sum for the (say) 3 year contract that funds the depreciation.
the only difference is, in the former you've spent a lot of money and have the potential make some back on sale (say 40%) and in the latter you've spent a little money up front and little bits spread out over time and have the potential to spend a lot by buying the car outright at the end.
In both cases you have the car at the end. In both cases you've spent a lot of money. In essence I cant see the difference in the end result. One is a direct route, one goes round the houses, both end up with an empty wallet.
J4CKO said:
I think every case is different, its a great way to run a car if you are sensible about it but I think here are a lot of people that bite off more than they can really chew. I think even people who would have in the past bought a car cash now do it, its gone the same way as a mobile phone, not many people have £600 spare to buy that Iphone 5 but £40 a month is more palatable, even if it does end up costing you £800
i have no need to at the moment but if I did, I would consider it but with the proviso that I could well afford the payments for the duration of the agreement and had a couple of months in hand, just in case.
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.
A lot of people forget tyres, tax, insurance, fuel, servicing (I'd get this thrown in if possible) These are the deal breakers. i have no need to at the moment but if I did, I would consider it but with the proviso that I could well afford the payments for the duration of the agreement and had a couple of months in hand, just in case.
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.
Andy665 said:
If he had bought on HP or paid cash he'd have lost £57k in depreciation, having a GMFV meant that he lost £47k, still a silly amount but £10k less than on HP / cash
But sometimes cash allows a discount similar to the GMFV "gain". By using a broker for instance.The big problem for consumers is the reference/comparison point. People usually compare the PCP deal to a cash deal using list or using max dealer discounts which are often much lower than discounts available through car brokers. People also compare the GMFV to a CAP price which doesn't always reflect the market's reality (does it ever ?).
And sometimes using cash that would otherwise only generates 2% interest before tax is a better idea than paying a higher interest rate in the finance deal, whether PCP or else.
The other risk obviously is that you end up mentally trapped into PCP. It's normal human inertia. You end up doing your maths with the pre-conceived idea that for simplicity's sake you're gonna stick to your current arrangement and you start being sloppy and complacent with your research/sums, if any.
For those with job worries,financial difficulties or those that are generally st with money,it makes no sense.
For those that have the money to buy the car, but choose to try and make that money work harder elsewhere it makes sense.
For those sensible and disciplined on monthly payments it might make sense.
For those that get off on making people think they are doing much better than they really are,it makes perfect sense to them, but it doesn't make sense to anyone else.
t with money,it makes no sense. For those that have the money to buy the car, but choose to try and make that money work harder elsewhere it makes sense.
For those sensible and disciplined on monthly payments it might make sense.
For those that get off on making people think they are doing much better than they really are,it makes perfect sense to them, but it doesn't make sense to anyone else.
Otispunkmeyer said:
J4CKO said:
Perhaps it makes sense to not get the flashiest car you can possibly "afford", I.e. pay for assuming nothing else comes up, perhaps have a couple of grand to tide you over, does make me wonder how many of the expensive cars are run one payment away from being repossessed.
lots probablyFrom what I read in these threads about the different financing options... to me it all boils down to: You are funding the depreciation.
If you buy out right, cash and sell in 3 years time. You lose money = the depreciation
If you do a PCP deal or something, you punt up a small deposit and then pay a monthly sum for the (say) 3 year contract that funds the depreciation.
the only difference is, in the former you've spent a lot of money and have the potential make some back on sale (say 40%) and in the latter you've spent a little money up front and little bits spread out over time and have the potential to spend a lot by buying the car outright at the end.
In both cases you have the car at the end. In both cases you've spent a lot of money. In essence I cant see the difference in the end result. One is a direct route, one goes round the houses, both end up with an empty wallet.
If I spend that 15 grand on a rather nice TVR, I still have an asset* at the end of the three years, probably worth 15 grand.
Ok, extreme example and A5 owners dont generally choose between one and a TVR but in my situation, spending 15 grand with zilch to show for it after three years would make me cry, I cant mentally box that money off, unless the company paid and I didnt have a choice, as it is they give me £500 a month to provide a car.
- or some parts, rusty tubes and a TVR shaped fibreglass jigsaw.
MagicalTrevor said:
But, in theory the car should be worth more than the GMFV and the customer should then be able to trade the car in and put the equity towards another car. So in both examples, the customer wins.
GMFV > AMV then the customer can walk away knowing that they've not lost the difference between the GMFV and the AMV
GMFV < AMV then the customer has money 'in the pot' to put towards another. The dealer hopes that they buy the same brand again but nothing stopping them going elsewhere and taking that equity with them.
I stand to be corrected but (AFAIK) GMFV > AMV then the customer can walk away knowing that they've not lost the difference between the GMFV and the AMV
GMFV < AMV then the customer has money 'in the pot' to put towards another. The dealer hopes that they buy the same brand again but nothing stopping them going elsewhere and taking that equity with them.
The GMFV is the amount the Customer can pay to buy the car outright at the end of the PCP period.
The dealership does not give the Customer any cash if AMV > GMFV.
The only way the customer can benefit from any "equity" is to pay the GMFV and then hopefully sell the car for the AMV.
wargriff said:
I may be missing the point but how does me buying my car with an unsecured bank loan leave me in a better place if I cant afford to pay the payment ?
If you lose your job, the bank will generally work with you on your payments as it's not in there interest to bankrupt you, so they might give you a few months deferral to allow you to find another job, they might drop the loan to interest only, whatever they do, they will try and help you.A finance company would be straight at your door to take the car back and slap you with a bill of the amount remaining and that if you don't pay in a certain time frame, they will possibly be sending round the baliffs. I wouldn't touch a finance company with a bargepole!
As many others have said, it all depends. It works for me, but I live in Germany where other possibilities are available. In my case: I'm self-employed, but my wife is a civil servant, with a very good salary, and she signs the agreement. So no worries about job loss.
I have a good friend who sells cars for a VW main dealer. When I want a car, he looks in the VW pool of cars that are sold after one year after the VW employee bought it. The employees at VW get silly discounts on a new car. After a year, they punt it on (as long as it has less than 12500Km on the clock) as a (Jahreswagen", German for nearly new used, with full VW guarantee.
I spec a car, and then he looks in the pool for the nearest match. Or he finds something interesting, and asks me if I'd concidered one of those. If I want the car, he buys it from VW's pool (for silly money, even though the first owner makes a good profit)
My new car cost €33760 list. I'd be surprised if the VW worker paid more than €14000 for it.
So, my mate sold it to me (for his dealer, not privately) for €21000: one year old, only 12346Km, and I have two years warranty. The last car I had went in part-ex to clear the VW bank, and the balance as deposit for the new one. Financed at 0.9% (special deal, as VW's cars sales are well down this year, they're practically giving credit away through their house bank.
So, I have €300 a month to pay, plus fuel, tyres etc etc. Which you have with any car anyway. But no big bills for things that could go wrong, as I extend the guaranree after the third year (only costs €130 a year, a steal at that price) And a nice new car that smells good, and hasn't been thrashed to death (until I buy it
) The VW employees drive like Miss Daisy, they're terrified of scratching it etc. I think if they could carry it, some of them would.
I'm limited to 12500 a year, more, and I have to pay per Km, if I do less, I get money back. I drive about 10000Km a year, so I'm good to go. After four years I have a guaranteed buy-back from €12700, after clearing the bank that's about € 2000 rest to finance the new one.What could possibly go wrong?
Oh, all right...If my wife dies on me, I'm fked 
Edited once due to fat fingers..
I have a good friend who sells cars for a VW main dealer. When I want a car, he looks in the VW pool of cars that are sold after one year after the VW employee bought it. The employees at VW get silly discounts on a new car. After a year, they punt it on (as long as it has less than 12500Km on the clock) as a (Jahreswagen", German for nearly new used, with full VW guarantee.
I spec a car, and then he looks in the pool for the nearest match. Or he finds something interesting, and asks me if I'd concidered one of those. If I want the car, he buys it from VW's pool (for silly money, even though the first owner makes a good profit)
My new car cost €33760 list. I'd be surprised if the VW worker paid more than €14000 for it.
So, my mate sold it to me (for his dealer, not privately) for €21000: one year old, only 12346Km, and I have two years warranty. The last car I had went in part-ex to clear the VW bank, and the balance as deposit for the new one. Financed at 0.9% (special deal, as VW's cars sales are well down this year, they're practically giving credit away through their house bank.
So, I have €300 a month to pay, plus fuel, tyres etc etc. Which you have with any car anyway. But no big bills for things that could go wrong, as I extend the guaranree after the third year (only costs €130 a year, a steal at that price) And a nice new car that smells good, and hasn't been thrashed to death (until I buy it
) The VW employees drive like Miss Daisy, they're terrified of scratching it etc. I think if they could carry it, some of them would. I'm limited to 12500 a year, more, and I have to pay per Km, if I do less, I get money back. I drive about 10000Km a year, so I'm good to go. After four years I have a guaranteed buy-back from €12700, after clearing the bank that's about € 2000 rest to finance the new one.What could possibly go wrong?
Oh, all right...If my wife dies on me, I'm f
ked Edited once due to fat fingers..
Edited by GuitarTech on Thursday 6th June 13:06
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