PCP Experiences Good AND Bad please
Discussion
Steameh said:
Dumb question I am sure, but GMFV - Is that the amount you have to pay to buy the car off the dealer/finance company? As in what is left outstanding at the end of your pcp term?
Or are they separate amounts? How does the GMFV help for future purchases?
The guaranteed future value is effectively what's making your payments lower on PCP vs HP. The dealer is estimating how much it'll be worth after the 2 or 3 years. If they get it wrong and it's worth a lot less, it makes sense to hand the car back. If the car is worth more than the GMFV then in some cases you can use the difference as a deposit on the next PCP deal. If they get it right, there should be almost no difference so it does't matter.Or are they separate amounts? How does the GMFV help for future purchases?
silverous said:
Andy665 said:
The dealership has ZERO financial interest / involvement in the agreement
Although I presume they set the "value" ?If the car is in negative equity come the end of the agreement,the finance company take the hit, not the dealer.
Edited by HTP99 on Thursday 6th June 14:40
HTP99 said:
silverous said:
Andy665 said:
The dealership has ZERO financial interest / involvement in the agreement
Although I presume they set the "value" ?If the car is in negative equity come the end of the agreement,the finance company take the hit, not the dealer.
Edited by HTP99 on Thursday 6th June 14:40
Marc p said:
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!
Edited by wargriff on Thursday 6th June 17:01
wargriff said:
Marc p said:
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!
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
405dogvan said:
Raising a separate question really - have people found that having cars on PCPs increases the cost of insurance at all?
It's just that you don't own the car and all that so does it usually add anything to premiums??
You're the registered keeper, so I'm not sure it makes any real difference, certainly didn't for me but that was a good while ago. The key thing is though you need GAP insurance in case it's written off and the insurers don't pay out the full value of the remaining finance.It's just that you don't own the car and all that so does it usually add anything to premiums??
KTF said:
CaptainSlow said:
Invested in what? Which investments will give a net yield of the ~5% on finance deal?
If I knew that then I wouldnt do the 9-5 every day instead 
Even if you dont get a return as high as 5%, any return can be used to offset the monthly payment.
Advantages of using finance in this circumstance would including retaining an emergency fund, having a source of relatively cheap finance if you lost your job etc and no losing your cumulative ISA allowances or interest breakage penalties.
The bit about tying up your own cash in a depreciating assets is irrelevant as you're commiting to to pay the depreciation either way,
If I were looking at a PCP I'd stay away from the dealer/manufacturer finance and look at a broker dealing with other funders as you'll be more likely to get a more competitive deal.
HTP99 said:
Countdown said:
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.
In reference to your two points above; yes they can and no not totally correct as your first point is wrong. The only way the customer can benefit from any "equity" is to pay the GMFV and then hopefully sell the car for the AMV.
Example:
Customer comes in with a Fiesta that has an MFV of £4000, they want a Clio, said Fiesta is worth £4500, they get £500 to either put down as deposit on their new Clio or if they decide they want to go for a nil deposit finance deal, we give her £500 cash.
Your second point is correct in that they can pay of the MFV of £4000 and sell the car privately for £5000, however my first point proves that selling it privately isn't the only way to do this.
This is assuming "AMV > GMFV" means; actual market value is greater than guaranteed future value.
Tomaytos Tomahtos
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.
CaptainSlow said:
KTF said:
CaptainSlow said:
Invested in what? Which investments will give a net yield of the ~5% on finance deal?
If I knew that then I wouldnt do the 9-5 every day instead Even if you dont get a return as high as 5%, any return can be used to offset the monthly payment.
Advantages of using finance in this circumstance would including retaining an emergency fund, having a source of relatively cheap finance if you lost your job etc and no losing your cumulative ISA allowances or interest breakage penalties.
The bit about tying up your own cash in a depreciating assets is irrelevant as you're commiting to to pay the depreciation either way,
If I were looking at a PCP I'd stay away from the dealer/manufacturer finance and look at a broker dealing with other funders as you'll be more likely to get a more competitive deal.
Andy665 said:
Absolutely not the case if the finance house is stupid enough to set a silly high GMFV as it guarantees that the finance house will be taking some of the depreciation that you would incur if you used cash
But that's just a sweetener so you use their juicy finance rate. There is a saying about a free lunch.OP, something I forgot to mention when I typed my reply yesterday was that you might be able to get a better-spec car for no extra outlay on a PCP deal, because of the higher residual values of choosing the right options.
For example, if you buy a basic model for -say- £15k that's worth £7k in three years, you're funding depreciation of £8k.
If you buy a high-spec version of the same model for -say- £18k that ends up worth £9k because of its more desirable engine or whatever, you're still only funding £9k of depreciation, and your monthly payments won't be massively different. When I bought my Audi I was able to choose the LeMans special edition S-Line spec for virtually the same cost as the basic SE model, and I've enjoyed three years of imagine as a result.
Might be worth asking the dealer to run some scenarios through their finance calculator if you're not yet put off the idea of PCP.
For example, if you buy a basic model for -say- £15k that's worth £7k in three years, you're funding depreciation of £8k.
If you buy a high-spec version of the same model for -say- £18k that ends up worth £9k because of its more desirable engine or whatever, you're still only funding £9k of depreciation, and your monthly payments won't be massively different. When I bought my Audi I was able to choose the LeMans special edition S-Line spec for virtually the same cost as the basic SE model, and I've enjoyed three years of imagine as a result.
Might be worth asking the dealer to run some scenarios through their finance calculator if you're not yet put off the idea of PCP.Jimmy No Hands said:
Has anyone had any experiences with PCP on 2-3 year old cars? Presumably it's just the same as a brand new car, although different values. Is there an age limit on PCP? (Sorry don't know much about it!)
PCP on used cars is available but doesn't usually attract the best interest rates or incentives, which are generally subsidised by the manufacturer to shift new models.
threadlock said:
OP, something I forgot to mention when I typed my reply yesterday was that you might be able to get a better-spec car for no extra outlay on a PCP deal, because of the higher residual values of choosing the right options.
For example, if you buy a basic model for -say- £15k that's worth £7k in three years, you're funding depreciation of £8k.
If you buy a high-spec version of the same model for -say- £18k that ends up worth £9k because of its more desirable engine or whatever, you're still only funding £9k of depreciation, and your monthly payments won't be massively different. When I bought my Audi I was able to choose the LeMans special edition S-Line spec for virtually the same cost as the basic SE model, and I've enjoyed three years of imagine as a result. Might be worth asking the dealer to run some scenarios through their finance calculator if you're not yet put off the idea of PCP.
For example, if you buy a basic model for -say- £15k that's worth £7k in three years, you're funding depreciation of £8k.
If you buy a high-spec version of the same model for -say- £18k that ends up worth £9k because of its more desirable engine or whatever, you're still only funding £9k of depreciation, and your monthly payments won't be massively different. When I bought my Audi I was able to choose the LeMans special edition S-Line spec for virtually the same cost as the basic SE model, and I've enjoyed three years of imagine as a result.
Might be worth asking the dealer to run some scenarios through their finance calculator if you're not yet put off the idea of PCP.threadlock said:
OP, something I forgot to mention when I typed my reply yesterday was that you might be able to get a better-spec car for no extra outlay on a PCP deal, because of the higher residual values of choosing the right options.
For example, if you buy a basic model for -say- £15k that's worth £7k in three years, you're funding depreciation of £8k.
If you buy a high-spec version of the same model for -say- £18k that ends up worth £9k because of its more desirable engine or whatever, you're still only funding £9k of depreciation, and your monthly payments won't be massively different. When I bought my Audi I was able to choose the LeMans special edition S-Line spec for virtually the same cost as the basic SE model, and I've enjoyed three years of imagine as a result. Might be worth asking the dealer to run some scenarios through their finance calculator if you're not yet put off the idea of PCP.
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. For example, if you buy a basic model for -say- £15k that's worth £7k in three years, you're funding depreciation of £8k.
If you buy a high-spec version of the same model for -say- £18k that ends up worth £9k because of its more desirable engine or whatever, you're still only funding £9k of depreciation, and your monthly payments won't be massively different. When I bought my Audi I was able to choose the LeMans special edition S-Line spec for virtually the same cost as the basic SE model, and I've enjoyed three years of imagine as a result.
Might be worth asking the dealer to run some scenarios through their finance calculator if you're not yet put off the idea of PCP.Thanks for your input.
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)
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
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