Thinking of buying a car on PCP (a few questions)
Discussion
Hi all,
Am looking into getting a bigger more practical car with good fuel consumption soon.
This car will be used by myself and my partner.
I currently own a car worth lets say £6k, originally was going to buy a seat leon FR (old shape) but i'm sick of used cars and not having a car i like. I fancy a new car which comes with warranty, better safety ratings, toys etc.
I was looking at a Nissan Qashqai 4WD with all the toys which looked great but having never leased/PCP apart from my two work vans (on HP) i have no idea whats the best option.
I have read quite a bit about PCP and its seem a viable options for me so just a few questions.
If i sell the car for £6k, would i be best to use that as a deposit or just keep it in the bank to pay some of the payments off?
How do they do a GFV figure if it is a new car just launched etc?
Are there any things to watch out for when going to the dealers?
Also anybody have/had a Qashqai??
Thanks
Am looking into getting a bigger more practical car with good fuel consumption soon.
This car will be used by myself and my partner.
I currently own a car worth lets say £6k, originally was going to buy a seat leon FR (old shape) but i'm sick of used cars and not having a car i like. I fancy a new car which comes with warranty, better safety ratings, toys etc.
I was looking at a Nissan Qashqai 4WD with all the toys which looked great but having never leased/PCP apart from my two work vans (on HP) i have no idea whats the best option.
I have read quite a bit about PCP and its seem a viable options for me so just a few questions.
If i sell the car for £6k, would i be best to use that as a deposit or just keep it in the bank to pay some of the payments off?
How do they do a GFV figure if it is a new car just launched etc?
Are there any things to watch out for when going to the dealers?
Also anybody have/had a Qashqai??
Thanks
Reasonable question. I'm just wondering how many people are about to tell you your stupid for considering PCP.When buying a car on PCP with a GMFV (future value) the key is a low APR i.e. 6% or less as the interest is charged on the amount owing, as the amount owing is larger due to the amount at the end more interest is paid.
PCP and a high interest rate are defintitely something to avoid but a low interest rate enables you to kep your money for something useful whilst paying very little extra in interest (cheap borrowing).
PCP and a high interest rate are defintitely something to avoid but a low interest rate enables you to kep your money for something useful whilst paying very little extra in interest (cheap borrowing).
Better to use the £6k as a deposit to reduce monthly payments as well as amount of overall interest paid. As said above you are paying interest on all the outstanding finance including the final balloon payment.
GFV is normally just a percentage of the purchase price, typically 40$ after 3 years.
Big downside of PCP is the cost to get out if you get bored easily or don't like the car.
GFV is normally just a percentage of the purchase price, typically 40$ after 3 years.
Big downside of PCP is the cost to get out if you get bored easily or don't like the car.
I bought my last new car on PCP. Had a bit of money saved up, but meant I couod just drop £1200 as a deposit. APR set at 4% so was cheap to borrow, after 2 years gave it back with just abit left to balance the books. The reason I chose this route was
a) It left me with some rainy day money
b) It got me into a car I wanted without wiping my savings out
c) I knew that when I got bored of it the outstanding v value would have levelled out so could easily get rid instead of waiting forever for a buyer
a) It left me with some rainy day money
b) It got me into a car I wanted without wiping my savings out
c) I knew that when I got bored of it the outstanding v value would have levelled out so could easily get rid instead of waiting forever for a buyer
I can only speak of my personal experience.
I bought a Golf on PCP in 2007. It was a great car, the payments worked for me and it didn't miss a beat. When it came to the end of the term, the GFV was significantly lower than the car's value, so I 'bought' it and ran it for another 18 months before selling it privately, leaving me with significant equity.
My only tips are to keep your initial deposit as low as possible and keep an eye on the GFV, which you want to be as low as possible.
If your deposit/GFV is high, you will get lower payments but will 'lose' more folding cash. Make sure you balance all the figures though as this could be offset in other ways.
There's a whole army of people on here who think that any form of finance is the devil's work, that I've just advised you to 'rent' a car, you're wasting your money and you're part of this country's problem of a nice car on the drive but no money to put food in the fridge and that you could better spend your money on a 10 year old E39 V8 5 series with an MX5 for the weekends.
Finance isn't for everybody - Paying cash outright will always be 'cheaper' in the long run and some people can't get their heads past that. However, the bottom line is that it does work for some people.
I bought a Golf on PCP in 2007. It was a great car, the payments worked for me and it didn't miss a beat. When it came to the end of the term, the GFV was significantly lower than the car's value, so I 'bought' it and ran it for another 18 months before selling it privately, leaving me with significant equity.
My only tips are to keep your initial deposit as low as possible and keep an eye on the GFV, which you want to be as low as possible.
If your deposit/GFV is high, you will get lower payments but will 'lose' more folding cash. Make sure you balance all the figures though as this could be offset in other ways.
There's a whole army of people on here who think that any form of finance is the devil's work, that I've just advised you to 'rent' a car, you're wasting your money and you're part of this country's problem of a nice car on the drive but no money to put food in the fridge and that you could better spend your money on a 10 year old E39 V8 5 series with an MX5 for the weekends.
Finance isn't for everybody - Paying cash outright will always be 'cheaper' in the long run and some people can't get their heads past that. However, the bottom line is that it does work for some people.
rich89 said:
Hi all,
I have read quite a bit about PCP and its seem a viable options for me so just a few questions.
1. If i sell the car for £6k, would i be best to use that as a deposit or just keep it in the bank to pay some of the payments off?
2. How do they do a GFV figure if it is a new car just launched etc?
3. Are there any things to watch out for when going to the dealers?
I can offer some guidance re: your questions:I have read quite a bit about PCP and its seem a viable options for me so just a few questions.
1. If i sell the car for £6k, would i be best to use that as a deposit or just keep it in the bank to pay some of the payments off?
2. How do they do a GFV figure if it is a new car just launched etc?
3. Are there any things to watch out for when going to the dealers?
1. Depends on your monthly budget. If you can get the car you want within your monthly budget and only use 2k out of your 6k then keep the 4k back. Many manufacturers GMFV are now so unrealistically high that there is virtually no chance of equity at the end, you absolutely should take this into account as you may be in a position whereby its best to hand the car back at the end of the term - whilst this can save you from a loss it also means that you need to either
a. Budget for far higher monthly payments next time
b. Stick cash into a deposit to keep yor monthly payments sensible
A higher than realistic GMFV is not necessarily a bad thing as long as you know the potential negatives
2. Most manufacturers use CAP predicted residuals as a guide to set their residuals. Also they will look at the residuals of the outgoing model as a guide
3. Remember that you can still negotiate a discount on the car if you're funding with a PCP. most manufacturers are offering aggressive (low) rates on PCP to shift metal so rate negotiation will probably prove fruitless - unless dealer is trying it on and not making you aware of any low rate deals
PCP can be a great way of getting in to a new car but you need to weigh up whats best for you
If you have a car worth 6k, I would be considering HP rather than PCP.
With a PCP on a new car, the GRFV is based on figures from an outside body. I think it is the SMMT (Society of Motor Manufacturers and Traders). They estimate a figure, the finance company knock a bit off and that is the deffered payment.
It is always worth paying a bigger deposit as it reduces the ammount of interest you pay along with the monthly payments. If you want the safety net, put 4500 down and keep some back.
The Qashqai isn't a bad car. Havn't driven the facelift car but the old one was ok. Not inspiring but a good useable family car. Residuals are on the high side for a family hack and build quality is ok. The big diesel is the engine of choice, 2.0 IIRC. The CVT gearbox is horrible, smooth but indecisive.
+2 has rear seats for midgets only.
With a PCP on a new car, the GRFV is based on figures from an outside body. I think it is the SMMT (Society of Motor Manufacturers and Traders). They estimate a figure, the finance company knock a bit off and that is the deffered payment.
It is always worth paying a bigger deposit as it reduces the ammount of interest you pay along with the monthly payments. If you want the safety net, put 4500 down and keep some back.
The Qashqai isn't a bad car. Havn't driven the facelift car but the old one was ok. Not inspiring but a good useable family car. Residuals are on the high side for a family hack and build quality is ok. The big diesel is the engine of choice, 2.0 IIRC. The CVT gearbox is horrible, smooth but indecisive.
+2 has rear seats for midgets only.
First of all the Qashqai. I've had a good look at these because my father-in-law is after one.
Very impressed, really. They rather render the family hatchback obsolete. I'd get the 1.6 diesel and in a top trim level. Well worthwhile.
As to PCP, Nissan are a mainstream brand and you can expect moderate residuals on the Qashqai so the GMFV will be reasonable, good for the sector. The real make or break deal here is the APR (as suggested previously). You'll be taking out a lot of finance on a depreciating asset and you'll be paying interest too. I'd check to see if you can get a 0% PCP on this car. If not, I'd look at other cars that offer a similar package.
It's notable that "in-demand" cars are offered at higher % than more run of the mill ones: I was interested to see that Land Rover have a floor of 9.9% APR on the Evoque at the moment, I assume because this is what they can get away with. The flipside of this is that the GMFV is likely to be a long way off the real 3 year value.
With the Qashqai, it's more likely that you'll be closer to the GMFV at the end of the deal, so you have to get a good deal on the APR.
(incidentally the 9.9% on the Evoque was a deal breaker).
Very impressed, really. They rather render the family hatchback obsolete. I'd get the 1.6 diesel and in a top trim level. Well worthwhile.
As to PCP, Nissan are a mainstream brand and you can expect moderate residuals on the Qashqai so the GMFV will be reasonable, good for the sector. The real make or break deal here is the APR (as suggested previously). You'll be taking out a lot of finance on a depreciating asset and you'll be paying interest too. I'd check to see if you can get a 0% PCP on this car. If not, I'd look at other cars that offer a similar package.
It's notable that "in-demand" cars are offered at higher % than more run of the mill ones: I was interested to see that Land Rover have a floor of 9.9% APR on the Evoque at the moment, I assume because this is what they can get away with. The flipside of this is that the GMFV is likely to be a long way off the real 3 year value.
With the Qashqai, it's more likely that you'll be closer to the GMFV at the end of the deal, so you have to get a good deal on the APR.
(incidentally the 9.9% on the Evoque was a deal breaker).
rich12 said:
Ok thanks,
So its best to get a low as possible GFV so hopefully there would be some equity at the end?
I think we will have to go into a couple of dealers and get a few figure from them.
Sort of. You don't want the GMFV so low that you have to pay off the lion's share of the value during the PCP term as this defeats the point (i.e. making monthly repayments low).So its best to get a low as possible GFV so hopefully there would be some equity at the end?
I think we will have to go into a couple of dealers and get a few figure from them.
PCP's are ok if you're happy to stay in the cycle of never really owning your car. It gives you a set monthly fee so you know where you are each month in terms of expenditure. You might have to get the odd pair of tyres and a couple of services but not much else.
The downside can come with the second PCP once your current one is over. If there is a special offer on your current car, i.e. big money off/ low interest rate there is no guarentee that in 3 years time you'll be able to be in the same position you are now. The problem with the GFV is that your progression into your second car is reliant upon there being equity or a renewal bonus to act as a deposit. Otherwise you will be in a position where you have to find another £6,000 in 3 years time. Should you be happy to find another 6 grand then there isn't really a problem.
The downside can come with the second PCP once your current one is over. If there is a special offer on your current car, i.e. big money off/ low interest rate there is no guarentee that in 3 years time you'll be able to be in the same position you are now. The problem with the GFV is that your progression into your second car is reliant upon there being equity or a renewal bonus to act as a deposit. Otherwise you will be in a position where you have to find another £6,000 in 3 years time. Should you be happy to find another 6 grand then there isn't really a problem.
There is not really any such thing as a good GMFV.
1. A high GMFV - has the effect of lowering the monthly payments (good) but virtually guaranteeing no equity at the end (bad). A manufacturer I work with is seeing a lot of cars coming back at the end of term with a real world value of 11.5 - 12k but a GMFV of 16k. In effect the customer has benefitted as they have been shielded against depreciation of 4 - 4.5k, downside is they have no equity
2. Low GMFV - should provide some equity at the end but this is reflected in higher monthly payments
Every persons priorities are different, I know people who have derived benefit from very low and very high GMFV's, in truth more have derived benefit from a high GMFV but they went into the deal with their eyes open fully aware that they had no chance of equity at the end
Manufacturers can set whatever GMFV they like - I have worked in and around PCPs for 20 years and detest the way that they are marketed - it should never be about the lowest possible monthly payment - it should be about a balanced deal that offers sensible monthly payments and a sensible amount of equity at the end (ideally tied in to the original deposit)
Most manufacturers finance systems allow you to lower the GMFV if that suits you better
1. A high GMFV - has the effect of lowering the monthly payments (good) but virtually guaranteeing no equity at the end (bad). A manufacturer I work with is seeing a lot of cars coming back at the end of term with a real world value of 11.5 - 12k but a GMFV of 16k. In effect the customer has benefitted as they have been shielded against depreciation of 4 - 4.5k, downside is they have no equity
2. Low GMFV - should provide some equity at the end but this is reflected in higher monthly payments
Every persons priorities are different, I know people who have derived benefit from very low and very high GMFV's, in truth more have derived benefit from a high GMFV but they went into the deal with their eyes open fully aware that they had no chance of equity at the end
Manufacturers can set whatever GMFV they like - I have worked in and around PCPs for 20 years and detest the way that they are marketed - it should never be about the lowest possible monthly payment - it should be about a balanced deal that offers sensible monthly payments and a sensible amount of equity at the end (ideally tied in to the original deposit)
Most manufacturers finance systems allow you to lower the GMFV if that suits you better
Edited by Andy665 on Friday 6th July 15:11
I would suggest a couple of things.
First off, are you confident that in 3 years time you'll still be in the same possition, going on your username you're 23. You'd finish at 25 or 26, during which time job offers abroad, a change of career, the desire to f
k off and travel for a year, all those things. PCPs annoyingly get in the way.
Second, don't focus on just one car. I personally wouldn't go for a deal until I'd spent a long while looking at what I can get. Dealers sometimes use mad lease deals to clear old stock, the Audi S5 deal, BMW M3 deals and the 635d cabrio deals all at well under £500 a month (about half that for the S5) show that an open mind and a lot of research can see you getting into something previously unatainable
First off, are you confident that in 3 years time you'll still be in the same possition, going on your username you're 23. You'd finish at 25 or 26, during which time job offers abroad, a change of career, the desire to f
k off and travel for a year, all those things. PCPs annoyingly get in the way.Second, don't focus on just one car. I personally wouldn't go for a deal until I'd spent a long while looking at what I can get. Dealers sometimes use mad lease deals to clear old stock, the Audi S5 deal, BMW M3 deals and the 635d cabrio deals all at well under £500 a month (about half that for the S5) show that an open mind and a lot of research can see you getting into something previously unatainable
CampDavid said:
I would suggest a couple of things.
First off, are you confident that in 3 years time you'll still be in the same possition, going on your username you're 23. You'd finish at 25 or 26, during which time job offers abroad, a change of career, the desire to fk off and travel for a year, all those things. PCPs annoyingly get in the way.
Second, don't focus on just one car. I personally wouldn't go for a deal until I'd spent a long while looking at what I can get. Dealers sometimes use mad lease deals to clear old stock, the Audi S5 deal, BMW M3 deals and the 635d cabrio deals all at well under £500 a month (about half that for the S5) show that an open mind and a lot of research can see you getting into something previously unatainable
Yes, i will be in the same situation in the next few years, hopefully more sucessfull as time goes on but yes. I own my company so am pretty tied down to that. First off, are you confident that in 3 years time you'll still be in the same possition, going on your username you're 23. You'd finish at 25 or 26, during which time job offers abroad, a change of career, the desire to f
k off and travel for a year, all those things. PCPs annoyingly get in the way.Second, don't focus on just one car. I personally wouldn't go for a deal until I'd spent a long while looking at what I can get. Dealers sometimes use mad lease deals to clear old stock, the Audi S5 deal, BMW M3 deals and the 635d cabrio deals all at well under £500 a month (about half that for the S5) show that an open mind and a lot of research can see you getting into something previously unatainable
I am open to different cars, just need to find one that fits my weird criteria.
New
toys
comfortable
good on fuel
4WD (just something i prefer)
looks nice
Doesn't feel cheap
not too expensive.
I would like to spend about £250 but no more than £300 if i have to.
rich12 said:
Yes, i will be in the same situation in the next few years, hopefully more sucessfull as time goes on but yes. I own my company so am pretty tied down to that.
I am open to different cars, just need to find one that fits my weird criteria.
New
toys
comfortable
good on fuel
4WD (just something i prefer)
looks nice
Doesn't feel cheap
not too expensive.
I would like to spend about £250 but no more than £300 if i have to.
If you own your own company it may be best to run the car through the business, you can get some pretty decent contract hire ratesI am open to different cars, just need to find one that fits my weird criteria.
New
toys
comfortable
good on fuel
4WD (just something i prefer)
looks nice
Doesn't feel cheap
not too expensive.
I would like to spend about £250 but no more than £300 if i have to.
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