New car sales 75% via PCP

[Derek Smith]

I need help.

My daily driver, a Focus, needed new discs, pads and such. The tyres were in their last few months as well. So I went into a dealership to replace it with another brand new this time Focus. I was pushed towards leasing. My hope of getting a big discount with cash was dashed. I came out confused. On paper it appears that with leasing I get a new car, with a guaranteed final price when I hand it in, for less than depreciation.

I got my genned up daughter to look through the terms and she said it was exactly as the sales staff said it would be. However, in the end I paid the few hundred for the repairs, tyres, service and brake bleeding.

I have read the rumours that you can buy cars with just a couple of hundred miles on them for half list price, but I'm damned if I can find a Focus for that. Any help and advice appreciated.

[chrispmartha]

Sheepshanks said:

chrispmartha said:

What if it went tits up and your older car threw up a 4 figure bill when its MOT was due?

That'd be annoying but I'd use some of my buffer to pay it.

chrispmartha said:

Also if you are a contractor and had money in the bank and needed a car, would it be wiser to use the money to buy a car, or take a cheap lease deal and keep the money in the bank? what would be the better situation, no work for 3 months and no money in the bank and a car or no work for 3 months, money in the bank and £900 to find over the three months?

You can invent scenarios all day, but that's not what nyxster did - he put £12K down on an RS4.

Taking a cheap lease deal is probably the worst thing to do as they're very inflexible.

chrispmartha said:

Again and again it amazes me why people are bothered how people finance their transport.

For the avoidance of doubt, I couldn't give a toss what anyone else does.

These deals are great as it gives me more options - for instance I can take a heavily subsidised PCP contribution and not care what the APR is - because I can just pay it off. I just did that.

However nyxster lost at least £20K as he couldn't make a few payments - that seems a bit daft to me. There but for the Grace of God etc though.

Just because nyxster lost money on a crap PCP doesn't mean all pcp/lease deals are bad or the wrong option, things aren't as black and white as that

[chrispmartha]

SDB660 said:

'I suspect that most people doing it see it as paying a monthly fee for a service rather than as a debt'

This was the mistake I made, and although lease/buy debate goes on forever it seems, you can't get away from the fact that if leasing your credit report will show a large debt outstanding. This is why I went from paying £900p/m approx to Mercedes for zero hassle motoring to the random hassle of bought vehicles. Comparison cost is similar, but my credit report is much better with, in my case, 50K plus debt erased from it.

I leased and it didn't show up on my credit report at all.

[SDB660]

chrispmartha said:

SDB660 said:

'I suspect that most people doing it see it as paying a monthly fee for a service rather than as a debt'

This was the mistake I made, and although lease/buy debate goes on forever it seems, you can't get away from the fact that if leasing your credit report will show a large debt outstanding. This is why I went from paying £900p/m approx to Mercedes for zero hassle motoring to the random hassle of bought vehicles. Comparison cost is similar, but my credit report is much better with, in my case, 50K plus debt erased from it.

I leased and it didn't show up on my credit report at all.

I am not an expert on leasing. All I can say is that my agreement showed.

Edit: Surely if you are committed to paying x over x period, whether it shows or not you are still
committed, bar any value you can get from selling car to a third party?

Edited by SDB660 on Friday 6th January 17:44

[del mar]

Have we become that materialistic as a society that we will pay to have something nice sitting on our drive - that we cant afford, rather than buy a car that we can ?

I cant name an advert that actually advertises the price of a car anymore, it is all how much per month.

A friend bought a BMW;

£4000 (car) as a deposit.
36 months at £300 or so
Then a lump of £16,000 - which they didn't have.

The logic was that to buy it new was £32,000 - which they didn't have and if they took a loan out the car would be worth £16,000 at the end so a £16,000 loss. So they rented a car for £16,000 over 3 years and had a return of £0 a £16,000 loss.

Surely a £15,000 car that might be worth £10,000 after 3 years is a better return for your money ?

[Sheepshanks]

chrispmartha said:

Just because nyxster lost money on a crap PCP doesn't mean all pcp/lease deals are bad or the wrong option, things aren't as black and white as that

I'm not saying they are?

[chrispmartha]

del mar said:

Have we become that materialistic as a society that we will pay to have something nice sitting on our drive - that we cant afford, rather than buy a car that we can ?

I cant name an advert that actually advertises the price of a car anymore, it is all how much per month.

A friend bought a BMW;

£4000 (car) as a deposit.
36 months at £300 or so
Then a lump of £16,000 - which they didn't have.

The logic was that to buy it new was £32,000 - which they didn't have and if they took a loan out the car would be worth £16,000 at the end so a £16,000 loss. So they rented a car for £16,000 over 3 years and had a return of £0 a £16,000 loss.

Surely a £15,000 car that might be worth £10,000 after 3 years is a better return for your money ?

Why are you presuming people who lease cars can't afford it? I would suspect most leases go the full term without being taken of the leasee, thus meaning they can afford it

[chrispmartha]

SDB660 said:

chrispmartha said:

SDB660 said:

'I suspect that most people doing it see it as paying a monthly fee for a service rather than as a debt'

This was the mistake I made, and although lease/buy debate goes on forever it seems, you can't get away from the fact that if leasing your credit report will show a large debt outstanding. This is why I went from paying £900p/m approx to Mercedes for zero hassle motoring to the random hassle of bought vehicles. Comparison cost is similar, but my credit report is much better with, in my case, 50K plus debt erased from it.

I leased and it didn't show up on my credit report at all.

I am not an expert on leasing. All I can say is that my agreement showed.

Edit: Surely if you are committed to paying x over x period, whether it shows or not you are still
committed, bar any value you can get from selling car to a third party?

Edited by SDB660 on Friday 6th January 17:44

Of course you're commited, thats why a lot of lease deals are cheap

Also a lease isnt a PCP

[nyxster]

I should explain I wasn't running around with 20 quid in my pocket when I was running my RS4, I had a successful software company that had been running for 12 years profitably. The problem is that we had half a dozen projects running and without warning the bank pulled even all our credit lines, customers started defaulting on stage payments for work we had already paid our subcontractors for. I was paying all the bills as they fell due trying to keep the lights on and actually sunk all my own money back into the business simply to try and trade through, but as most people know the entire market evaporated - I had plenty of equity security but the bank wanted out of all their business loans and wouldn't extend. Since I was on the hook for a lot of personal director guarantees it was a question of fighting fires and I kept paying for the car long after the income wasn't coming in, as said 3 months grace and I was back into a 15k / month consultancy gig and the 1800 arrears on the car was trivial - I simply ran out of runway.

As others had said during that period it felt like we were printing money, I could have bought a RS4 B5 for cash but I was working 70 hours a week and business was good and I was offered a good deal on an RS4. The same yer I actually held off buying a Lamborghini gallardo that I could have comfortably afforded because I just had a bad feeling everything was over-heated.

I'm not complaining really, I got out without issue through a bit of graft - one of my accountant's clients went down with 3 million in debt and lost absolutely everything.

I can see cases where PCP's make sense - I was offered an extra 15k discount if I took an S class on a PCP on a 4 percent finance deal - those cases make sense if you have the cash to buy and it saves you money.

I think my caveat emptor is not to make the mistake of thinking it's only 300 a month - it's not, it's a 35k or however much debt liability. -plan for the worst outcome - if you lose your job and are unemployed for 12 months, can you service that monthly debt load? If you were left with a 35 percent of its value shortfall liability could you afford to repay it and get another car? - I'd just advocate some serious thought because as someone said, when you are sat in the showroom with the shiny car and coffee they make it very easy - for another X a month you can get the RS! Etc. We live in very uncertain times with brevity & the job market, having lived through months of stress from debt collectors, bank legal people and all that I can tell you that these people will relentlessly hound you for every penny day and night - they don't care if you can't afford to buy food for your kids - they want their money and will keep at you until they get it.

I took a photo of my RS being taken away on the back of a low loader as a reminder of what borrowing money on a car actually means. It's very humbling when your 60 grand P&J goes off down the road and you are left on the bus, but with the added bonus of still paying for the car you no longer own.

And the fact is that at the time I wasn't even over extended on the car finance - if I'd bought the lambo I'd have lost my house when they went from 120k to 70k in a week.

I'm not criticising people for using car finance - only avoid the trap of thinking a Range Rover evoque / whatever is only 40 quid a month more than something modest - because that deferred 20 plus K balloon is still your liability, and some of the best PCP deals from the Germans are on cars that are ludicrously overpriced and get spanked in the auction. There really is no market for a c220 special at 3k off list when dealer PCP packages on new cars mean a brand new car is half the price of a 6 month old one on used finance.

I just think in the coming years money will become increasingly hard to come by, so the era of a new car on PCP every 3 years is simply burning money - fine if you have plenty and don't want for anything - but when I see people riding round in evoques they clearly can't afford I just worry that one big economic upset and a lot of people are going to be in financial trouble.

[otolith]

del mar said:

Have we become that materialistic as a society that we will pay to have something nice sitting on our drive - that we cant afford, rather than buy a car that we can ?

Surely a materialist would place more value in owning a "pride and joy" outright for the sake of it?

If they are able to comfortably afford the payments, they can afford the car.

[SDB660]

chrispmartha said:

SDB660 said:

chrispmartha said:

SDB660 said:

'I suspect that most people doing it see it as paying a monthly fee for a service rather than as a debt'

This was the mistake I made, and although lease/buy debate goes on forever it seems, you can't get away from the fact that if leasing your credit report will show a large debt outstanding. This is why I went from paying £900p/m approx to Mercedes for zero hassle motoring to the random hassle of bought vehicles. Comparison cost is similar, but my credit report is much better with, in my case, 50K plus debt erased from it.

I leased and it didn't show up on my credit report at all.

I am not an expert on leasing. All I can say is that my agreement showed.

Edit: Surely if you are committed to paying x over x period, whether it shows or not you are still
committed, bar any value you can get from selling car to a third party?

Edited by SDB660 on Friday 6th January 17:44

Of course you're commited, thats why a lot of lease deals are cheap

Also a lease isnt a PCP

...so your agreement/debt/commitment not appearing on your credit report is semantics. The money is owed.

[chrispmartha]

SDB660 said:

chrispmartha said:

SDB660 said:

chrispmartha said:

SDB660 said:

'I suspect that most people doing it see it as paying a monthly fee for a service rather than as a debt'

This was the mistake I made, and although lease/buy debate goes on forever it seems, you can't get away from the fact that if leasing your credit report will show a large debt outstanding. This is why I went from paying £900p/m approx to Mercedes for zero hassle motoring to the random hassle of bought vehicles. Comparison cost is similar, but my credit report is much better with, in my case, 50K plus debt erased from it.

I leased and it didn't show up on my credit report at all.

I am not an expert on leasing. All I can say is that my agreement showed.

Edit: Surely if you are committed to paying x over x period, whether it shows or not you are still
committed, bar any value you can get from selling car to a third party?

Edited by SDB660 on Friday 6th January 17:44

Of course you're commited, thats why a lot of lease deals are cheap

Also a lease isnt a PCP

...so your agreement/debt/commitment not appearing on your credit report is semantics. The money is owed.

Well yes, but i was replying to a post stating it apearing on the credit report was a problem.

Also with a lease you don't owe the full price of the car

[otolith]

SDB660 said:

'I suspect that most people doing it see it as paying a monthly fee for a service rather than as a debt'

This was the mistake I made, and although lease/buy debate goes on forever it seems, you can't get away from the fact that if leasing your credit report will show a large debt outstanding. This is why I went from paying £900p/m approx to Mercedes for zero hassle motoring to the random hassle of bought vehicles. Comparison cost is similar, but my credit report is much better with, in my case, 50K plus debt erased from it.

It's a liability, and may affect your ability to borrow money from both an outstanding debt and affordability point of view - but if you have a secure income, a reasonable monthly budget for motoring and no particular desire to take on more debt for anything else, it's not going to have much of an impact on your life. £900/month is beyond what is sensible for most people's means, but if someone has that much genuinely spare cash floating around and knows they will be able to continue to pay it for the duration of the contract, it's no more crazy than taking a couple of very expensive holidays a year. Personally, that level of spending would be making me think about how much earlier I could retire if I didn't, but people have different priorities in life. And to be honest, what I have been spending on four sessions a week with a personal trainer for the last six months would get me a very nice new car on the drive.

[SDB660]

chrispmartha said:

SDB660 said:

chrispmartha said:

SDB660 said:

chrispmartha said:

SDB660 said:

'I suspect that most people doing it see it as paying a monthly fee for a service rather than as a debt'

This was the mistake I made, and although lease/buy debate goes on forever it seems, you can't get away from the fact that if leasing your credit report will show a large debt outstanding. This is why I went from paying £900p/m approx to Mercedes for zero hassle motoring to the random hassle of bought vehicles. Comparison cost is similar, but my credit report is much better with, in my case, 50K plus debt erased from it.

I leased and it didn't show up on my credit report at all.

I am not an expert on leasing. All I can say is that my agreement showed.

Edit: Surely if you are committed to paying x over x period, whether it shows or not you are still
committed, bar any value you can get from selling car to a third party?

Edited by SDB660 on Friday 6th January 17:44

Of course you're commited, thats why a lot of lease deals are cheap

Also a lease isnt a PCP

...so your agreement/debt/commitment not appearing on your credit report is semantics. The money is owed.

Well yes, but i was replying to a post stating it apearing on the credit report was a problem.

Also with a lease you don't owe the full price of the car

Fair play. True and true. The irony of a credit report saying it was a negative that I had x amount of credit although was keeping up payments.

Now am happier that am paying roughly same for two old cars. Can do stuff like mods and detailing and know if I have no income my car is not going to be taken in a few months and will need to find money for another.

Actually this was worst part of ending leases. Going cold turkey and finding 4.5K for secondhand cars and then another load of money to get them reliable and up to spec.

[CaptainSlow]

chrispmartha said:

Of course you're commited, thats why a lot of lease deals are cheap

Also a lease isnt a PCP

A lease isn't a PCP but a PCP is an (operating) lease. eta...if following accounting rules for CP.

[rxe]

Derek Smith said:

I need help.

My daily driver, a Focus, needed new discs, pads and such. The tyres were in their last few months as well. So I went into a dealership to replace it with another brand new this time Focus. I was pushed towards leasing. My hope of getting a big discount with cash was dashed. I came out confused. On paper it appears that with leasing I get a new car, with a guaranteed final price when I hand it in, for less than depreciation.

I got my genned up daughter to look through the terms and she said it was exactly as the sales staff said it would be. However, in the end I paid the few hundred for the repairs, tyres, service and brake bleeding.

I have read the rumours that you can buy cars with just a couple of hundred miles on them for half list price, but I'm damned if I can find a Focus for that. Any help and advice appreciated.

I would guess that new discs, pads and tyres on your existing Focus would be cheaper than the deposit on a new one, let alone the monthly payments.

"Discount for cash" works in a business that is cash starved or values the immediacy and certainty of the transaction. Car dealers don't really care - they would rather make money on the finance deal - they get the money anyway.

The numbers are made up. "Full retail price" is a largely made up number. "Depreciation" is an estimate based on a made up number.

I'll give an example from my business. There was a bit of kit that used to cost £1m. That was list. You could pretty easily get 30% off that, but getting more was hard. Actual physical cost of production was about £90k. Yes, you could build one yourself, but the bills and support costs added up very fast, and in the end it was cheaper to pay the man £700k with your 30% discount.

However, once you understood the sales motivation, it all became much simpler. The salesman (and hence his managers) were targeted with a sales number, in £. The number of units sold was pretty much irrelevant. So a discussion along the lines of "buy one full price and get three free" was easy. So were these devices worth £1m .... or £250K? If you bought boat loads of them, you got closer to the real pricing which was 80% discount.

The car industry will be a bit less clear than that, but not by much. What do you think the incremental cost of building a Focus is? You build a factory, you spend millions in R&D, and you build a million of them .... the additional cost of building a million and 1 would be a rounding error.

When times are good, they hold to list (don't want to upset the market), and can provide all sorts of inducements to get you to part with £200 a month for a new one. They have to, because no one in their right mind would hand over the list price of a Focus in used 20s. So you look at the deal and think "this is a flippin bargain, how do they do it" - and sign up - which people do in droves as we can see.

When times are bad, they will finesse stuff all over the place and the 6 month old bargains crop up. I bought an Alfa 156 in the 2001 when it was all going a bit wobbly - 9 months old, 3k on the clock, owned by Alfa GB - 50% off list.

Edited by rxe on Friday 6th January 19:43

[anonymous-user]

walm said:

*non
non-essential.
non-UK-built (from the Brexit thread).

You should be as frugal with your letters as you are with your finances jsf!
(Sorry, I'm a hoot at parties, honest.)

Thanks, always happy to be educated.

[anonymous-user]

del mar said:

Have we become that materialistic as a society that we will pay to have something nice sitting on our drive - that we cant afford, rather than buy a car that we can ?

If you can afford the lease you can afford the car. No different to being able to afford the mortgage on the drive it's sat on.

[vonuber]

And 6k a month servicing the damn thing

[anonymous-user]

Sheepshanks said:

jsf said:

I am one of the people who managed to benefit from the crazy selling that went on after the 2008 crash. I bought a 3 year old car with 25K miles on the clock for half the price it was selling for pre crash. I paid cash for it.

It now has 110K miles on it and I could sell it tomorrow for 20% more than I paid for it.

Care to share some details - car and cost? I can't get my head around a car that would now be 10-11yrs old still being worth 20% more than you paid.

Mind you, at that time a colleague bought a demo VW Tourareg for £19,500 cash - he had to come up with the money in 2 days, he thinks they needed it to pay wages and the dealer did go bust shortly afterwards. When he went back he tried to get it for £18K by saying that's all he could get together but they put the other £1500 on finance.

No Problem.

I bought a 55 plate Widetrack Subaru Impreza JDM STi for £8.5K, good stock ones go for upto £12K now.

My own is fairly modified now, although it looks stock. It has circa 500BHP and some pretty trick stuff going on under the skin which if sold as is would probably cost someone £18K to buy, but best way financially to sell it would be put the stock parts back on and sell the trick stuff separately. The ECU and Turbo alone are £5.5K new.