New car sales 75% via PCP
Discussion
I don't think it will be a problem for the finance companies or manufacturers for a while, I think it will hit the consumers first.
PCP etc is allowing people to get quite a few rungs higher up the (motoring) ladder when it comes to how much depreciation they can take on.
I'm sure it ties in nicely with the millions who have < £100 in savings stories.
PCP etc is allowing people to get quite a few rungs higher up the (motoring) ladder when it comes to how much depreciation they can take on.
I'm sure it ties in nicely with the millions who have < £100 in savings stories.
Adrian W said:
places like Bruntingthorp are filled to capacity with lease returns, if they dump them on to the used market it will either destroy it or dramatically effect new car sales.
This makes no sense at all. You buy 2.7m new cars a year so roughly 2m lease cars being returned every year. That's 5500 every single day. How many are sat at Bruntingthorpe? A few thousand? Even if it were possible to store 5500 cars every single day why on earth would anyone accumulate depreciating assets? They can't just dribble them out slowly when the returns keep coming in. What are they waiting for? A used car market that defies the laws of supply and demand? Adrian W said:
TLandCruiser said:
I just don't know how people can swallow spending £450 - £500 a month on car finance! thats some serious money to in my eyes waste a month.
What's the difference between paying 500 per month or 50000 every 8-9 years With such huge volumes being traded there will always be thousands of cars sat around, but they'll all sell sooner or later, and the volumes coming into stock will roughly equal the volumes being sold over time. Otherwise, as eluded to above, all the airfields in the country would fill up pretty bloody quickly.
PCP makes excellent sense if you're intending to buy a new car every two to three years. Keeps the payments lower as you aren't trying to pay off the whole loan (someone taking a 3 year PCP would generally need a 5 -7 year loan to get a similar payment IIRC) and you get reassurance over knowing precisely how much it will cost you.
As also mentioned previously, manufacturers will generally try and offer you an "early upgrade", my sister in law had the supplying dealer on the phone the other day saying that she "only has a few payments left, so would she like a brand new car for the same monthly amount?"
Those few payments turned out to be a whole year left on the PCP. But once you're in the cycle it's very easy to see why someone would deal again, why wouldn't you want a new car for exactly the same monthly rental as you're paying now?
PCP makes excellent sense if you're intending to buy a new car every two to three years. Keeps the payments lower as you aren't trying to pay off the whole loan (someone taking a 3 year PCP would generally need a 5 -7 year loan to get a similar payment IIRC) and you get reassurance over knowing precisely how much it will cost you.
As also mentioned previously, manufacturers will generally try and offer you an "early upgrade", my sister in law had the supplying dealer on the phone the other day saying that she "only has a few payments left, so would she like a brand new car for the same monthly amount?"
Those few payments turned out to be a whole year left on the PCP. But once you're in the cycle it's very easy to see why someone would deal again, why wouldn't you want a new car for exactly the same monthly rental as you're paying now?
What I've never really understood about the whole PCP deal in the residual value/deposit required for a new car.
Let's take a simple example. £30k car, £5k deposit, £299/month over 3 years. Doesn't exceed mileage. At the end of that 3 years, Mr Customer can either give the keys back and walk away, or strike another PCP deal. Where does he get his next deposit though? Does he need to have saved another £5k, in addition to his monthly payments, or does he have enough value in the car he's been running?
Surely his initial deposit £5,000 + (36 x £299) = £15,764 just covers the depreciation?
The car is worth (roughly) 50% residual after three years, yes?
Whenever I hear people harping on about PCP they always focus on the monthly payment. Surely they're missing the 'new deposit required every time' element. Is my man maths wrong?
Let's take a simple example. £30k car, £5k deposit, £299/month over 3 years. Doesn't exceed mileage. At the end of that 3 years, Mr Customer can either give the keys back and walk away, or strike another PCP deal. Where does he get his next deposit though? Does he need to have saved another £5k, in addition to his monthly payments, or does he have enough value in the car he's been running?
Surely his initial deposit £5,000 + (36 x £299) = £15,764 just covers the depreciation?
The car is worth (roughly) 50% residual after three years, yes?
Whenever I hear people harping on about PCP they always focus on the monthly payment. Surely they're missing the 'new deposit required every time' element. Is my man maths wrong?
Carmakers love PCP because it raises average spend and accelerates replacement rates. Buyers spend more, and swap old for new more often.
Truly cheap PCP deals are rare (<20% of total). Total price-paid exceeds depreciation and costs in the vast majority of PCP deals. Carmakers do well from in-house finance. They love it.
Truly cheap PCP deals are rare (<20% of total). Total price-paid exceeds depreciation and costs in the vast majority of PCP deals. Carmakers do well from in-house finance. They love it.
Esseesse said:
He's not spending £50,000. And the difference is that when spending £50k in one go you know how much you're spending. Loads of people in very modest jobs spending the thick end of £500/month on a car.
Reality calling PH. People in modest jobs have enough trouble scraping together £200/month. A lot of people earn less than £40-50K.PurpleTurtle said:
What I've never really understood about the whole PCP deal in the residual value/deposit required for a new car.
Let's take a simple example. £30k car, £5k deposit, £299/month over 3 years. Doesn't exceed mileage. At the end of that 3 years, Mr Customer can either give the keys back and walk away, or strike another PCP deal. Where does he get his next deposit though? Does he need to have saved another £5k, in addition to his monthly payments, or does he have enough value in the car he's been running?
Surely his initial deposit £5,000 + (36 x £299) = £15,764 just covers the depreciation?
The car is worth (roughly) 50% residual after three years, yes?
Whenever I hear people harping on about PCP they always focus on the monthly payment. Surely they're missing the 'new deposit required every time' element. Is my man maths wrong?
The more successful PCP treadmills ensure the guaranteed value at the end of the term allows the customer a 'margin' on sale, which is then ploughed back into the next PCP.Let's take a simple example. £30k car, £5k deposit, £299/month over 3 years. Doesn't exceed mileage. At the end of that 3 years, Mr Customer can either give the keys back and walk away, or strike another PCP deal. Where does he get his next deposit though? Does he need to have saved another £5k, in addition to his monthly payments, or does he have enough value in the car he's been running?
Surely his initial deposit £5,000 + (36 x £299) = £15,764 just covers the depreciation?
The car is worth (roughly) 50% residual after three years, yes?
Whenever I hear people harping on about PCP they always focus on the monthly payment. Surely they're missing the 'new deposit required every time' element. Is my man maths wrong?
I've been comparing PCP/Lease/Buy outright/bank loan/buy used for my wife's next car (218/220i convertible M Sport)
Having been to a couple of BMW dealers and looked at the figures, I am baffled as to why would anyone want to do PCP if they have other means.
Some PCP deals can be ok if seen in the context of all the money (deposit plus all payments) are basically thrown away and compared to a lease.
My point is that PCP only works if one gets the lowest possible deposit and monthly payment and forgets about balloon/ residual value. Hand the car back and that's it. Unless they really want to buy again from the same dealer down the line. Quite limiting.
One might as well lease the car in that respect.
Personally, I decided to buy a 1 year old car, which has already depreciated 33% or so from list and has 2 years warranty and little mileage. I know it's the old new vs/used but I can't force myself to spend some 18K£ on an average car for 3 years. Just no.
Having been to a couple of BMW dealers and looked at the figures, I am baffled as to why would anyone want to do PCP if they have other means.
Some PCP deals can be ok if seen in the context of all the money (deposit plus all payments) are basically thrown away and compared to a lease.
My point is that PCP only works if one gets the lowest possible deposit and monthly payment and forgets about balloon/ residual value. Hand the car back and that's it. Unless they really want to buy again from the same dealer down the line. Quite limiting.
One might as well lease the car in that respect.
Personally, I decided to buy a 1 year old car, which has already depreciated 33% or so from list and has 2 years warranty and little mileage. I know it's the old new vs/used but I can't force myself to spend some 18K£ on an average car for 3 years. Just no.
Adrian W said:
TLandCruiser said:
I just don't know how people can swallow spending £450 - £500 a month on car finance! thats some serious money to in my eyes waste a month.
What's the difference between paying 500 per month or 50000 every 8-9 years The point is that spaffing >£5k a year on depreciation appears absolutely crazy to me, unless you are driving a genuine supercar.
If you earn £50k then that's nearly 20% of your take-home gone.
Paying for two cars and it's gonna be tough to make rent!
Or as I look at it... drop that £5k to £2k and get a free skiing holiday for you and the missus!!
PurpleTurtle said:
What I've never really understood about the whole PCP deal in the residual value/deposit required for a new car.
Let's take a simple example. £30k car, £5k deposit, £299/month over 3 years. Doesn't exceed mileage. At the end of that 3 years, Mr Customer can either give the keys back and walk away, or strike another PCP deal. Where does he get his next deposit though? Does he need to have saved another £5k, in addition to his monthly payments, or does he have enough value in the car he's been running?
Surely his initial deposit £5,000 + (36 x £299) = £15,764 just covers the depreciation?
The car is worth (roughly) 50% residual after three years, yes?
Whenever I hear people harping on about PCP they always focus on the monthly payment. Surely they're missing the 'new deposit required every time' element. Is my man maths wrong?
Yes, your man maths is wrong. People get used to paying the monthly so it just sits there in the background - when it comes to time to change they think they're getting a new car for £5000.Let's take a simple example. £30k car, £5k deposit, £299/month over 3 years. Doesn't exceed mileage. At the end of that 3 years, Mr Customer can either give the keys back and walk away, or strike another PCP deal. Where does he get his next deposit though? Does he need to have saved another £5k, in addition to his monthly payments, or does he have enough value in the car he's been running?
Surely his initial deposit £5,000 + (36 x £299) = £15,764 just covers the depreciation?
The car is worth (roughly) 50% residual after three years, yes?
Whenever I hear people harping on about PCP they always focus on the monthly payment. Surely they're missing the 'new deposit required every time' element. Is my man maths wrong?
walm said:
Obviously not much.
The point is that spaffing >£5k a year on depreciation appears absolutely crazy to me, unless you are driving a genuine supercar.
If you earn £50k then that's nearly 20% of your take-home gone.
Paying for two cars and it's gonna be tough to make rent!
Or as I look at it... drop that £5k to £2k and get a free skiing holiday for you and the missus!!
That's my point, I earn 55k a year and I would not want to pay £400 - £500 a month on a car, my old land cruiser keeps on ticking along and never needs anything other than a service. Someone said what's the difference between £500 a month and 50k every ten years?? Well I would not spend 50k cash on car either The point is that spaffing >£5k a year on depreciation appears absolutely crazy to me, unless you are driving a genuine supercar.
If you earn £50k then that's nearly 20% of your take-home gone.
Paying for two cars and it's gonna be tough to make rent!
Or as I look at it... drop that £5k to £2k and get a free skiing holiday for you and the missus!!
. I truely am intrigued how so many people can afford to the cars I see on the road near me. i'm still convinced people are more skint then they look to be.Sheepshanks said:
PurpleTurtle said:
What I've never really understood about the whole PCP deal in the residual value/deposit required for a new car.
Let's take a simple example. £30k car, £5k deposit, £299/month over 3 years. Doesn't exceed mileage. At the end of that 3 years, Mr Customer can either give the keys back and walk away, or strike another PCP deal. Where does he get his next deposit though? Does he need to have saved another £5k, in addition to his monthly payments, or does he have enough value in the car he's been running?
Surely his initial deposit £5,000 + (36 x £299) = £15,764 just covers the depreciation?
The car is worth (roughly) 50% residual after three years, yes?
Whenever I hear people harping on about PCP they always focus on the monthly payment. Surely they're missing the 'new deposit required every time' element. Is my man maths wrong?
Yes, your man maths is wrong. People get used to paying the monthly so it just sits there in the background - when it comes to time to change they think they're getting a new car for £5000.Let's take a simple example. £30k car, £5k deposit, £299/month over 3 years. Doesn't exceed mileage. At the end of that 3 years, Mr Customer can either give the keys back and walk away, or strike another PCP deal. Where does he get his next deposit though? Does he need to have saved another £5k, in addition to his monthly payments, or does he have enough value in the car he's been running?
Surely his initial deposit £5,000 + (36 x £299) = £15,764 just covers the depreciation?
The car is worth (roughly) 50% residual after three years, yes?
Whenever I hear people harping on about PCP they always focus on the monthly payment. Surely they're missing the 'new deposit required every time' element. Is my man maths wrong?
Yes, his maths is right, but man maths wrong.
Ignoring the deposit is the very obvious easy way to sell credit!
stuckmojo said:
I've been comparing PCP/Lease/Buy outright/bank loan/buy used for my wife's next car (218/220i convertible M Sport)
Having been to a couple of BMW dealers and looked at the figures, I am baffled as to why would anyone want to do PCP if they have other means.
The key word there is 'if'. Having been to a couple of BMW dealers and looked at the figures, I am baffled as to why would anyone want to do PCP if they have other means.
Ari said:
stuckmojo said:
I've been comparing PCP/Lease/Buy outright/bank loan/buy used for my wife's next car (218/220i convertible M Sport)
Having been to a couple of BMW dealers and looked at the figures, I am baffled as to why would anyone want to do PCP if they have other means.
The key word there is 'if'. Having been to a couple of BMW dealers and looked at the figures, I am baffled as to why would anyone want to do PCP if they have other means.
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