Are the wheels about to fall of car finance?
Discussion
Granfondo said:
djc206 said:
Granfondo said:
djc206 said:
It’s really not that clear cut. There are plenty of people who PCP’d cars over the years with overly generous GFV’s who then laughed as they handed the keys over at the end of the term. Cash buyers would have been worse off. It’s not very common these days but during the financial crisis many of the premium brands such as Porsche had got GFV’s quite wrong as the arse fell out of the market.
Moot point because to "own" a PCP'ed car you have to make the final payment,but I do agree that GFV is a plus point!Besides there’s nothing stopping someone handing it back and then buying it back from the dealer network if so inclined.
djc206 said:
Granfondo said:
djc206 said:
It’s really not that clear cut. There are plenty of people who PCP’d cars over the years with overly generous GFV’s who then laughed as they handed the keys over at the end of the term. Cash buyers would have been worse off. It’s not very common these days but during the financial crisis many of the premium brands such as Porsche had got GFV’s quite wrong as the arse fell out of the market.
Moot point because to "own" a PCP'ed car you have to make the final payment,but I do agree that GFV is a plus point!Besides there’s nothing stopping someone handing it back and then buying it back from the dealer network if so inclined.
If you know you're going to keep it then you're better off securing better finance for the settlement amount, settling the PCP and paying your loan off.
ashleyman said:
But if they're on a PCP they'll be paying interest for the full list price of the car, handing back and then paying the dealer price for their own car?
If you know you're going to keep it then you're better off securing better finance for the settlement amount, settling the PCP and paying your loan off.
No and no again.If you know you're going to keep it then you're better off securing better finance for the settlement amount, settling the PCP and paying your loan off.
You pay interest on the agreed price minus deposit which if you’re savvy/lucky enough could even be 0% APR.
The point is the settlement amount has in the past exceeded the actual value of the car at which you’d have to be seriously stupid to pay the settlement. You’d just hand the car back as you are entitled to do and then pay the lesser amount to buy it back. This is all rather pointless because I can’t see many people doing it, it’s just a means of illustrating that it has in the past proven to be more expensive to buy cash because of manufacturers/lenders setting GFV’s too high and getting burnt when people just handed their cars back having paid less than the depreciation cost.
djc206 said:
ashleyman said:
But if they're on a PCP they'll be paying interest for the full list price of the car, handing back and then paying the dealer price for their own car?
If you know you're going to keep it then you're better off securing better finance for the settlement amount, settling the PCP and paying your loan off.
No and no again.If you know you're going to keep it then you're better off securing better finance for the settlement amount, settling the PCP and paying your loan off.
You pay interest on the agreed price minus deposit which if you’re savvy/lucky enough could even be 0% APR.
The point is the settlement amount has in the past exceeded the actual value of the car at which you’d have to be seriously stupid to pay the settlement. You’d just hand the car back as you are entitled to do and then pay the lesser amount to buy it back. This is all rather pointless because I can’t see many people doing it, it’s just a means of illustrating that it has in the past proven to be more expensive to buy cash because of manufacturers/lenders setting GFV’s too high and getting burnt when people just handed their cars back having paid less than the depreciation cost.
ashleyman said:
djc206 said:
ashleyman said:
But if they're on a PCP they'll be paying interest for the full list price of the car, handing back and then paying the dealer price for their own car?
If you know you're going to keep it then you're better off securing better finance for the settlement amount, settling the PCP and paying your loan off.
No and no again.If you know you're going to keep it then you're better off securing better finance for the settlement amount, settling the PCP and paying your loan off.
You pay interest on the agreed price minus deposit which if you’re savvy/lucky enough could even be 0% APR.
The point is the settlement amount has in the past exceeded the actual value of the car at which you’d have to be seriously stupid to pay the settlement. You’d just hand the car back as you are entitled to do and then pay the lesser amount to buy it back. This is all rather pointless because I can’t see many people doing it, it’s just a means of illustrating that it has in the past proven to be more expensive to buy cash because of manufacturers/lenders setting GFV’s too high and getting burnt when people just handed their cars back having paid less than the depreciation cost.
You said you pay interest on the full list price which is only correct if you buy a car at full list price (unlikely) and put down no deposit.
djc206 said:
Besides there’s nothing stopping someone handing it back and then buying it back from the dealer network if so inclined.
I'm sorry, I misunderstood what you wrote. Regardless of list price, deposit, interest etc..I don't understand why anyone would do what you've said. This seems like a terrible idea!
Why would you want to pay all the payments, hand it back and then re-buy it? You're costing yourself money on interest over the PCP term. Then you're buying the same car with the dealers markup, then paying more interest (if you can't buy cash) on the new purchase price.
I'm currently on a PCP but I'm buying it out with an alternative means of finance on a lower rate (4.8% vs 3.5%). I'm always interested in the PCP vs HP vs Loan vs Cash discussion as it's something I'm involved with by being as you say a debt monkey.
Reading all this just makes me doubt myself and my knowledge and to be quite honest, I want to understand as much as possible as I don't want to make a mistake. Perhaps I should stop reading. lol
ashleyman said:
I'm sorry, I misunderstood what you wrote. Regardless of list price, deposit, interest etc..
I don't understand why anyone would do what you've said. This seems like a terrible idea!
Why would you want to pay all the payments, hand it back and then re-buy it? You're costing yourself money on interest over the PCP term. Then you're buying the same car with the dealers markup, then paying more interest (if you can't buy cash) on the new purchase price.
I'm currently on a PCP but I'm buying it out with an alternative means of finance on a lower rate (4.8% vs 3.5%). I'm always interested in the PCP vs HP vs Loan vs Cash discussion as it's something I'm involved with by being as you say a debt monkey.
Reading all this just makes me doubt myself and my knowledge and to be quite honest, I want to understand as much as possible as I don't want to make a mistake. Perhaps I should stop reading. lol
I’m not sure you’ve read back far enough actually. We’re talking very specifically about a scenario where a car is worth markedly less than the GFV which doesn’t happen very often any more.I don't understand why anyone would do what you've said. This seems like a terrible idea!
Why would you want to pay all the payments, hand it back and then re-buy it? You're costing yourself money on interest over the PCP term. Then you're buying the same car with the dealers markup, then paying more interest (if you can't buy cash) on the new purchase price.
I'm currently on a PCP but I'm buying it out with an alternative means of finance on a lower rate (4.8% vs 3.5%). I'm always interested in the PCP vs HP vs Loan vs Cash discussion as it's something I'm involved with by being as you say a debt monkey.
Reading all this just makes me doubt myself and my knowledge and to be quite honest, I want to understand as much as possible as I don't want to make a mistake. Perhaps I should stop reading. lol
I’ll give an example. Try to ignore interest for the purposes of this example just assume it’s 0% as it makes the explanation easier:
Car originally £50k. GFV £25k but car actually only worth £20k.
Option a) pay the GFV and keep the car. Terrible idea the car is worth less than it’s costing, you’d be paying £25k for a £20k car.
Option b) return the car and then buy it once it reappears on the forecourt at £20k plus dealer margin so let’s say £22k.
Option c) return the car and walk away
Option b saves you £3k over Option a if you really want to own the car. Option c is obviously what most people would (and did) do.
It’s a very unique set of circumstances that is not likely to affect any of us and was only used to refute someone’s point that cash is cheaper than PCP 100% of the time which is simply not true if you look back particularly to the start of the recession.
I wish I’d never started this now....
djc206 said:
I’m not sure you’ve read back far enough actually. We’re talking very specifically about a scenario where a car is worth markedly less than the GFV which doesn’t happen very often any more.
I’ll give an example. Try to ignore interest for the purposes of this example just assume it’s 0% as it makes the explanation easier:
Car originally £50k. GFV £25k but car actually only worth £20k.
Option a) pay the GFV and keep the car. Terrible idea the car is worth less than it’s costing, you’d be paying £25k for a £20k car.
Option b) return the car and then buy it once it reappears on the forecourt at £20k plus dealer margin so let’s say £22k.
Option c) return the car and walk away
Option b saves you £3k over Option a if you really want to own the car. Option c is obviously what most people would (and did) do.
It’s a very unique set of circumstances that is not likely to affect any of us and was only used to refute someone’s point that cash is cheaper than PCP 100% of the time which is simply not true if you look back particularly to the start of the recession.
I wish I’d never started this now....
Understood but as you say, extremely unlikely.I’ll give an example. Try to ignore interest for the purposes of this example just assume it’s 0% as it makes the explanation easier:
Car originally £50k. GFV £25k but car actually only worth £20k.
Option a) pay the GFV and keep the car. Terrible idea the car is worth less than it’s costing, you’d be paying £25k for a £20k car.
Option b) return the car and then buy it once it reappears on the forecourt at £20k plus dealer margin so let’s say £22k.
Option c) return the car and walk away
Option b saves you £3k over Option a if you really want to own the car. Option c is obviously what most people would (and did) do.
It’s a very unique set of circumstances that is not likely to affect any of us and was only used to refute someone’s point that cash is cheaper than PCP 100% of the time which is simply not true if you look back particularly to the start of the recession.
I wish I’d never started this now....
I know threads like this get knocked but I find them fascinating as I'm always looking for that pot of gold at the end of a rainbow which for me, never appears.
I do recognise though that for some people it does and that is the point. Different peoples circumstances are different and the cars they want are different too.
I've just bought a car and the PCP on offer yet again didn't make sense for me so cash purchase it was.
My colleague wanted an Audi A4 and the deal on that was better on a PCP.
The big appeal for me in financing a car is I don't have to fork out at least 6 months salary in 1 lump sum but I'll always try to go with the option which is going to cost me the least over the time I think I'm going to own it.
I do recognise though that for some people it does and that is the point. Different peoples circumstances are different and the cars they want are different too.
I've just bought a car and the PCP on offer yet again didn't make sense for me so cash purchase it was.
My colleague wanted an Audi A4 and the deal on that was better on a PCP.
The big appeal for me in financing a car is I don't have to fork out at least 6 months salary in 1 lump sum but I'll always try to go with the option which is going to cost me the least over the time I think I'm going to own it.
Granfondo said:
Granfondo said:
[b]Buying outright will always be cheaper than PCP[b] unless 0% to own outright!
This is the statement that djc206 is using smoke and mirrors to disprove and of course with his 0% example! 
To use a random £35k car as an example, how does walking into a dealer with a suitcase of cash, then taking a trade in after 3 years (for example), work out being a better option than some of the finance / lease deals available?
I'm clinging tenaciously to my ownership model that means that I can have a £60k (new value) car as my daily driver, which uses 50% more fuel than a regular car, as it's between 7-10 years old, and I maintain it myself. It's not a model for everyone, nor one I'm wedded to for life, however it's more attractive than having a 118d BMW to live with as a like for like monthly expenditure.
ashleyman said:
Understood but as you say, extremely unlikely.
This has been the case with my last 2 Mercedes PCPs. In one case the car was marketed as approved used after I handed it back at less than the GFV.Also likely to happen with my current SL. Naturally I will be handing it back. Best case scenario on this one - GFV exceeding value and 0% PCP.
Granfondo said:
This is the statement that djc206 is using smoke and mirrors to disprove and of course with his 0% example!
Smoke and mirrors means to obscure or embellish, I’ve written it down in the simplest terms humanly possible so it does not qualify as either. I could waste some time adding in interest and capital gains losses and still make the point but I suspect you will never concede that you are in fact incorrect. It’s easier to use sarcastic smileys and keep arguing. Edited by Granfondo on Wednesday 10th January 07:26
The point stands some people were offered overly generous GFV’s and paid considerably less than the actual depreciation even when you factor in interest paid. If you’re going to make an absolute statement you should probably make sure it’s absolutely watertight, yours was not. I’ll say no more on the matter.
Granfondo said:
Ares said:
Granfondo said:
Ares said:
Granfondo said:
Ares said:
gizlaroc said:
Granfondo said:
My wife's Audi Q5 retained 50% after 6 years!
Hence why they were on deals with a 2.0tdi S-Line for £189 a month plus VAT when they had only been out for a couple of years. That was with 9 month down mind, and limited to 10k miles a year. But still, my mate jumped on that deal, and refinanced for another year last year.
Buying outright will always be cheaper than PCP unless 0%.
I've never had 0%.
I've always had cheaper than buying outright (otherwise I'd have bought outright).
You show me the best PCP deal on any car that is not 0% and I will show it can be cheaper to buy outright!
Edited by Granfondo on Tuesday 9th January 20:47
My last 4 cars were all cheaper through PCP than buying outright. None were 0%.
My current car is leased, but PCP would have been just £12/mth more - that will still be comfortably cheaper than buying outright.
Manager at work has cars on PCP. Nothing wrong with that, it's her choice.
We were talking about her new car this morning that she picks up in a few months. She told me PCP is great as she keeps paying the same amount per month, will keep paying the same amount for her new car and even gets her deposit back.
We were talking about her new car this morning that she picks up in a few months. She told me PCP is great as she keeps paying the same amount per month, will keep paying the same amount for her new car and even gets her deposit back.
funkyrobot said:
Manager at work has cars on PCP. Nothing wrong with that, it's her choice.
We were talking about her new car this morning that she picks up in a few months. She told me PCP is great as she keeps paying the same amount per month, will keep paying the same amount for her new car and even gets her deposit back.
Is she referring specifically to this trade in? Because it’s entirely possible. It’s also entirely possible that she doesn’t understand what she’s signed up for of course.We were talking about her new car this morning that she picks up in a few months. She told me PCP is great as she keeps paying the same amount per month, will keep paying the same amount for her new car and even gets her deposit back.
djc206 said:
funkyrobot said:
Manager at work has cars on PCP. Nothing wrong with that, it's her choice.
We were talking about her new car this morning that she picks up in a few months. She told me PCP is great as she keeps paying the same amount per month, will keep paying the same amount for her new car and even gets her deposit back.
Is she referring specifically to this trade in? Because it’s entirely possible. It’s also entirely possible that she doesn’t understand what she’s signed up for of course.We were talking about her new car this morning that she picks up in a few months. She told me PCP is great as she keeps paying the same amount per month, will keep paying the same amount for her new car and even gets her deposit back.
The way she was saying it though it was if she had just been given her initial deposit back, plus the new car without having to pay anything extra.
funkyrobot said:
She's hit nearly 3 years and rolled over into another car. I guess she has used the current car value as a deposit on the next PCP?
The way she was saying it though it was if she had just been given her initial deposit back, plus the new car without having to pay anything extra.
Almost certainly.The way she was saying it though it was if she had just been given her initial deposit back, plus the new car without having to pay anything extra.
Entirely plausible depending on the value of the new car and the deal they were offering. She may well just be being a bit disingenuous of course.
Granfondo said:
Ares said:
Granfondo said:
NomduJour said:
Do you think the average punter getting finance saves money over buying it outright? The headline deals are the minority.
Buying outright will always be cheaper than PCP unless 0% to own outright!Cash deal attracts £0 manufacturer support, just whatever dealer margin you might negotiate.
Or, take a 2 year PCP, get £8,500-12,000 deposit contribution and pay 0% APR.Still has the same negotiable dealer margin as cash.
Same applies across the rest of the FCA brands, very few attract any manufacturer support for cash deals - tends to only kick in on old/end of life cycle models to clear the built stock. Similar with BMW and Mercedes the last few years, although they do tend to still offer some manufacturer support for cash deals on the dearer models, but less so than any funded option.
The most manufacturer support goes into PCH/lease products as then the cash price of the car isn't necessarily made known to the user, so they can pump in a huge %age support without appearing to be distress selling/massively discounting and therefore harming residuals.
4941cc said:
Granfondo said:
Ares said:
Granfondo said:
NomduJour said:
Do you think the average punter getting finance saves money over buying it outright? The headline deals are the minority.
Buying outright will always be cheaper than PCP unless 0% to own outright!Cash deal attracts £0 manufacturer support, just whatever dealer margin you might negotiate.
Or, take a 2 year PCP, get £8,500-12,000 deposit contribution and pay 0% APR.Still has the same negotiable dealer margin as cash.
Same applies across the rest of the FCA brands, very few attract any manufacturer support for cash deals - tends to only kick in on old/end of life cycle models to clear the built stock. Similar with BMW and Mercedes the last few years, although they do tend to still offer some manufacturer support for cash deals on the dearer models, but less so than any funded option.
The most manufacturer support goes into PCH/lease products as then the cash price of the car isn't necessarily made known to the user, so they can pump in a huge %age support without appearing to be distress selling/massively discounting and therefore harming residuals.
Excluding 0% which I have already stated.
You can do this with any PCP so you are always going to save the interest paying in full!
So ergo pYing in full is always going to be cheaper than an interest costing PCP.
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