PCP: How many people actually pay the balloon

[SWoll]

Zoobeef said:

I bought my A4 4 years ago for £2k and it's now at 258k miles. I feel I must get a PCP deal £300 a month because it's definitely cheaper than carrying on with what I'm doing.

Good for you, and of course running a 15 year old snotter as a daily is a lot cheaper than having a new car. You do appreciate that most people prefer to sink their money into the car they spend a lot of time in and rely on daily rather than occasional use exotica like you have though?

[Zoobeef]

SWoll said:

Zoobeef said:

I bought my A4 4 years ago for £2k and it's now at 258k miles. I feel I must get a PCP deal £300 a month because it's definitely cheaper than carrying on with what I'm doing.

Good for you, and of course running a 15 year old snotter as a daily is a lot cheaper than having a new car. You do appreciate that most people prefer to sink their money into the car they spend a lot of time in and rely on daily rather than occasional use exotica like you have though?

I'm just chain yanking, I'm sat in a pub bored

The lease/PCP makes perfect sense if we're looking for a new/couple of year old car. The problem is it encourages people into it that would never consider a new car if they weren't available. Therefore the £3-4k everyone used to spend on a car to keep 15 years ago is now £9-10k and they hand it back. That's what makes it "expensive"

[SWoll]

Zoobeef said:

SWoll said:

Zoobeef said:

I bought my A4 4 years ago for £2k and it's now at 258k miles. I feel I must get a PCP deal £300 a month because it's definitely cheaper than carrying on with what I'm doing.

Good for you, and of course running a 15 year old snotter as a daily is a lot cheaper than having a new car. You do appreciate that most people prefer to sink their money into the car they spend a lot of time in and rely on daily rather than occasional use exotica like you have though?

I'm just chain yanking, I'm sat in a pub bored

The lease/PCP makes perfect sense if we're looking for a new/couple of year old car. The problem is it encourages people into it that would never consider a new car if they weren't available. Therefore the £3-4k everyone used to spend on a car to keep 15 years ago is now £9-10k and they hand it back. That's what makes it "expensive"

Not sure I understand your point. Are you suggesting that everyone who now leases cars at £300 a month used to buy cars for £3-4k?

[Crumpet]

Zoobeef said:

I bought my A4 4 years ago for £2k and it's now at 258k miles. I feel I must get a PCP deal £300 a month because it's definitely cheaper than carrying on with what I'm doing.

Good for you! If I was a single man I’d probably do the same and spunk the money saved on weekend toys.

But I’m not and some of us work out of the country for half the year. So while I’m away I don’t want my wife having to worry about a 15 year old stheap leaving her stranded on the M1stuck in lane 2 with the children in the back. So I bought a new Discovery and now at least she can sit in comfort when it leaves her stranded in lane 2 of the M1 with the children in the back.

Joking aside, we have the new car because if (when) it does break, LR Assist bring you a new one while they take away yours to be fixed. I’m happy to pay a premium for that - everyone’s circumstances are different and money isn’t always a major part of the decision.

[liner33]

Not everyone can run a old car for work thanks to restrictions on their car allowance

[NerveAgent]

SWoll said:

Not sure I understand your point. Are you suggesting that everyone who now leases cars at £300 a month used to buy cars for £3-4k?

Do you not agree that PCP/lease enables peoples to spend more than they otherwise would be able to?

If so you may be surprised how much the average white Audi/Evoque owner has in the bank or is able to borrow personally....

[DonHorizon]

SWoll said:

You're paying £14k for something that'll be worth £5-6k in 3 years, so the cost for those 3 years to you is £8-9k. For that same £8-9k over the 3 year period you could lease a much nicer car, hand it back then buy a 3 year old i20 and you'd be no worse off financially?

The 'nicer' car statement aside, am I really being shafted here? I've always loved my old i20 so the thought of having a new one 'was' really appealing to me. The £2,500 off RRP made it even sweeter.

I know where you're coming from in terms of valuation in 3 years time, but am I really making a big mistake now?

[SWoll]

NerveAgent said:

SWoll said:

Not sure I understand your point. Are you suggesting that everyone who now leases cars at £300 a month used to buy cars for £3-4k?

Do you not agree that PCP/lease enables peoples to spend more than they otherwise would be able to?

If so you may be surprised how much the average white Audi/Evoque owner has in the bank or is able to borrow personally....

It provides them the use of new car for much less financial commitment than if they chose to buy it outright with cash.

£300 a month over 3 years would still buy you a £10k car using a personal loan, so far from the £3-4k suggested above, which was my point.

[Zoobeef]

SWoll said:

NerveAgent said:

SWoll said:

Not sure I understand your point. Are you suggesting that everyone who now leases cars at £300 a month used to buy cars for £3-4k?

Do you not agree that PCP/lease enables peoples to spend more than they otherwise would be able to?

If so you may be surprised how much the average white Audi/Evoque owner has in the bank or is able to borrow personally....

It provides them the use of new car for much less financial commitment than if they chose to buy it outright with cash.

£300 a month over 3 years would still buy you a £10k car using a personal loan, so far from the £3-4k suggested above, which was my point.

But would they have bought a £10k car if they had to get a loan? I'd say no. I certainly remember what people used to have 10-15 years ago. A simple monthly payment removes what it actually costs in total, encouraging people to spend more then they would have.

[Elysium]

Zoobeef said:

SWoll said:

NerveAgent said:

SWoll said:

Not sure I understand your point. Are you suggesting that everyone who now leases cars at £300 a month used to buy cars for £3-4k?

Do you not agree that PCP/lease enables peoples to spend more than they otherwise would be able to?

If so you may be surprised how much the average white Audi/Evoque owner has in the bank or is able to borrow personally....

It provides them the use of new car for much less financial commitment than if they chose to buy it outright with cash.

£300 a month over 3 years would still buy you a £10k car using a personal loan, so far from the £3-4k suggested above, which was my point.

But would they have bought a £10k car if they had to get a loan? I'd say no. I certainly remember what people used to have 10-15 years ago. A simple monthly payment removes what it actually costs in total, encouraging people to spend more then they would have.

With HP you are buying the car over the term and incurring interest cost.

With PCP you are paying for the value lost over the term and incurring interest cost.

PCP is not inherently worse than a straight loan. It encourages people to newer cars, where depreciation is greater, so to that extent they spend more.

[NerveAgent]

SWoll said:

It provides them the use of new car for much less financial commitment than if they chose to buy it outright with cash.

£300 a month over 3 years would still buy you a £10k car using a personal loan, so far from the £3-4k suggested above, which was my point.

Well I'm guessing that £10k car will still be worth something after 2-3 years? So yes that is a very good example of how PCP/lease deals enable people to spend more as its not really £300 a month for the HP/cash purchase is it?

Of course, this is for the average man on the street. Not the average PH'r who of course "has the choice" to pay cash.

[Zoobeef]

Elysium said:

Zoobeef said:

SWoll said:

NerveAgent said:

SWoll said:

Not sure I understand your point. Are you suggesting that everyone who now leases cars at £300 a month used to buy cars for £3-4k?

Do you not agree that PCP/lease enables peoples to spend more than they otherwise would be able to?

If so you may be surprised how much the average white Audi/Evoque owner has in the bank or is able to borrow personally....

It provides them the use of new car for much less financial commitment than if they chose to buy it outright with cash.

£300 a month over 3 years would still buy you a £10k car using a personal loan, so far from the £3-4k suggested above, which was my point.

But would they have bought a £10k car if they had to get a loan? I'd say no. I certainly remember what people used to have 10-15 years ago. A simple monthly payment removes what it actually costs in total, encouraging people to spend more then they would have.

With HP you are buying the car over the term and incurring interest cost.

With PCP you are paying for the value lost over the term and incurring interest cost.

PCP is not inherently worse than a straight loan. It encourages people to newer cars, where depreciation is greater, so to that extent they spend more.

That's exactly what I'm trying to say, I think. If you were getting a new one anyway then they make perfect sense to "spend" less on depreciation.

I bet there is a fair few people that, when originally were going out to find a car, weren't even considering anything new.

[SWoll]

Zoobeef said:

SWoll said:

NerveAgent said:

SWoll said:

Not sure I understand your point. Are you suggesting that everyone who now leases cars at £300 a month used to buy cars for £3-4k?

Do you not agree that PCP/lease enables peoples to spend more than they otherwise would be able to?

If so you may be surprised how much the average white Audi/Evoque owner has in the bank or is able to borrow personally....

It provides them the use of new car for much less financial commitment than if they chose to buy it outright with cash.

£300 a month over 3 years would still buy you a £10k car using a personal loan, so far from the £3-4k suggested above, which was my point.

But would they have bought a £10k car if they had to get a loan? I'd say no. I certainly remember what people used to have 10-15 years ago. A simple
monthly payment removes what it actually costs in total, encouraging people to spend more then they would have.

What people? Can only speak from personal experience but 15 years ago I had a 2 year old 330i worth about £20k, £12.5k of that paid for by a personal loan over 3 years at about £350 a month so very simlar to the current outgoings on my wife's leased car.

I personally think leasing a new car makes it far easier for people to understand a total cost as everything can be planned for. Buy at 3 years old out of manufacturers warranty and who knows what big bill could be around the corner or how a new model etc. might affect depreciation? This is one of the things that makes leasing so attractive in my view.

For me at least a daily workhorse car is a monthly bill like any other. I know it's costing me a bit more than buying used but peace of mind is never cheap is it?

[Sheepshanks]

yellowbentines said:

Sheepshanks said:

I do wonder if a lot of the "I'll pay the GFV as the car is worth more" folks are looking at forecourt retail values and not being realistic about the sale (private, trade or p/x) value of their car?

Arguably, why wouldnt you?

Retail is what it would cost to replace it with something similar if you dont pay the balloon, if you do pay the balloon and intend to keep the car long term its current trade value has little relevance.

That makes sense, but some people seem to think they can pay the GFV and then sell the car themselves.

[Elysium]

Sheepshanks said:

yellowbentines said:

Sheepshanks said:

I do wonder if a lot of the "I'll pay the GFV as the car is worth more" folks are looking at forecourt retail values and not being realistic about the sale (private, trade or p/x) value of their car?

Arguably, why wouldnt you?

Retail is what it would cost to replace it with something similar if you dont pay the balloon, if you do pay the balloon and intend to keep the car long term its current trade value has little relevance.

That makes sense, but some people seem to think they can pay the GFV and then sell the car themselves.

They can, I have done it several times. The GFV is generally below trade in value, so in most cases you should be able to beat it with a private sale.

I bought one of my cars on a 4 year PCP. I ran it for 5.5 years in total and ended up selling it for more than than the GFV.

The dealers are guaranteeing a value regardless of market conditions, its obvious that they would want to leave headroom in that number to allow them to sell the car on at a profit.

[Sheepshanks]

Elysium said:

They can, I have done it several times. The GFV is generally below trade in value, so in most cases you should be able to beat it with a private sale.

I bought one of my cars on a 4 year PCP. I ran it for 5.5 years in total and ended up selling it for more than than the GFV.

OK.

Elysium said:

The dealers are guaranteeing a value regardless of market conditions, its obvious that they would want to leave headroom in that number to allow them to sell the car on at a profit.

It's odd that you've done this several times yet don't seem to understand how PCP finance works - it has absolutely nothing to do with the dealer.

[nikaiyo2]

HumanDoing said:

I particularly love the 'probably lives with his mummy' comment - wow with razor sharp debating skills like those, who knows what gold is in your other 20,000 posts!

Just to be clear, is your point that

a) The Fiesta ST is such a crap car that someone should be ridiculed for owning it (outright, as it happens)
b) Owning a car universally lauded for being great bang for buck and a performance bargain makes me LESS qualified to comment on financial issues
c) Both of the above (plus I live with 'my mummy' apparently).

Regarding the rented bike that you don't own, what makes ladies throw themselves as you more - the sight of you in your leathers riding it or the bit where you stop, look back and wink 'I pay £70 a month to PCP this ladies!'

I mean don't get me wrong, renting rather than owning things is a sure fire winner with the very hottest of birds, that point would never be up for debate, never.

Edited by HumanDoing on Friday 20th October 09:13

Why is owning outright such a big thing? You paid I assume £20k ish for your ST (assuming you got an ST3) why would you not pay £230 a month for it?


My Abarth was similar sort of list price, I got a cracking deal on it, so over the PCP term it is going to cost me £8500 give or take, or £236 a month.
That means I have 85 months of motoring before I have spent as much money as you. In that 7 years I will have had 3 new cars to your one, so I get to keep up with the latest updates etc, (you laugh but the old 2010 vintage ford bluetooth no longer streams music from an iPhone) I will never have paid for an MOT, never have paid for a service, never have paid to replace a clutch, head gasket or turbo. Realistically I won't have even had to change brake pads etc.

So in 7 years, when we are at converging spend, you are driving a 7 year old Fiesta worth what £1500? £2000 tops, this is cool, this is where i think the difference comes, to me £300 a year to have new cars is a bloody great deal. You get a warm feeling knowing you own something, I have a disposable car for the cost of one meal out per year...

I also have big issues with spending my wealth on a liability, a car is not an asset, income not wealth should fund liabilities.

I could have purchased my Abarth outright, I bought my 1st one on debit card, but i just can't see where it would make any sense to do that.

As long as the cost for PCP/PCH stay so competitive I can't see me ever paying cash for another car.

[Mandat]

I too would be interested in seeing the stats for those on PCP who settle the GFV compared to those who hand back & walk away.

In my own experience, I bought my Q5 in 2014 on a 3 year PCP, with the intention of part exchanging for the new model Q5 in 2017.

My cicrumstances changed somewhat and, and when I got a Mustang as a second car this year, I decided to keep the Q5 rather than changing for a new one, as I couldn't justify to myself getting 2 new cars in the same year, particualrly as the Q5 is now much rearly used, with the Mustang being used as a daily driver.

The ballon was £21k, compared to a market value of circa £24k.

[Elysium]

Sheepshanks said:

Elysium said:

The dealers are guaranteeing a value regardless of market conditions, its obvious that they would want to leave headroom in that number to allow them to sell the car on at a profit.

It's odd that you've done this several times yet don't seem to understand how PCP finance works - it has absolutely nothing to do with the dealer.

Might be better if you explained they point you are trying to make?

The dealer is selling the car and arranging the finance deal - they have discretion on the level of discount and the interest rate. Suggesting that PCP is 'nothing to do with them' is a bit of a leap.

[daemon]

Elysium said:

Sheepshanks said:

Elysium said:

(1) The dealers are guaranteeing a value regardless of market conditions, (2) its obvious that they would want to leave headroom in that number to allow them to sell the car on at a profit.

It's odd that you've done this several times yet don't seem to understand how PCP finance works - it has absolutely nothing to do with the dealer.

Might be better if you explained they point you are trying to make?

The dealer is selling the car and arranging the finance deal - they have discretion on the level of discount and the interest rate. Suggesting that PCP is 'nothing to do with them' is a bit of a leap.

Your original statements (quoted) are banal :-

(1) The dealer doesnt set the residual value - they have no control over it - the finance company sets it.

(2) The dealer doesnt by default get the car back if the customer hands it back at the end of term - the finance company does, so there is no direct ability for them to get the car back and sell it on for a profit.