PCP: How many people actually pay the balloon
Discussion
nikaiyo2 said:
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.
My post was more in opposition to a 'debating style' that includes assuming anyone who disagrees must 'live with their mummy' and that the ST is somehow a joke of a car. But regarding your specific points: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.
I actually paid just under 13k for my ST, at 2 years old. I intend to own it until it is 10 years old so if it is worth £2k then, that'll be £11k over 8 years = £1,375 per year in depreciation, or around £115 per month. For me, that's outstanding value, even adding in that yes there is the potential for big repairs and I'm paying for MOTs, tax etc. If people want to laugh at the Fiesta ST on here, Lord knows how they'd react to the sort of cars that go for around £100 per month on PCP (without even including the upfront deposit):
https://www.carwow.co.uk/best/cars-under-100-per-m...
I fail to see how a system set up to line the pockets of finance companies and dealers by perpetually keeping people paying the most expensive part of the depreciation curve can be the best financial product for the customer IN MOST CASES. Yes people may be able to find the odd one where it works out compared to leasing, but compared to buying at two years?
HumanDoing said:
I fail to see how a system set up to line the pockets of finance companies and dealers by perpetually keeping people paying the most expensive part of the depreciation curve can be the best financial product for the customer IN MOST CASES.
That's clear, but what's less clear is your opposition to trying to learn.The retail price of a lot of cars is inflated, and many dealers will not discount to their minimum profitable price, as once people knew that they could pay that little, they'd never sell any at the full price.
What they can do, though, is make them available through lease deals, where the actual selling price is never explicitly revealed. That way they shift cars without compromising on the higher price cash sales that they are also making.
It's pretty standard economic theory, you'll sell as many units as you can at cost of production plus one penny as long as that doesn't stop you selling any units at the higher prices that you can achieve through other routes.
James_B said:
HumanDoing said:
I fail to see how a system set up to line the pockets of finance companies and dealers by perpetually keeping people paying the most expensive part of the depreciation curve can be the best financial product for the customer IN MOST CASES.
That's clear, but what's less clear is your opposition to trying to learn.The retail price of a lot of cars is inflated, and many dealers will not discount to their minimum profitable price, as once people knew that they could pay that little, they'd never sell any at the full price.
What they can do, though, is make them available through lease deals, where the actual selling price is never explicitly revealed. That way they shift cars without compromising on the higher price cash sales that they are also making.
It's pretty standard economic theory, you'll sell as many units as you can at cost of production plus one penny as long as that doesn't stop you selling any units at the higher prices that you can achieve through other routes.
James_B said:
That's clear, but what's less clear is your opposition to trying to learn.
The retail price of a lot of cars is inflated, and many dealers will not discount to their minimum profitable price, as once people knew that they could pay that little, they'd never sell any at the full price.
What they can do, though, is make them available through lease deals, where the actual selling price is never explicitly revealed. That way they shift cars without compromising on the higher price cash sales that they are also making.
It's pretty standard economic theory, you'll sell as many units as you can at cost of production plus one penny as long as that doesn't stop you selling any units at the higher prices that you can achieve through other routes.
How does any of that relate to the comparison of cost per month, which is the only thing that's relevant? One can't just say 'well, I'm paying twice what I would per month if I bought used and kept it a long time, but I got a 'discount' by going PCP/lease so somehow this makes financial sense yayy!!' The retail price of a lot of cars is inflated, and many dealers will not discount to their minimum profitable price, as once people knew that they could pay that little, they'd never sell any at the full price.
What they can do, though, is make them available through lease deals, where the actual selling price is never explicitly revealed. That way they shift cars without compromising on the higher price cash sales that they are also making.
It's pretty standard economic theory, you'll sell as many units as you can at cost of production plus one penny as long as that doesn't stop you selling any units at the higher prices that you can achieve through other routes.
HumanDoing said:
How does any of that relate to the comparison of cost per month, which is the only thing that's relevant? One can't just say 'well, I'm paying twice what I would per month if I bought used and kept it a long time, but I got a 'discount' by going PCP/lease so somehow this makes financial sense yayy!!'
If the buying price is hidden but lower, then it will drop the cost per month, given that the final price is the same.I genuinely think that you must be trolling at this point, as you are asking questions too naive for anyone being serious.
The conversation is around whether buying a new car outright or financing it is a better deal overall. The heavily reduced initial price on the PCP deal can mean that even though the finance company is making a profit, the buyer can also come out ahead.
Seriously, how can you struggle to understand this?
James_B said:
If the buying price is hidden but lower, then it will drop the cost per month, given that the final price is the same.
I genuinely think that you must be trolling at this point, as you are asking questions too naive for anyone being serious.
The conversation is around whether buying a new car outright or financing it is a better deal overall. The heavily reduced initial price on the PCP deal can mean that even though the finance company is making a profit, the buyer can also come out ahead.
Seriously, how can you struggle to understand this?
The discussion is about whether paying the balloon is better than rolling in to another PCP. The answer to that is that most people roll in to another PCP and usually they won't have been budgeting, or even able to budget, for the balloon as if they had that sort of money they wouldn't need to PCP. As always with this discussion, people are entitled to their own opinions (they prefer new cars, they like paying on the monthlies or whatever) but NOT their own facts (that PCPs work out cheaper or that it's better to invest the money because they have a unique gift fo stock picks whereby they always make money and therefore the capital is never really at risk bahahaha). I genuinely think that you must be trolling at this point, as you are asking questions too naive for anyone being serious.
The conversation is around whether buying a new car outright or financing it is a better deal overall. The heavily reduced initial price on the PCP deal can mean that even though the finance company is making a profit, the buyer can also come out ahead.
Seriously, how can you struggle to understand this?
As I've said before, what we have here is a phenomenon known as groupthink https://en.wikipedia.org/wiki/Groupthink whereby a whole bunch of car enthusiasts come on here to tell each other that repeatedly paying the most expensive part of the ownership period for a car, egged on by a gleefully enthusiast dealership, is somehow the most financially savvy way to own a vehicle. People often give individual examples as if that somehow proves anything - the equivalent of a medical company submitting the outcome for one patient out of a trial of hundreds of thousands as evidence for the efficacy of a new drug they wish to introduce. Many people on here clearly can't get their heads around the idea that one anecdote can't necessarily be applied to the whole market/population.
And also as I've said before - I defy anyone to find a prominent financial expert who would agree with the notion that repeatedly running PCPs is ultra-groovy yeah yeah groovy man. The idea that somehow getting a couple of grand knocked off list price is relevant is truly ludicrous - a PCP will cost far more than any saving in interest costs and PCPers aren't dealing with list costs or buying outright, that's why they PCP.
What's more likely - that you've outsmarted the finance arms of global multinationals, or that they want you to think that as they joyfully rake in your cash?
HumanDoing said:
The discussion is about whether paying the balloon is better than rolling in to another PCP. The answer to that is that most people roll in to another PCP and usually they won't have been budgeting, or even able to budget, for the balloon as if they had that sort of money they wouldn't need to PCP. As always with this discussion, people are entitled to their own opinions (they prefer new cars, they like paying on the monthlies or whatever) but NOT their own facts (that PCPs work out cheaper or that it's better to invest the money because they have a unique gift fo stock picks whereby they always make money and therefore the capital is never really at risk bahahaha).
Thats a sweeping and baseless statement, many people you choose pcp can afford to buy with cash, they chose not to for many reasons 1) They like the flexibility of pcp and change cars frequently
2) They prefer to use their capital elsewhere
3) They dont want the hassle of selling a car
4) They can control their expenditure accurately
Some pcp's are 0% why would anyone use their cash if the dealer is paying the interest? They are often cheaper or at least no more expensive that using cash.
PCP's are good for dealers since (as a dealer pointed out in this thread) it brings the customer back to the dealer in a few years time and customer retention is worth money to manufacturers
Of course you wont be told no matter how many people tell you.
liner33 said:
Thats a sweeping and baseless statement, many people you choose pcp can afford to buy with cash, they chose not to for many reasons
1) They like the flexibility of pcp and change cars frequently
2) They prefer to use their capital elsewhere
3) They dont want the hassle of selling a car
4) They can control their expenditure accurately
Some pcp's are 0% why would anyone use their cash if the dealer is paying the interest? They are often cheaper or at least no more expensive that using cash.
PCP's are good for dealers since (as a dealer pointed out in this thread) it brings the customer back to the dealer in a few years time and customer retention is worth money to manufacturers
Of course you wont be told no matter how many people tell you.
Of course, when you say "many" you are referring to a tiny minority.1) They like the flexibility of pcp and change cars frequently
2) They prefer to use their capital elsewhere
3) They dont want the hassle of selling a car
4) They can control their expenditure accurately
Some pcp's are 0% why would anyone use their cash if the dealer is paying the interest? They are often cheaper or at least no more expensive that using cash.
PCP's are good for dealers since (as a dealer pointed out in this thread) it brings the customer back to the dealer in a few years time and customer retention is worth money to manufacturers
Of course you wont be told no matter how many people tell you.
liner33 said:
Thats a sweeping and baseless statement, many people you choose pcp can afford to buy with cash, they chose not to for many reasons
1) They like the flexibility of pcp and change cars frequently
2) They prefer to use their capital elsewhere
3) They dont want the hassle of selling a car
4) They can control their expenditure accurately
Some pcp's are 0% why would anyone use their cash if the dealer is paying the interest? They are often cheaper or at least no more expensive that using cash.
PCP's are good for dealers since (as a dealer pointed out in this thread) it brings the customer back to the dealer in a few years time and customer retention is worth money to manufacturers
Of course you wont be told no matter how many people tell you.
I said 'usually', not 'always'. To take your reasons in turn:1) They like the flexibility of pcp and change cars frequently
2) They prefer to use their capital elsewhere
3) They dont want the hassle of selling a car
4) They can control their expenditure accurately
Some pcp's are 0% why would anyone use their cash if the dealer is paying the interest? They are often cheaper or at least no more expensive that using cash.
PCP's are good for dealers since (as a dealer pointed out in this thread) it brings the customer back to the dealer in a few years time and customer retention is worth money to manufacturers
Of course you wont be told no matter how many people tell you.
1) If people wish to pay a premium for that, it's their business, fine.
2) Possible but as always, it's funny how on here we never get anyone saying 'I took a PCP to keep my money in tracker index funds ... and the market dipped 25% over the 3 year period'. It's always 'yeah I got 12% every year so what sort of mug would not take that risk, I mean come on can't you all see faultlessly in to the future like I can?' I doubt overpaying a mortgage beats PCP interest in most cases either.
3) It is a hassle but we're talking about the best economic outcome, not the most 'hassle-free' economic outcome. If it takes 10 hours of annoyance and graft to flog a car for a grand more, I do hope all these people saying they can't be arsed are on more than £100 per hour ...
4) You could make the same argument about having a phone or toaster on contract 'at least I can control my expenditure'. Never mind the incredible premium paid for doing so.
Also very few PCPs are 0% and even for those that are, we don't know what may have happened before the '0%' figure gets to you as customer to cushion that supposedly interest free deal.
As I say, the thread is supposed to be about how many people actually pay the balloon and reasons for why the number appears to be so few, not an argument about whether PCP is 'better'.
swerni said:
You mean like you and your fiesta?
I`m paying £70 a month for a bike that would have cost me north of £12k.
Over three years I pay a total of £2640 ( including arrangement fee)
I could pay cash but I'm seeing on average 5% on investments (net)
That equates to £1,390 return over the period on £12k ( compound)
Subtract that from my PCP payment and the true cost is £1,250 over 3 years.
I have no intention of keeping it
However, I if I did want to, as the dealer has paid the deposit and the whole plan is at 0%, i've ended up paying significantly less than had i walked in with cash.
However you're the financially savvy one and one your example of your Fiesta is meaningful because you own it out right, while no one else's is.
As a matter of interest, do you factor on the cost of the money you have plowed into a depreciation asset when looking at its true cost?
If you're putting words in to my mouth to 'win' the debate then perhaps your argument isn't all that strong? I didn't say my example was the only meaningful one, it is just an example in direct response to some bloke's post - the other guy had put my purchase cost at £20,000 in order to 'prove' PCP is better, that's nearly twice what I paid. Also as I said in my post, you could just as easily lose 30% on your investments next year as continue to make 5% per year, so would the deal be so great then? Or have you sold the investments now? I`m paying £70 a month for a bike that would have cost me north of £12k.
Over three years I pay a total of £2640 ( including arrangement fee)
I could pay cash but I'm seeing on average 5% on investments (net)
That equates to £1,390 return over the period on £12k ( compound)
Subtract that from my PCP payment and the true cost is £1,250 over 3 years.
I have no intention of keeping it
However, I if I did want to, as the dealer has paid the deposit and the whole plan is at 0%, i've ended up paying significantly less than had i walked in with cash.
However you're the financially savvy one and one your example of your Fiesta is meaningful because you own it out right, while no one else's is.
As a matter of interest, do you factor on the cost of the money you have plowed into a depreciation asset when looking at its true cost?
NerveAgent said:
liner33 said:
Thats a sweeping and baseless statement, many people you choose pcp can afford to buy with cash, they chose not to for many reasons
1) They like the flexibility of pcp and change cars frequently
2) They prefer to use their capital elsewhere
3) They dont want the hassle of selling a car
4) They can control their expenditure accurately
Some pcp's are 0% why would anyone use their cash if the dealer is paying the interest? They are often cheaper or at least no more expensive that using cash.
PCP's are good for dealers since (as a dealer pointed out in this thread) it brings the customer back to the dealer in a few years time and customer retention is worth money to manufacturers
Of course you wont be told no matter how many people tell you.
Of course, when you say "many" you are referring to a tiny minority.1) They like the flexibility of pcp and change cars frequently
2) They prefer to use their capital elsewhere
3) They dont want the hassle of selling a car
4) They can control their expenditure accurately
Some pcp's are 0% why would anyone use their cash if the dealer is paying the interest? They are often cheaper or at least no more expensive that using cash.
PCP's are good for dealers since (as a dealer pointed out in this thread) it brings the customer back to the dealer in a few years time and customer retention is worth money to manufacturers
Of course you wont be told no matter how many people tell you.
Edited by daemon on Sunday 22 October 16:38
swerni said:
I'm quoting you that's all, not putting any words into your mouth, if you can't see that them there isn't much point in having a debate. I didn't know there was something to "win"either, I just think you are a tad naive and blinkered in your outlook
I didn't put your car at 20k, I'm just giving you an equally valid and real scenario.
I couldn't pay cash and get the bike as cheaply as i did.
You also seem to be ignoring the cost of your own money, you have a mortgage, therefore in reality, you don't own the car outright, you've borrowed the cash against the value of your house
If you want to be consistent and accurate, you need to factor in the cost of that money.
For balance, I once leased a car, this is the only thing I've ever pcp'd and the rest I've paid for in cash, I can see all sides of the argument and purchase based on what gives me the best return.
I don't have any axe to grind.
I'm not ignoring anything - it's you that is refusing to tell me if you sold your shares, thus realising this 5% gain, or if you are bizarrely assuming this run will go on forever - what if there is a 30% correction over the next 12 months? I didn't put your car at 20k, I'm just giving you an equally valid and real scenario.
I couldn't pay cash and get the bike as cheaply as i did.
You also seem to be ignoring the cost of your own money, you have a mortgage, therefore in reality, you don't own the car outright, you've borrowed the cash against the value of your house
If you want to be consistent and accurate, you need to factor in the cost of that money.
For balance, I once leased a car, this is the only thing I've ever pcp'd and the rest I've paid for in cash, I can see all sides of the argument and purchase based on what gives me the best return.
I don't have any axe to grind.
HumanDoing said:
I'm not ignoring anything - it's you that is refusing to tell me if you sold your shares, thus realising this 5% gain, or if you are bizarrely assuming this run will go on forever - what if there is a 30% correction over the next 12 months?
I'll bite, I did. Bought an S3 on PCP, had money invested in Lloyds, made £25k, bought a house. Had I paid cash for the car I wouldn't own the house. swerni said:
Don't' be a dick
If the interest rate goes to 15% in this great correction and house prices dive you'll be screwed and homeless.
wont be so smug then will you Audi boy
Haha don't worry I've returned to the safety of blue collar motoring and drive a Ford. So I'll be homeless and drive a Ford, Jesus my future looks bleak.If the interest rate goes to 15% in this great correction and house prices dive you'll be screwed and homeless.
wont be so smug then will you Audi boy
I don't have a PCP and don't own a car at the moment. PCP or finance isn't my thing anyway, so if I needed a car, I'd look at something I can buy outright.
If I had a PCP and the end of term was imminent, I'd look into the value of the vehicle against the optional final payment thing and take it from there. If the sums stacked up I'd be one of the small percentages buying the car.
One thing that I don't agree with is the way the used market is fixed by the manufacturers.
I couldn't give a stuff about what others do with their money. Its annoying the way the economy is built around debt though. I think we will see some change if and when interest rates rise.
If I had a PCP and the end of term was imminent, I'd look into the value of the vehicle against the optional final payment thing and take it from there. If the sums stacked up I'd be one of the small percentages buying the car.
One thing that I don't agree with is the way the used market is fixed by the manufacturers.
I couldn't give a stuff about what others do with their money. Its annoying the way the economy is built around debt though. I think we will see some change if and when interest rates rise.
swerni said:
5% is conservative, (i'm not claiming to be making massive returns) all are long term investments so the next 12 months are irrelevant. A 30% correction would still see me well ahead and will mean nothing in 10 years time.
There is nothing bizarre about it and you are clearly venturing into areas that you know nothing about.
take the FTSE 100 as a prime example ( feel free to google what it is if you're unsure)
So care to comment on the true cost of your car?
Thought not
Haha yeah that's right, I understand rates of return, capital risk, index trackers/active funds etc. but have never heard of the FTSE 100, yes you're right, well done. My point is that anyone who, for example, took out a PCP in 2005 smugly assuming their stocks would continue to rise would'n't have been feeling too smart about their decision in 2008 when their stocks would've dived massively and they had no car at the end of the PCP. Maybe they didn't need to sell, maybe they did. You did well, great. I couldn't be more pleased for you - nice to see you've remained grounded and not become pompously condescending to anyone with whom you disagree. There is nothing bizarre about it and you are clearly venturing into areas that you know nothing about.
take the FTSE 100 as a prime example ( feel free to google what it is if you're unsure)
So care to comment on the true cost of your car?
Thought not
You know nothing of what the market will be like in 10 years, not can you say with any certainty that past performance is any indicator of future performance. Assuming returns are a certainty over the length of a PCP is indeed very bizarre - perhaps you'd like to direct me to a reputable investment firm/financial expert who views a 3 or 4 year period as anything other than very short term?
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