PCP, an M4, and a larger deposit.
Discussion
Right folks, never had a PCP deal before, always bought cash or a straight loan.
Just after buying a house but have a bit of spare cash lying around and have fancied getting myself into an M4 for a while. At the moment I have an E92 320d which is valued by a dealer at around the 8k mark. No outstanding finance on it.
The most I would be wanting to pay just now, monthly wise, would be around 300 quid. I can get to this figure (for a 2016 45K M4) with a PCP by using my own car + 7K ish as a deposit. Apparently the bigger deposit will mean I pay less in interest over the course of the PCP, but what else should I be worried about or am I missing something obvious? I mentioned to the sales guy about what would be the situation after a couple of years if I wanted to change to something more 'normal' again. He seemed to think that because of the larger deposit (he'd worked it out around 33% of car value on the paper work) I would always be on the 'right side' of having some equity with the car whether it was after 2 years or going the full 48 months.
Any advice for a PCP newbie?
Just after buying a house but have a bit of spare cash lying around and have fancied getting myself into an M4 for a while. At the moment I have an E92 320d which is valued by a dealer at around the 8k mark. No outstanding finance on it.
The most I would be wanting to pay just now, monthly wise, would be around 300 quid. I can get to this figure (for a 2016 45K M4) with a PCP by using my own car + 7K ish as a deposit. Apparently the bigger deposit will mean I pay less in interest over the course of the PCP, but what else should I be worried about or am I missing something obvious? I mentioned to the sales guy about what would be the situation after a couple of years if I wanted to change to something more 'normal' again. He seemed to think that because of the larger deposit (he'd worked it out around 33% of car value on the paper work) I would always be on the 'right side' of having some equity with the car whether it was after 2 years or going the full 48 months.
Any advice for a PCP newbie?
steve-5snwi said:
Your putting 15k in so you make the payments manageable, so while it will have some warranty and possibly a service pack at the end of the term you will own nothing, I couldn't put 15k into a PCP for an M4 its dead money.
Whilst the payments are fairly low what you need to think about is what you will do at the end of the agreement, in most cases on PCP cars are worth somewhere around their guaranteed future value and not much more so your £15k deposit may well turn in to little or no equity at the end of the agreement- are you prepared to accept this as it may mean you cannot go for such a nice car next time around unless you have/can find another 5 figure deposit?Nickp82 said:
Whilst the payments are fairly low what you need to think about is what you will do at the end of the agreement, in most cases on PCP cars are worth somewhere around their guaranteed future value and not much more so your £15k deposit may well turn in to little or no equity at the end of the agreement- are you prepared to accept this as it may mean you cannot go for such a nice car next time around unless you have/can find another 5 figure deposit?
Yeah, I know what you're saying. Adding it up between a large deposit and smaller payments, or bigger payments and a smaller deposit, the former seems to give the better deal over the 48 months due to paying less interest overall. The salesman mentioned they get a lot of people back in at the end of a PCP deal expecting to still have a big deposit for another car and are shocked to hear that it has 'gone'.steve-5snwi said:
Your putting 15k in so you make the payments manageable, so while it will have some warranty and possibly a service pack at the end of the term you will own nothing, I couldn't put 15k into a PCP for an M4 its dead money.
Put in £0 or £15k + the PPMs total spent will be more or less the same. Welshbeef said:
steve-5snwi said:
Your putting 15k in so you make the payments manageable, so while it will have some warranty and possibly a service pack at the end of the term you will own nothing, I couldn't put 15k into a PCP for an M4 its dead money.
Put in £0 or £15k + the PPMs total spent will be more or less the same. jontysafe said:
I did this on a 48k M6. Put in 18k and low and behold after 18months my deposit had disappeared with the depreciation fairies along with the value paid off in that time. Was lucky to get out with no negative equity.
Id look at a cheap lease deal.
Lol one key part of PCP is GFV it's risk free and you couldn't care less about negative equityId look at a cheap lease deal.
steve-5snwi said:
Your putting 15k in so you make the payments manageable, so while it will have some warranty and possibly a service pack at the end of the term you will own nothing, I couldn't put 15k into a PCP for an M4 its dead money.
It's hardly "dead money" since the greater the initial depoist, the lower the over all re-payments will be since you will have less interest to pay on a lower sum borrowed. jontysafe said:
The risk you take is all that it will be worth is the paltry GFV and these deals are sold a lot of the time that the car will be worth a whole lot more. Which is not going to happen.
Well if there are naive people out there then fair enough - if OEM believe it will be worth more then pony up the GFV / split the difference with you that's confidence in future. Skies otherwise it's lip service. OP - the total cost will be same either way (bar some interest). The difference is cashflow only:
Big deposit + low monthlies
Low deposit + big monthlies
Aiming for low payments each month is "eroding" your initial £15k deposit.
As long as you're comfortable with the cost there is no right or wrong. For me, I'd want to be sure I could afford the big monthlies as an acid test to being comfortable with the overall cost of the vehicle, but I may choose to go for lower monthlies if that suited my cash profile better (I.e access that interest rate saving, if material)
Big deposit + low monthlies
Low deposit + big monthlies
Aiming for low payments each month is "eroding" your initial £15k deposit.
As long as you're comfortable with the cost there is no right or wrong. For me, I'd want to be sure I could afford the big monthlies as an acid test to being comfortable with the overall cost of the vehicle, but I may choose to go for lower monthlies if that suited my cash profile better (I.e access that interest rate saving, if material)
Many thanks for replies folks, some food for thought. Still trying to come round to the idea of basically renting/leasing a car instead of my usual cash or straight loan situation with an asset at the end of the specified period.
As for the car I was looking at, went back today and it was sold.. so back to the search again.
As for the car I was looking at, went back today and it was sold.. so back to the search again.
Scrubs said:
Many thanks for replies folks, some food for thought. Still trying to come round to the idea of basically renting/leasing a car instead of my usual cash or straight loan situation with an asset at the end of the specified period.
)
Here's something to help you with your thinking:)
Even if you buy the car outright, when you eventually come to sell it, you will lose a certain amount, due to depreciation.
If you work out the total amount lost, divided by the number of months that you have had the car, you will get a cost per month, which is basicly the same thing as you would have if you rent / lease a car.
Obviously, the cost per month can differ, and will be dependant on a lot of different factors but the principle is the same, therefore don't make the mistake of thinking that having an assett at the end of the specified period is the be all and end all.
Mandat said:
Here's something to help you with your thinking:
Even if you buy the car outright, when you eventually come to sell it, you will lose a certain amount, due to depreciation.
If you work out the total amount lost, divided by the number of months that you have had the car, you will get a cost per month, which is basicly the same thing as you would have if you rent / lease a car.
Obviously, the cost per month can differ, and will be dependant on a lot of different factors but the principle is the same, therefore don't make the mistake of thinking that having an assett at the end of the specified period is the be all and end all.
Unless of course you buy it new and literally keep it forever. Even if you buy the car outright, when you eventually come to sell it, you will lose a certain amount, due to depreciation.
If you work out the total amount lost, divided by the number of months that you have had the car, you will get a cost per month, which is basicly the same thing as you would have if you rent / lease a car.
Obviously, the cost per month can differ, and will be dependant on a lot of different factors but the principle is the same, therefore don't make the mistake of thinking that having an assett at the end of the specified period is the be all and end all.
Super long term ownership >15years from new will see a very nice slow depreciation cost to you on a pcm basis.
Then again buy at 3years old save 50% of the new price keep it for 7 years you'll then be fine.
Mandat said:
Here's something to help you with your thinking:
Even if you buy the car outright, when you eventually come to sell it, you will lose a certain amount, due to depreciation.
If you work out the total amount lost, divided by the number of months that you have had the car, you will get a cost per month, which is basicly the same thing as you would have if you rent / lease a car.
Obviously, the cost per month can differ, and will be dependant on a lot of different factors but the principle is the same, therefore don't make the mistake of thinking that having an assett at the end of the specified period is the be all and end all.
I agree with this as well. You have to include the resale under a "but outright" scenario to make it a fair comparison to leasing.Even if you buy the car outright, when you eventually come to sell it, you will lose a certain amount, due to depreciation.
If you work out the total amount lost, divided by the number of months that you have had the car, you will get a cost per month, which is basicly the same thing as you would have if you rent / lease a car.
Obviously, the cost per month can differ, and will be dependant on a lot of different factors but the principle is the same, therefore don't make the mistake of thinking that having an assett at the end of the specified period is the be all and end all.
Gassing Station | Car Buying | Top of Page | What's New | My Stuff