Older car financing. PCP basics....
Discussion
Every car I’ve ever bought I’ve bought outright, but looking for something bigger so looked into finance.
I know enough about financing options but not why PCP isn’t available on cars older than 3-4yrs, I don’t fathom the logic.
Here’s my thinking.
Depreciation is a skate ramp, starts off high, then lessens off, so after a decade (we’re talking like luxury cars) then the depreciation curve is getting flatter. If finance companies are concerned about what’s left for them after the term of 3yr or so, it’s much easier to calculate than a new vehicle which is depreciating in free fall.
For instance, I’m looking at a 10yr old Jag XK... new, they were £75k. Now, £15k. They’re depreciating at around 10% a year now for well kept ones. So, in three year, that £15k is likely about £10-12k. Very little risk. Easy to price for residual values.
So why can’t I get a PCP agreement on it?
Am I missing something fundamental here?
I know enough about financing options but not why PCP isn’t available on cars older than 3-4yrs, I don’t fathom the logic.
Here’s my thinking.
Depreciation is a skate ramp, starts off high, then lessens off, so after a decade (we’re talking like luxury cars) then the depreciation curve is getting flatter. If finance companies are concerned about what’s left for them after the term of 3yr or so, it’s much easier to calculate than a new vehicle which is depreciating in free fall.
For instance, I’m looking at a 10yr old Jag XK... new, they were £75k. Now, £15k. They’re depreciating at around 10% a year now for well kept ones. So, in three year, that £15k is likely about £10-12k. Very little risk. Easy to price for residual values.
So why can’t I get a PCP agreement on it?
Am I missing something fundamental here?
MissTaniaThomaa said:
Not sure on that.
For instance. a 15k loan over three years even at 3% APR is over £400pm but a PCP deal with a GMFV of say £10k is around a third of that.
What’s your thinking?
Surely with the loan at the end you actually own the car , with the pcp at the end of the contract you either pay the balance or hand the car back .For instance. a 15k loan over three years even at 3% APR is over £400pm but a PCP deal with a GMFV of say £10k is around a third of that.
What’s your thinking?
The PCP'd new cars go back into approved used stock at end of term, which is where a second (immediate, or at least very near term) profit is made. Marque residual values are controlled throughout. Asset has actual, known and relatively easily realised value throughout. Asset not particularly dependent on maintenance regularity or quality outside of straightforward servicing easily covered via contract.
None of the above applies to second hand.
None of the above applies to second hand.
Not sure if it helps but admiral do a pcp finance loan fixed at 5.9% from memory. More than a loan at 3%, but will only be for the part your financing and not the GMFV part. Not sure what criteria they have though (ref age, makes etc).
I did notice they mark down the GMFV considerably compared to an OEM on newer cars - Bmw were offering GMFV of 18k on a 35k used car but 12% Apr. Admiral offered 5.9% Apr, but marked the GMFV down to 12k instead of 18k so the monthlies were higher (though likely more equity at the end). Worth a shot? They have an online thingy where you can stick in a number plate and it’ll give you the numbers. It does do a soft credit search (not hard search) so be aware of that.
I did notice they mark down the GMFV considerably compared to an OEM on newer cars - Bmw were offering GMFV of 18k on a 35k used car but 12% Apr. Admiral offered 5.9% Apr, but marked the GMFV down to 12k instead of 18k so the monthlies were higher (though likely more equity at the end). Worth a shot? They have an online thingy where you can stick in a number plate and it’ll give you the numbers. It does do a soft credit search (not hard search) so be aware of that.
MissTaniaThomaa said:
So, in three year, that £15k is likely about £10-12k. Very little risk. Easy to price for residual values.
So why can’t I get a PCP agreement on it?
Because the value could tank and your now 13yr old skip might only be work 5k (or less)So why can’t I get a PCP agreement on it?
To much risk for to little reward for finance co in my op.
The apr% will be rubbish.
Get a personal loan.
MissTaniaThomaa said:
Not sure on that.
For instance. a 15k loan over three years even at 3% APR is over £400pm but a PCP deal with a GMFV of say £10k is around a third of that.
What’s your thinking?
My thinking is that you'll own the car if you take out that loan over 3 years whereas with the PCP deal after three years you'll still owe £10K.For instance. a 15k loan over three years even at 3% APR is over £400pm but a PCP deal with a GMFV of say £10k is around a third of that.
What’s your thinking?
Look at the total amount repayable - the APR is usually painfully high on a used car PCP.
MissTaniaThomaa said:
Every car I’ve ever bought I’ve bought outright, but looking for something bigger so looked into finance.
I know enough about financing options but not why PCP isn’t available on cars older than 3-4yrs, I don’t fathom the logic.
Here’s my thinking.
Depreciation is a skate ramp, starts off high, then lessens off, so after a decade (we’re talking like luxury cars) then the depreciation curve is getting flatter. If finance companies are concerned about what’s left for them after the term of 3yr or so, it’s much easier to calculate than a new vehicle which is depreciating in free fall.
For instance, I’m looking at a 10yr old Jag XK... new, they were £75k. Now, £15k. They’re depreciating at around 10% a year now for well kept ones. So, in three year, that £15k is likely about £10-12k. Very little risk. Easy to price for residual values.
So why can’t I get a PCP agreement on it?
Am I missing something fundamental here?
Why don’t they do it?I know enough about financing options but not why PCP isn’t available on cars older than 3-4yrs, I don’t fathom the logic.
Here’s my thinking.
Depreciation is a skate ramp, starts off high, then lessens off, so after a decade (we’re talking like luxury cars) then the depreciation curve is getting flatter. If finance companies are concerned about what’s left for them after the term of 3yr or so, it’s much easier to calculate than a new vehicle which is depreciating in free fall.
For instance, I’m looking at a 10yr old Jag XK... new, they were £75k. Now, £15k. They’re depreciating at around 10% a year now for well kept ones. So, in three year, that £15k is likely about £10-12k. Very little risk. Easy to price for residual values.
So why can’t I get a PCP agreement on it?
Am I missing something fundamental here?
You cannot get OEM extended warranty on it
Rick-fgpe0 said:
Not sure if it helps but admiral do a pcp finance loan fixed at 5.9% from memory. More than a loan at 3%, but will only be for the part your financing and not the GMFV part. Not sure what criteria they have though (ref age, makes etc).
I did notice they mark down the GMFV considerably compared to an OEM on newer cars - Bmw were offering GMFV of 18k on a 35k used car but 12% Apr. Admiral offered 5.9% Apr, but marked the GMFV down to 12k instead of 18k so the monthlies were higher (though likely more equity at the end). Worth a shot? They have an online thingy where you can stick in a number plate and it’ll give you the numbers. It does do a soft credit search (not hard search) so be aware of that.
Not true. You pay interest on the whole amount borrowed, including the final balloon payment.I did notice they mark down the GMFV considerably compared to an OEM on newer cars - Bmw were offering GMFV of 18k on a 35k used car but 12% Apr. Admiral offered 5.9% Apr, but marked the GMFV down to 12k instead of 18k so the monthlies were higher (though likely more equity at the end). Worth a shot? They have an online thingy where you can stick in a number plate and it’ll give you the numbers. It does do a soft credit search (not hard search) so be aware of that.
Used PCP is typically a very expensive option. The monthly payments might look lower, but if you look at what you’re paying (capital and interest) it will normally cost a lot more than alternative funding options (e.g. a loan).
tickedon said:
Not true. You pay interest on the whole amount borrowed, including the final balloon payment.
Used PCP is typically a very expensive option. The monthly payments might look lower, but if you look at what you’re paying (capital and interest) it will normally cost a lot more than alternative funding options (e.g. a loan).
In addition there is no manufacturer involvement or dealer contribution that you can have on new cars. Used PCP is typically a very expensive option. The monthly payments might look lower, but if you look at what you’re paying (capital and interest) it will normally cost a lot more than alternative funding options (e.g. a loan).
tickedon said:
Not true. You pay interest on the whole amount borrowed, including the final balloon payment.
Used PCP is typically a very expensive option. The monthly payments might look lower, but if you look at what you’re paying (capital and interest) it will normally cost a lot more than alternative funding options (e.g. a loan).
Agree with the above, I wasn’t clear. What I meant was that the monthlies for a loan are likely to be at a lower apr but repaying the whole amount over the term. The monthlies for pcp will probably be a higher apr (and as stated above will be apr on the whole amount) but you’re only paying the monthly cost required to clear the repayment element plus interest on the lot (but not having to repay the GMFV in these payments), rather than clearing the whole lot split monthly with a loan payment. Used PCP is typically a very expensive option. The monthly payments might look lower, but if you look at what you’re paying (capital and interest) it will normally cost a lot more than alternative funding options (e.g. a loan).
As said pcp is expensive as you’re typically paying more interest so if you intend to own the car at the end it’s more expensive to have a higher apr. But from a monthly perspective if you don’t want it at the end, it can work out as a lower monthly payment.
Hope that makes sense.
Too much downside risk for the party /company that needs to provide the PCP.
A good example: modern diesels are well known for clogging up DPF's and EGR'S when used for shorter stop start trips locally...and as we know there were shedloads of diesels sold on PCP's to folks who wanted the lower tax and in some cases enjoy the torque and low down shove that comes with diesel Vs petrols. In the first few years of a new diesel they probably have some tolerance for taking short journeys however after say 3 years the risk of a a DPF or EGR issue likely increases and for some of the nicer German cars it's bl**dy expensive to get it fixed and as a mate of mine found out the hard way smaller independents aren't always able to fix those issues so has to be main dealer and by default top end quotes for the repair work..cue a £3k + bill for my mates Audi to be repaired. It doesn't make any sense for a finance company or even a main dealer to shoulder that risk by offering PCP's on older cars.
A good example: modern diesels are well known for clogging up DPF's and EGR'S when used for shorter stop start trips locally...and as we know there were shedloads of diesels sold on PCP's to folks who wanted the lower tax and in some cases enjoy the torque and low down shove that comes with diesel Vs petrols. In the first few years of a new diesel they probably have some tolerance for taking short journeys however after say 3 years the risk of a a DPF or EGR issue likely increases and for some of the nicer German cars it's bl**dy expensive to get it fixed and as a mate of mine found out the hard way smaller independents aren't always able to fix those issues so has to be main dealer and by default top end quotes for the repair work..cue a £3k + bill for my mates Audi to be repaired. It doesn't make any sense for a finance company or even a main dealer to shoulder that risk by offering PCP's on older cars.
MissTaniaThomaa said:
Not sure on that.
For instance. a 15k loan over three years even at 3% APR is over £400pm but a PCP deal with a GMFV of say £10k is around a third of that.
What’s your thinking?
Because you're paying MUCH less in interest. If you're that bothered about the monthlies then make the term longer. £15k over 5 yrs is more like £270. After 3 yrs you've got something like £6.5k-£7k left to pay on the loanFor instance. a 15k loan over three years even at 3% APR is over £400pm but a PCP deal with a GMFV of say £10k is around a third of that.
What’s your thinking?
If you are referring to the assumptions I made about older German cars...Im not in a position to opine as I drive a 16 yr old shed of the Ford Focus variety 
The £3k figure I mentioned to repair an Audi is not bs, a friend of mine spent that ballpark figure in total as his A6 TDI had repeated issues going back and forth to Audi for repairs...his car was around 5/6 years old and used for a lot of short town stop start journeys but he had no issues whatsoever in the 0-4 years age range.
The £3k figure I mentioned to repair an Audi is not bs, a friend of mine spent that ballpark figure in total as his A6 TDI had repeated issues going back and forth to Audi for repairs...his car was around 5/6 years old and used for a lot of short town stop start journeys but he had no issues whatsoever in the 0-4 years age range.
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