When is PCP a good deal?

[loofer]

Only ever bought second hand sheds but now onto my 2nd PCH. Yet to see the appeal with PCP but there must be occasions when it works out better.

Been considering Kodiaqs as I need a 7seater. PCH deals aren’t really there, except for the petrol version which which works out ~£14.7k over the 4 years or £11.9k over 3 years. Obviously means I’m out of warranty in 4th year but it’s the better deal

Even though I’m a PCH convert, £15k seems a phenomenal amount to pay for convenience over “equity”.

So I’ve considered PCP and ran some numbers. Trying to see if I’ve got it right.
The Kodiaq I’m considering, which would be SE L, mid range trim/spec, with optional special colour (Meteor Grey - I’m thinking residuals here) but it’s diesel so don’t know how that will fare in 3 years time as we move closer to greener vehicles.

OTR £35,440
CarWoW (20% “discount”) £28,120 on condition I take Skoda’s PCP.

Based on Skoda website calculator and their condition that the total deposit, including Skoda contribution, can’t exceed 30% of the OTR price
My total payments over 3 years would be almost £15.5k. Regardless of how I increase/decrease deposit/monthlies.

So straight away that’s more money for 1 year less of motoring, plus 2 years of road tax on me. Not so great.

Now, based on 10k/pa miles, the optional payment after 3 years is £14k. It’s a similar final payment even if set it at 5k/pa so I’m a bit perplexed how that can be the case. Is this where the value of PCP kicks in?

Anyway, having a quick look at Autotrader for 2017 models of same spec and 30k miles, they’re advertised around £21-£22k.

Now if I did 8k miles per year, it doesn’t seem far fetched to be able to expect a private sale of say £20k.

In theory, I would’ve made £5-6k on paper by buying and selling the vehicle and if offset that against the monthlies I’ve paid so far, it would stand me £11k for 3 years motoring, plus road tax

The biggest headache in all this seems to be trying to guess what I could sell it for. The Kodiaq was a brand new model, released in 2017. In another 3 years I would expect a refresh/facelift if not a new version. All effecting residuals.

So is PCP just a big gamble?

[FlyingPanda]

I’ve run these sorts of calculations so many different ways, and they nearly always end up too close to call for 3 or 4 years ahead.

I’ve usually only been able to tell whether I was right or wrong when I got to the end of the PCP, and assessed the value of the car in the then-current market. Some I’ve bought at the end of the PCP because the car was easily worth more than the GFV and I wanted to keep the car. Others I’ve handed back because there was no real value in keeping it, but these have all been marginal decisions.

A new model in the interim could affect the later values, so looking at the current price of a 3yr old model might not help that much. However, a really good PCP deal on an outgoing model could get you a healthy incentive from the manufacturer though (see BMW’s current deals on M4s etc) which offsets this.

In the end, I treat a PCP as a rental that I have three options with (buy it, hand it back or VT it). The three options (and some very good dealer-supported offers) have always swung me towards PCP, but truthfully there’ll be very little between them at the end of the day.

[churchie2856]

PCP is easier to terminate early.

I think you have to know what the plan is beyond the end of the agreement. If intending to buy PCP is the obvious, but remember many leasing compaines will still sell to you.

I PCP'ed my 718, because over 3 years I could get a better deal than PCH.
Prior to that, I PCH'ed a Golf R, because the three year agreement was way cheaper than anything VW finance could do (PCP or PCH). My wife PCHs her Seat Arona, because no SEAT delear could get close on PCP over 3 years.

In general PCH volume cars (Golf, SEAT, Skoda), PCP niche cars (718).

The above is my view for new cars. For older cars, I typically pay cash or personal loan.

[hoganscrogan]

churchie2856 said:

PCP is easier to terminate early.

I think you have to know what the plan is beyond the end of the agreement. If intending to buy PCP is the obvious, but remember many leasing compaines will still sell to you.

I PCP'ed my 718, because over 3 years I could get a better deal than PCH.
Prior to that, I PCH'ed a Golf R, because the three year agreement was way cheaper than anything VW finance could do (PCP or PCH). My wife PCHs her Seat Arona, because no SEAT delear could get close on PCP over 3 years.

In general PCH volume cars (Golf, SEAT, Skoda), PCP niche cars (718).

The above is my view for new cars. For older cars, I typically pay cash or personal loan.

I'd second the above - also PCH if you are able to 'chase the deal' and ignore spec/model/make/category - I was looking at VW Tiguans and ended up with a Volvo V90 due to some amazing deals.

PCP for getting spec. model colour you are fixed on

[Nano2nd]

Having been in the market for a replacement 4x4 for our X3 and potential replacement daily (Sirocco), i'm not precious about the way to buy, but clearly i want the best deal - i.e. the lowest TCO option, pretty much without exception, PCH is the cheapest way to go on a new expensive'ish car, especially as it includes RFL, taking the X3 as a example RFL amortizes to £37.50pm in years 2,3,4 etc - not an insignificant amount to factor in when PCP'ing or even cash buying.

Cash buying a second hand car is clearly the lowest cost option, but in the same vain, not buying a car at all is pretty cheap for me that's not an apples to apples comparison, whilst i considered it, i just can't get it to work as there's a lot unknowns thrown in that could bite you and skew the figures.

The main advantages of PCP to me (and maybe worth a slight premium) is you have some flexibility to change and terminate early (at at a price) - you can also spec a car with options at a cheaper rate than options cost on PCH generally. PCH as said, is cheaper, but you are locked in, or indeed have a very expensive opt out solution (50% of remaining payments for example) - another advantage to me is it removes any temptation to change and pretty much fixes your cost of motoring for the term, as its turned out with my VW the extension was silly cheap - £307pm down to £194pm, makes the TCO for 3 years a bargain IMO.

As i've not been able to find a suitable stock car deal, i've just FTK'd on a factory build RRS PHEV on a 1+47 PCH, no one could get near it with a PCP unfortunately.

[loofer]

thanks all. some valuable advice.
I'm generally not fussed about the car, too much. usually chase the deal but won't settle for anything.
Seems easier to know if if a PCH is a decent deal or not.

Thought I would wade into PCP territory but on this occasion, it's not for me.

[loofer]

12 months on ...

ended up buying a £1400 shed to get me through the year. It's now due it's MOT. I know at least one thing wrong with it which I'm hoping to get sorted this week iA.

If it passes the MOT (without requiring expensive remedial work) then I'll keep it, get it serviced and hang on for another year.
If it fails, on some major work then I'll try and chop it in for something newer.

I've since learnt that PCP generally works out better on Brand New cars due to a better rate and sometimes discounts - compared to nearly new.
Anything other than that is just crap terms

Quick question when it comes to settling the PCP finance within Day 1-14 with say cash/cheaper loan/CC BT...
a) Do you settle just the finance amount of PCP and then you still have the outstanding amount deferred at the end of the term to pay off/hand car back or
b) The PCP is one complete package so you have to actually pay off the entire amount of the car and own it?

[InitialDave]

One advantage of PCP is the future value of the car is defined, so you know what you're working with.

If you're looking at a PCP expenditure of £15k over 4 years, you can take an estimate of how much you think the car will drop in value over that time, and that will influence how good a deal it is.

If you think the cost is very close to how much it'll drop in value, the PCP offers cheap security against you being rather wrong. If it drops by £16k, well, not your problem.

[anonymous-user]

loofer said:

12 months on ...

I've since learnt that PCP generally works out better on Brand New cars due to a better rate and sometimes discounts - compared to nearly new.
Anything other than that is just crap terms

Totally agree, especially if you can find the car for a healthy discount on something like CarWow. Brand new cars usually have a cheaper finance rate than second hand cars so can actually work out cheaper than buying a 1 or 2 year old model.

Plus with the way second hand car prices are going you may well find it is actually worth more than the balloon payment at the end of the 3/4 years.

[omniflow]

loofer said:

I've since learnt that PCP generally works out better on Brand New cars due to a better rate and sometimes discounts - compared to nearly new.
Anything other than that is just crap terms

[snip]

Not necessarily.

I bought a 66 plate Mondeo estate using PCP when it was 6 months old with 4,000 miles on the clock. There were quite a few in the system so I was able to get the exact spec I wanted - colour, wheels, trim level, options - everything.

I paid £2K deposit and then £400 / month for 3 years. At then end of 3 years, I paid ~£7,500 and kept the car. I could have sold it for £15K and offset £7,500 against what I'd already paid out, but I didn't want to.

For me, it was a simple, straightforward and cost effective way of getting access to a car I needed, and eventually becoming the full owner of that car.

[jjr1]

loofer said:

12 months on ...

ended up buying a £1400 shed to get me through the year. It's now due it's MOT. I know at least one thing wrong with it which I'm hoping to get sorted this week iA.

If it passes the MOT (without requiring expensive remedial work) then I'll keep it, get it serviced and hang on for another year.
If it fails, on some major work then I'll try and chop it in for something newer.

I've since learnt that PCP generally works out better on Brand New cars due to a better rate and sometimes discounts - compared to nearly new.
Anything other than that is just crap terms

Quick question when it comes to settling the PCP finance within Day 1-14 with say cash/cheaper loan/CC BT...
a) Do you settle just the finance amount of PCP and then you still have the outstanding amount deferred at the end of the term to pay off/hand car back or
b) The PCP is one complete package so you have to actually pay off the entire amount of the car and own it?

You don't settle the finance, you 'withdraw' from the agreement. Thus the finance becomes null and void. A great way to get discounts from comission hungry salesmen. I have done it numerous times.

[loofer]

jjr1 said:

You don't settle the finance, you 'withdraw' from the agreement. Thus the finance becomes null and void. A great way to get discounts from comission hungry salesmen. I have done it numerous times.

Thanks. I’m assuming the semantics matter, as if you withdraw from the agreement, you’re using your cooling off rights whereas settling means you accept any set up and pro-data charges.

Just to be clear, you just settle the finance, not the full vehicle value? Therefore still getting option to return carat end of term

[Nano2nd]

loofer said:

Just to be clear, you just settle the finance, not the full vehicle value? Therefore still getting option to return carat end of term

no, you settle the full value, the Final Payment is included, so you own the vehicle outright at that point.