PCP - dumb question
Discussion
mhurley said:
What do folks do at the end of their PCP deal?
If they have sold their existing car to fund the deposit do they then get a loan to finance the balloon payment?
Or if they hand the car back, where do they get the money from to fund the deposit on a new PCP car?
Well.......each to their ownIf they have sold their existing car to fund the deposit do they then get a loan to finance the balloon payment?
Or if they hand the car back, where do they get the money from to fund the deposit on a new PCP car?
The way I see it is...
You have savings/a personal loan to cover the balloon payment. You should only pay this if the car is worth more than the balloon payment and you want to keep the car. You can then enjoy the car or, sell it privately and release that equity as cash. You can then replenish your savings, or pay off a personal loan and put that equity towards another car, deposit or outright payment.
If you want to get into another PCP deal, and the current car is worth more than the balloon payment, but you want another car, you trade the car in. The value of the car will pay off the balloon payment and then anything over this (equity) will be your deposit on a new PCP.
If your car is worth less than the balloon payment the you DO NOT pay the balloon payment even if you love the car. You simply go back to the dealer and hand the car back, walk away and hope that you didn't damage it too badly so as you incur penalties for damage repair.
It would then be up to you to either put savings towards a new car on another PCP or a cheaper second hand car that you could buy outright, get a personal loan for a 'better' car or, start getting the bus.
The above is why PCP can be a trap if you only plan on it once but also good if that sort of ownership suits your lifestyle and essentially gives you a throwaway attitude to cars.
The deposit at the beginning, and the depreciation of the car will determine how long you can keep it going and whether or not you need to top up the deposit each time. Most cars on PCP aren't likely to be classics so it is likely that you'll have to top up due to depreciation. I.e you put down £5k deposit on first PCP car worth £35k. At the end of the term the car is worth £15k but your balloon is £12.5k, you'd need to find another £2.5k cash to go into another PCP with £5k deposit.
If you can't save money alongside the monthly payments of a PCP, this spending all of your available money on a PCP, then you shouldn't take one out. Buy a much cheaper car outright or using a small loan with manageable payments.
You have savings/a personal loan to cover the balloon payment. You should only pay this if the car is worth more than the balloon payment and you want to keep the car. You can then enjoy the car or, sell it privately and release that equity as cash. You can then replenish your savings, or pay off a personal loan and put that equity towards another car, deposit or outright payment.
If you want to get into another PCP deal, and the current car is worth more than the balloon payment, but you want another car, you trade the car in. The value of the car will pay off the balloon payment and then anything over this (equity) will be your deposit on a new PCP.
If your car is worth less than the balloon payment the you DO NOT pay the balloon payment even if you love the car. You simply go back to the dealer and hand the car back, walk away and hope that you didn't damage it too badly so as you incur penalties for damage repair.
It would then be up to you to either put savings towards a new car on another PCP or a cheaper second hand car that you could buy outright, get a personal loan for a 'better' car or, start getting the bus.
The above is why PCP can be a trap if you only plan on it once but also good if that sort of ownership suits your lifestyle and essentially gives you a throwaway attitude to cars.
The deposit at the beginning, and the depreciation of the car will determine how long you can keep it going and whether or not you need to top up the deposit each time. Most cars on PCP aren't likely to be classics so it is likely that you'll have to top up due to depreciation. I.e you put down £5k deposit on first PCP car worth £35k. At the end of the term the car is worth £15k but your balloon is £12.5k, you'd need to find another £2.5k cash to go into another PCP with £5k deposit.
If you can't save money alongside the monthly payments of a PCP, this spending all of your available money on a PCP, then you shouldn't take one out. Buy a much cheaper car outright or using a small loan with manageable payments.
Swole said:
The way I see it is...
You have savings/a personal loan to cover the balloon payment. You should only pay this if the car is worth more than the balloon payment and you want to keep the car. You can then enjoy the car or, sell it privately and release that equity as cash. You can then replenish your savings, or pay off a personal loan and put that equity towards another car, deposit or outright payment.
If you want to get into another PCP deal, and the current car is worth more than the balloon payment, but you want another car, you trade the car in. The value of the car will pay off the balloon payment and then anything over this (equity) will be your deposit on a new PCP.
If your car is worth less than the balloon payment the you DO NOT pay the balloon payment even if you love the car. You simply go back to the dealer and hand the car back, walk away and hope that you didn't damage it too badly so as you incur penalties for damage repair.
It would then be up to you to either put savings towards a new car on another PCP or a cheaper second hand car that you could buy outright, get a personal loan for a 'better' car or, start getting the bus.
The above is why PCP can be a trap if you only plan on it once but also good if that sort of ownership suits your lifestyle and essentially gives you a throwaway attitude to cars.
The deposit at the beginning, and the depreciation of the car will determine how long you can keep it going and whether or not you need to top up the deposit each time. Most cars on PCP aren't likely to be classics so it is likely that you'll have to top up due to depreciation. I.e you put down £5k deposit on first PCP car worth £35k. At the end of the term the car is worth £15k but your balloon is £12.5k, you'd need to find another £2.5k cash to go into another PCP with £5k deposit.
If you can't save money alongside the monthly payments of a PCP, this spending all of your available money on a PCP, then you shouldn't take one out. Buy a much cheaper car outright or using a small loan with manageable payments.
Many thanks for an informative answerYou have savings/a personal loan to cover the balloon payment. You should only pay this if the car is worth more than the balloon payment and you want to keep the car. You can then enjoy the car or, sell it privately and release that equity as cash. You can then replenish your savings, or pay off a personal loan and put that equity towards another car, deposit or outright payment.
If you want to get into another PCP deal, and the current car is worth more than the balloon payment, but you want another car, you trade the car in. The value of the car will pay off the balloon payment and then anything over this (equity) will be your deposit on a new PCP.
If your car is worth less than the balloon payment the you DO NOT pay the balloon payment even if you love the car. You simply go back to the dealer and hand the car back, walk away and hope that you didn't damage it too badly so as you incur penalties for damage repair.
It would then be up to you to either put savings towards a new car on another PCP or a cheaper second hand car that you could buy outright, get a personal loan for a 'better' car or, start getting the bus.
The above is why PCP can be a trap if you only plan on it once but also good if that sort of ownership suits your lifestyle and essentially gives you a throwaway attitude to cars.
The deposit at the beginning, and the depreciation of the car will determine how long you can keep it going and whether or not you need to top up the deposit each time. Most cars on PCP aren't likely to be classics so it is likely that you'll have to top up due to depreciation. I.e you put down £5k deposit on first PCP car worth £35k. At the end of the term the car is worth £15k but your balloon is £12.5k, you'd need to find another £2.5k cash to go into another PCP with £5k deposit.
If you can't save money alongside the monthly payments of a PCP, this spending all of your available money on a PCP, then you shouldn't take one out. Buy a much cheaper car outright or using a small loan with manageable payments.
mhurley said:
What do folks do at the end of their PCP deal?
If they have sold their existing car to fund the deposit do they then get a loan to finance the balloon payment?
Or if they hand the car back, where do they get the money from to fund the deposit on a new PCP car?
Car (1) I paid the balloon as I wanted to keep it.If they have sold their existing car to fund the deposit do they then get a loan to finance the balloon payment?
Or if they hand the car back, where do they get the money from to fund the deposit on a new PCP car?
Car (2) I returned as the balloon was far higher than the value of the car. I then put a modest deposit down from my own pocket for car (3)
Car (3) still has two years left and I'm undecided.
For the last 3 cars on PCP I have simply traded in before the end of term (usually 2.5 years out of 3 or even 4 year term).
Generally make about 1000£ on top of paying the finance, and I also put some away each month to go toward deposit of next car. I have always got nicer cars each time never going above a certain monthly amount.
Not for everyone, but I see no difference in being able to afford monthly payments vs saving up the same for 15 years and buying outright. To each their own
PS - always get <1% interest....the real issues are the deals that look good with 8+%
Generally make about 1000£ on top of paying the finance, and I also put some away each month to go toward deposit of next car. I have always got nicer cars each time never going above a certain monthly amount.
Not for everyone, but I see no difference in being able to afford monthly payments vs saving up the same for 15 years and buying outright. To each their own
PS - always get <1% interest....the real issues are the deals that look good with 8+%
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