PCP: How many people actually pay the balloon

[InitialDave]

del mar said:

I thought one of the benefits of renting was the fact that you avoid depreciation attached to new cars.

Surely buying at the end gets you a big chunk of depreciation?

Depends how much they want for it vs how much you think it's worth.

And if you think the depreciation is much worse than the pricing reflects, you can walk away.

[Hol]

There are lots of opinions and assumptions being posted on here by people who clearly have never leased or bought a car on PCP.

My favourite thus far, is the one about never being able to choose the spec of the car.
Its no surprise people are confused by others leasing, if they come up with such assumptions.

[Tuvra]

Gad-Westy said:

It's sometimes quite surprising how the numbers work out with new vs. old. I admit, this one is a very specific case and for every case like this you could find some extreme numbers the opposite way but alas...

My wife has an old Nissan Note. It's the family wagon and a little bit shabby in places and being 10 years old and about 90k miles, there are a couple of biggish jobs looming, tyres being the main one and they're an awkward size, nothing horrendous though. It's a 1.6 petrol and used predominantly around town and averages around 32mpg over about 8k per year. Neither her nor I like it very much so were considering a change to 1.2TSi Leon Lease over 2 years. For some reason a Seat is far cheaper for her to insure. I estimate it would do round 38mpg under same sort of driving and lease costs 'amortise' at about £170 per month. These are the numbers I calculated. Not foolproof but I tried to be realistic.



So if I'm anywhere close to being right, it's less £1000 difference over 2 years for the Leon vs. 10 year old Note. Which seems good value on the face of it. I realised I didn't include breakdown cover for the Note but it doesn't change numbers massively.

Being totally honest about the situation, there are cheaper options again by buying an older car that requires less maintenance or depreciates less or is far better on fuel but there is some unqunatifiable value in having a new car under warranty.

That's a good point. The other advantage with the new car is that you won't have any extraordinary costs and will also have a courtesy car if yours is off the road for any matter of time.

I've always had newish cars but ran older vans. Then after a while I started getting hit with big bills when I really didn't need them (£1200 gearbox bill for a 12 year old Transit and £200 a week to hire another being the straw that broke the camels back), I ended up taking out new vans on PCP and the costs are much more manageable and predictable from a business point of view.

[C70R]

GetCarter said:

HumanDoing said:

I'm not telling anybody anything - but would be interested in why you think my opinion is less valid because of the car I own. Does my opinion somehow 'mean more' if I am in flashier metal (as if an ST is such a st car).

If, rather than owning an ST outright, I PCP'd in to a car you happen to respect, does that make my opinion more valid? Bahahahaha.

Mate. You need to stop and look at what you are posting. I have no problem with the car you drive, but you seem to have serious problems with others' decisions about what they drive. We are not all as stupid as you think! And many of us are older and may just be wiser.

I quote you:

Collossal ego that they also have to lie to themselves that doing so makes them financial geniuses

everyone 'could've afforded cash but chose the PCP instead’

Self-important gas bag 'I make more investing it' posters


We make financial decisions that suit us. Not your view of us.

HTH

Edited by GetCarter on Thursday 19th October 16:16

He's a massive troll. Don't feed him. This applies to all posters on this thread.

HTH

[bqf]

I do. Every Time. Bought a VW Touareg in 2007, paid off the £9k balloon 4 years later, then traded it in for £11k 2 years later against a new Touareg. Balloon due January on that car - £14k, car is worth way more than that.

Surprised everyone doesn't pay the balloon, at least on a quality car that you can keep for another 2-3 years with no monthly outlay? I'll be driving this one until I'm 50. 5 years of no payments. Yay.

[HumanDoing]

C70R said:

He's a massive troll. Don't feed him. This applies to all posters on this thread.

HTH

Yes you're right, I'm the 'troll' for having the temerity to have someone insult me out of nowhere for owning a Fiesta ST. Let's hope they never ask you to do jury duty, the victim blaming is extraordinarily unedifying.

[bqf]

Oh, and also, the number of people who repay the PCP balloon, based on my experience, is 8%.

What happens after that, thats a problem, and could get very bad when interest rates start rising.

[liner33]

bqf said:

Oh, and also, the number of people who repay the PCP balloon, based on my experience, is 8%.

What happens after that, thats a problem, and could get very bad when interest rates start rising.

I expect take up of pcp's to be reduced as interest rates increase , I'm already seeing that , deals that were 0-3% apr are now 5-7% apr they are therefore less attractive over taking a pcp and then just paying it off with a bank loan like the previous poster did with his BMW or simply using cash.

[C70R]

HumanDoing said:

C70R said:

He's a massive troll. Don't feed him. This applies to all posters on this thread.

HTH

Yes you're right, I'm the 'troll' for having the temerity to have someone insult me out of nowhere for owning a Fiesta ST. Let's hope they never ask you to do jury duty, the victim blaming is extraordinarily unedifying.

Yes, you're a massive troll.
To quote you from another thread which you derailed...

HumanDoing said:

I showed my wife this thread last night and she said she was proud of me

Please STFU if you've nothing to say which isn't antagonistic. Your influence on threads is incredibly tedious.
Ta.

[Gad-Westy]

bqf said:

I do. Every Time. Bought a VW Touareg in 2007, paid off the £9k balloon 4 years later, then traded it in for £11k 2 years later against a new Touareg. Balloon due January on that car - £14k, car is worth way more than that.

Surprised everyone doesn't pay the balloon, at least on a quality car that you can keep for another 2-3 years with no monthly outlay? I'll be driving this one until I'm 50. 5 years of no payments. Yay.

The only PCP's we've had both had what are I would call 'artificially high' balloon figures. They looked optimistic at point of sale, let alone 2/3 years later. Whether this was to make the deals more attractive or whether they were errors that we just happened to benefit from, I'm not sure but I know in both cases the cars were worth a lot, lot less than the balloon so both went back. I quite like this arrangement as long as the interest rates are reasonable. I see it as insurance against unexpected depreciation. Takes some of the guesswork out.

[J4CKO]

del mar said:

I thought one of the benefits of renting was the fact that you avoid depreciation attached to new cars.

Surely buying at the end gets you a big chunk of depreciation?

The only way you avoid depreciation is to buy an older, cheaper car at a good price that you then manage to sell at some point later for what you paid for it,

PCP, lease or whatever way you finance a car doesnt mean you avoid depreciation, whether you buy it or not.

What you can avoid are MOT's, Old car foibles, not having a warranty and having to flog it on.

Not sure why everyone gets so opinionated about how other people afford cars, just think anyone financing really needs to look carefully at the deal and whether they can truly afford it as the lenders dont seem to be that great at making that call.

[yellowbentines]

del mar said:

I thought one of the benefits of renting was the fact that you avoid depreciation attached to new cars.

Surely buying at the end gets you a big chunk of depreciation?

PCP isnt just reserved for new cars. I bought one of my current cars on PCP at about 10mths old, for about 35% lower than new list price - a huge chunk of new car depreciation avoided.

IMO you cant generalise and say PCP or buying the car outright at the end of it is a good or bad thing, theres too many influencing factors to consider.

[liner33]

yellowbentines said:

PCP isnt just reserved for new cars. I bought one of my current cars on PCP at about 10mths old, for about 35% lower than list price - a huge chunk of depreciation avoided.

IMO you cant generalise and say PCP or buying the car outright at the end of it is a good or bad thing, theres too many influencing factors to consider.

PCP doesnt always work as well on used cars as the interest tends to be higher than you can get elsewhere and you dont get the juicy dealer contributions.

[48k]

briSk said:

Hi, there's been all this chat about increased PCP-funded sales over the past couple of years.. and the risk of the balloon value being too low to 'pay off the debt' OR that if too many people 'walk away' that there will be a 'flood of used cars' but who ever pays the balloon anyway?

seriously - does anyone have any data on what % of people actually 'buy the car' at the end?

I think it must be incredibly low unless it's some middle aged person who gets an inheritance and things 'ooh this car is fine and it hasn't broken down i'll just keep it'. my believe is that people just keep rolling over and over..

so that makes me think that there is an expectation in the pricing of the loan that people won't pay the balloon (...??)

I don't have the data but you have to bear in mind that PCP is a "customer retention product". That's why it was invented. Its whole raison d'etre is to capture a customer and make them "sticky" to the manufacturer - retaining them for as long as possible. The manufacturer doesn't want customers paying the optional final payment and taking the car away. That ends the relationship. The deals are structured to make that choice the least attractive. The sales team will start calling customers 6-12 months before their PCP is due to end with new offers such as upgrading to a newer model with more shiny things for the same monthly outlay, in an effort to "reset the PCP timer" and retain the customer for another three years or so. That's how they work.

[alorotom]

Gad-Westy said:

The only PCP's we've had both had what are I would call 'artificially high' balloon figures. They looked optimistic at point of sale, let alone 2/3 years later.

This is my current situation on my 4.2 TDi Q7 that is now not particularly favoured s a car someone would want to own themselves due to high running costs, diesel stigmatism and a hit of emissions scandal - hence why itll be going back on VT rather than wait to the end of the period then chop it out

[Sheepshanks]

bqf said:

I do. Every Time. Bought a VW Touareg in 2007, paid off the £9k balloon 4 years later, then traded it in for £11k 2 years later against a new Touareg. Balloon due January on that car - £14k, car is worth way more than that.

I think it's pretty unusual for cars on PCP to be worth clearly more than their GFV. VW FS must be very cautious, which of course means your monthly payments are higher.

There's regular wailing and gnashing of teeth on the Mercedes forums from people who would like to keep their 3yrs old E Class but it's underwater and they're upset that MB Finance isn't open to offers. They complain, somewhat tongue-in-cheek, that the car's final value was "guaranteed".

I imagine this is why GFV has disappeared to be replaced by Optional Final Payment.

bqf said:

Surprised everyone doesn't pay the balloon, at least on a quality car that you can keep for another 2-3 years with no monthly outlay? I'll be driving this one until I'm 50. 5 years of no payments. Yay.

Well, that's the gamble. Did you buy a 5yr warranty? Good luck - Tourareg has the potential to throw up hefty bills. Wife's EU6 DSG 4Motion Tiguan is approaching 3yrs and I'm getting twitchy about it!

[HumanDoing]

C70R said:

Please STFU if you've nothing to say which isn't antagonistic. Your influence on threads is incredibly tedious.
Ta.

Or what, what are you going to do, come and get me? Bahahahahaha if you're going to follow me around getting offended that I exist and offer opinions then ... perhaps don't follow me around? Especially if it involves grabbing completely out of context quotes and putting them up in a (failed) attempt to make me ridiculous.

Perhaps you'd like to point out where on this thead I've said anything remotely antagonistic, except in self defence which expressly defended in law, to whit:

"It is both good law and good sense that a man who is attacked may defend himself. It is both good law and good sense that he may do, but only do, what is reasonably necessary."

Maybe have a pop at the people attacking my wife and I for the thought crime of not liking the Focus RS before getting around to slagging me off?

[bqf]

Sheepshanks said:

Well, that's the gamble. Did you buy a 5yr warranty? Good luck - Tourareg has the potential to throw up hefty bills. Wife's EU6 DSG 4Motion Tiguan is approaching 3yrs and I'm getting twitchy about it!

EVERY CAR has the potential to throw up hefty bills. Had the last Touareg for 7 years, 120,000 miles - total non-service costs, £1,500. £1,000 for inlet manifold issue and £500 for a refurbed propshaft.

[nbetts]

I have bought a couple of mine after the term of the agreement was up but only when it made financial sense to do so. Basically the car was worth much more than the balloon

Most of mine that in the past were on agreements I ended early due to changing the car before the agreement was up, or selling it privately and settling up with the Finance company.

Sometimes it is good to do it - sometimes it is not.

[Kuji]

Sheepshanks said:

bqf said:

I do. Every Time. Bought a VW Touareg in 2007, paid off the £9k balloon 4 years later, then traded it in for £11k 2 years later against a new Touareg. Balloon due January on that car - £14k, car is worth way more than that.

I think it's pretty unusual for cars on PCP to be worth clearly more than their GFV. VW FS must be very cautious, which of course means your monthly payments are higher.

There's regular wailing and gnashing of teeth on the Mercedes forums from people who would like to keep their 3yrs old E Class but it's underwater and they're upset that MB Finance isn't open to offers. They complain, somewhat tongue-in-cheek, that the car's final value was "guaranteed".

I imagine this is why GFV has disappeared to be replaced by Optional Final Payment.

bqf said:

Surprised everyone doesn't pay the balloon, at least on a quality car that you can keep for another 2-3 years with no monthly outlay? I'll be driving this one until I'm 50. 5 years of no payments. Yay.

Well, that's the gamble. Did you buy a 5yr warranty? Good luck - Tourareg has the potential to throw up hefty bills. Wife's EU6 DSG 4Motion Tiguan is approaching 3yrs and I'm getting twitchy about it!

Why, do you think that?

is it based on experience, something toy read, or just a feeling?


II think people will pay the balloon if,

a) The car is worth more
b) they intend to sell it quickly and generate a profit.

else, they just walk away and its costs them nothing more than the regular monthly payments they accepted 24/36/48 months previously.