PCP: How many people actually pay the balloon

[HumanDoing]

Close to 0% as PCP appeals to the sort of people who don't even register it's possible to own a phone outright, or in some cases are paying for a TV/toaster on the monthlies.

If they could afford it they wouldn't be PCP'ing it whilst strutting around pretending that entering a deal that puts bread on the table for the dealer and finance company is somehow 'the most efficient way of purchasing'.

'Get a PCP, it's cheaper' - said no financial expert ever. Someone please find me a financial analyst/guru/expert who advocates PCP, please. It's only on Planet Pistonheads that's people have such ego that they can't accept they're paying more for shinier metal than they could otherwise afford (which is fine). What is not fine is having such a collossal ego that they also have to lie to themselves that doing so makes them financial geniuses as well.

[culpz]

My current and my previous cars are/were both leases. I understood, from the off, that i will never own them. This is why i don't get many who go down the PCP route. It's all about being smart with it but most individuals that i know ended up in negative equity and knew they'd never buy the car in the end anyway, nor did they have the intention to, either.

[Frankthered]

There's no doubt that most people treat PCP like a more flexible (In some ways) form of leasing.

Swap when the time comes and keep the monthly payment rolling. I paid off a Civic in 2009 mainly because Mrs FTR didn't get PCP (she's American) and she thought we'd be better off without a car payment. Funnily enough, the Honda dealer wasn't very pushy about a new deal at all. I had no problem keeping the car though, it was absolutely fine - ended up keeping it for 8 years.

Moved onto a QQ in 2014 and ended up swapping for another (with more toys) at the end of that agreement. Nissan were far more active in pursuing a repeat order, offering deposit contributions and loyalty bonuses which meant it felt like we got a good deal.

7% paying off sounds very plausible - I wonder if that includes only the people who pay off the balloon at the end, or those (apparently hundreds on here) who take finance to get the discount and settle within days as well.

[InitialDave]

HumanDoing said:

If they could afford

Third page, not bad.

[HumanDoing]

InitialDave said:

Third page, not bad.

It's a simple principle of economics - if one chooses to pay a bit more in total in order to have it on the monthlies, fine - some people can't afford to drop £800 on the newest phone so pay £40 a month for 24 years and are either happy paying that premium or can't afford otherwise.

I'm always interested in the facts that show how little savings most people have, yet on here everyone 'could've afforded cash but chose the PCP instead'. Why lie on a forum where nobody knows or gives a baboon's toss about your financial affairs?

[Limpet]

HumanDoing said:

It's a simple principle of economics - if one chooses to pay a bit more in total in order to have it on the monthlies, fine - some people can't afford to drop £800 on the newest phone so pay £40 a month for 24 years and are either happy paying that premium or can't afford otherwise.

I'm always interested in the facts that show how little savings most people have, yet on here everyone 'could've afforded cash but chose the PCP instead'. Why lie on a forum where nobody knows or gives a baboon's toss about your financial affairs?

So if the PCP costs you the same or less than the cash would earn if you left it wherever it is for the same period of time, please tell me how it makes sense to pay cash?

[kambites]

HumanDoing said:

some people can't afford to drop £800 on the newest phone so pay £40 a month for 24 years

That wouldn't be a very good deal.

[InitialDave]

Well, in my case, I probably couldn't have afforded to buy outright with cash I had. But even if I could, I wouldn't have, or taken out a loan. I regarded the PCP as a way to hedge my bets on what I thought would happen to the car's value and give me the option for it to be someone else's problem if I was correct.

I own my phone outright, yes, as I do cars I know I want to keep.

Edit: When I've run the numbers on buying an expensive phone outright rather than on a contract,it seems to come out about £50 more over the term. So it's not horrific.

Edited by InitialDave on Thursday 19th October 13:38

[LotusOmega375D]

liner33 said:

LotusOmega375D said:

This thread has apt timing. Just started my 6th consecutive PCP deal. Often seriously considered keeping a car at the end and even put money aside each month to do this, but when the deadline comes around I think "sod-it" and spend my savings on a fun car instead!

.

Do you find you get offered a good price come handback or just the GFV?

There's usually a bit of equity left in the vehicle over and above the final repayment, so I just offset that against the deal for the new car. If I could be arsed, I ought to pay the balloon payment and sell privately to make a few quid. But I can't be arsed and I know that I need a new car to replace it anyway, so in that respect PCP makes it easy to keep on going. It's actually always a deal for my work car, so I am personally not losing out financially. Nevertheless, VW has done very well out of me over the years!

[HumanDoing]

Limpet said:

So if the PCP costs you the same or less than the cash would earn if you left it wherever it is for the same period of time, please tell me how it makes sense to pay cash?

I assume you're referring to, for example, £200,000 in the bank netting 5% every year on stock returns and that beating the cost of a PCP (potentially).

So do all these financial hotshots 'know' that their stocks are going to increase in worth and that there won't be a crash around the corner? The market is due a huge correction soon, I wonder where all these self-important gas bag 'I make more investing it' posters will be when their stake is now worth less than the original investment? It's the self-importance that I always find bewildering.

[Limpet]

LotusOmega375D said:

There's usually a bit of equity left in the vehicle over and above the final repayment, so I just offset that against the deal for the new car. If I could be arsed, I ought to pay the balloon payment and sell privately to make a few quid. But I can't be arsed and I know that I need a new car to replace it anyway, so in that respect PCP makes it easy to keep on going. It's actually always a deal for my work car, so I am personally not losing out financially. Nevertheless, VW has done very well out of me over the years!

And this in a nutshell is the value of PCP to the manufacturers. As long as you have a decent experience with the car, and your financial situation doesn't change for the worse, there is a very good chance you'll register another new car in 2/3/4 years. At the very least, they dealer gets the opportunity to get you back in for a chat, and to show you their latest wares.

I'm not far into my first PCP, but I can see me going the same route as you for the same reason.

[CraigyMc]

kambites said:

briSk said:

kambites said:

I know some people have had; mostly people who were intending to buy outright but it turned out that PCP was so heavily subsidized as to be cheaper.

'heavily subsidised' as in for that particular deal the effective interest was less than available through a personal loan?
ta

In at least one case, "heavily subsidised" as in for that particular deal the interest was negative. Discounts ("deposit contributions") available only if (0%) finance was taken.

In that sort of case wouldn't one just proceed with the PCP until it's sorted out then withdraw from the finance inside the cooling off period (14 days?).

Once the finance is in place, it's not like they can come back to you for a refund of any discounts given, but it's entirely up to the purchaser if they want to wothdraw early - it won't cost a bean to do so, and is a legal right.

[InitialDave]

Why withdraw from it if it's 0%? I don't see how that saves money over letting it run.

[Limpet]

HumanDoing said:

I assume you're referring to, for example, £200,000 in the bank netting 5% every year on stock returns and that beating the cost of a PCP (potentially).

So do all these financial hotshots 'know' that their stocks are going to increase in worth and that there won't be a crash around the corner? The market is due a huge correction soon, I wonder where all these self-important gas bag 'I make more investing it' posters will be when their stake is now worth less than the original investment? It's the self-importance that I always find bewildering.

Most PCPs are a tenth of that amount, so it's hardly a relevant comparison.

I can only speak from my experience. Simple calculation: (Finance and interest charges over period - the finance company "contribution") / the balance to finance *100 = 1.852%. So the PCP is costing me less than 2% of the financed amount for the whole term. Even the worst High Street savings account will return double that over a four year period. A conventional loan or finance agreement would cost more. It's not about having an ego or boasting, it's about wanting a car, researching the cheapest way to pay for it, and the PCP being it. It's just what it is.

I appreciate the situation is artificially driven by manufacturer subsidies and current market conditions, and yes there is probably a "correction" coming and it probably won't last, but while it's here, why not take advantage of it?

Edited by Limpet on Thursday 19th October 14:01

[CraigyMc]

InitialDave said:

Why withdraw from it if it's 0%? I don't see how that saves money over letting it run.

Depends if you want to keep the car for the length of the deal.
If you want it to be yours so you can do whatever you want to it immediately (sell it on, modify it, whatever) then jumping out of even a 0% deal may be worthwhile.

[HumanDoing]

Limpet said:

Most PCPs are a tenth of that amount, so it's hardly a relevant comparison.

I can only speak from my experience. Simple calculation: (Finance and interest charges over period - the finance company "contribution") / the balance to finance *100 = 1.852%. So the PCP is costing me less than 2% of the financed amount for the whole term. Even the worst High Street savings account will return double that over a four year period. A conventional loan or finance agreement would cost more. It's not about having an ego or boasting, it's about wanting a car, researching the cheapest way to pay for it, and the PCP being it. It's just what it is.

I appreciate the situation is artificially driven by manufacturer subsidies and current market conditions, and yes there is probably a "correction" coming and it probably won't last, but while it's here, why not take advantage of it?

Edited by Limpet on Thursday 19th October 14:01

Well perhaps because if stocks 'correct' 30% downwards, people will be kicking themselves that they'd didn't play safe? Also you state 'most PCPs are a tenth of that amount' = 5% on £200,000 = £10,000. Are most PCPs £1,000 per year? I'd wager the average PCP for a 'desirable' car as adjudged by petrolheads is at least £300 per month + initial payment?

[CraigyMc]

HumanDoing said:

I assume you're referring to, for example, £200,000 in the bank netting 5% every year on stock returns and that beating the cost of a PCP (potentially).

If the £200K is in the bank, it's not making 5% - 2% at most is more likely.
Depending on the income of the account holder, interest will be taxable at 20% on anything above £0, £500 or £1000 depending on the tax bracket of the saver, cutting further on returns.
If it's "in stocks", then it's not "in a bank" - it's invested, and liable to risks of capital loss in a market correction that a savings account won't be exposed to. It's also liable for capital gains.

[GetCarter]

I've said it before. If it appreciates, buy it, if it depreciates, rent it.

Why I rarely buy cars. But drive some very nice ones.

All tax deductible too. No brainer.

[Alfa numeric]

I've had 2 PCP's- the first on a Nissan Leaf and the second on an Octavia. The Leaf was returned as the bubble (£17.5k) was higher than the resale value (£13k) otherwise we may have kept it. The Octavia's PCP came with a £2k deposit contribution and 0% apr, my wife loves it so we'll probably buy it at the end of the deal. Unless of course Skoda make us an offer we can't refuse on a new one.

[Equilibrium25]

PCPs and their inherent value and flexibility work well for me.

Three PCPs, balloon paid on each one. Currently running a fourth.

The first cleared PCP, I traded the car in 6 months later for an amount 15% higher than the balloon had been.

The second cleared PCP, kept the car another 3.5 years, 30-40% further depreciation from the balloon number.

Third cleared PCP, still have the car (my wife's); looking at retailed cars of the same spec, it's likely to still be worth more than the balloon now, some 14 months after paying the balloon. Would meet the balloon number if I sold privately for 70% of the current retail value.

I'll be buying the fourth out at the end of the term.