Why the PH hatred for PCP?
Discussion
av185 said:
How do you see this panning out when and not if interest rates inevitably rise and what could possibly go wrong with the exsting system model?
Manufacturers will subsidise the finance rates to make the monthly payments palatable.With a few minor exceptions, residuals are being set very low currently, so a time of higher rates could also be offset by higher residuals.
Also, i think we'll see a continued move towards the leasing model, where you're in to the realms of true rental of the car, so things like interest rates, discount, residuals, contributions become a moot point.
And finally, if prices do go up, people will simply drive a car one down the model range to offset it if they have a specific budget if needs be.
The short answer - the market will adapt.
av185 said:
Haha re age......speak for yourself!!
I can see the many advantages to consumers in general as we inevitably move to the subscriptive economics scenario giving much greater freedom of choice across larger product ranges and can also see how pcp type financing at al would lend themselves well to this model of car 'buying.'
We all know the huge growth in finance and pcps as a way to access car 'ownership' has been fundamentally driven by an extended period of historically low interest rates which undeniably has allowed many pcpers who could not have normally afforded these deals on higher interest rates to essentially get a better deal or a better car or one that they could not truly afford, it has to be said.
How do you see this panning out when and not if interest rates inevitably rise and what could possibly go wrong with the exsting system model?
There are several component parts to that answer I can see the many advantages to consumers in general as we inevitably move to the subscriptive economics scenario giving much greater freedom of choice across larger product ranges and can also see how pcp type financing at al would lend themselves well to this model of car 'buying.'
We all know the huge growth in finance and pcps as a way to access car 'ownership' has been fundamentally driven by an extended period of historically low interest rates which undeniably has allowed many pcpers who could not have normally afforded these deals on higher interest rates to essentially get a better deal or a better car or one that they could not truly afford, it has to be said.
How do you see this panning out when and not if interest rates inevitably rise and what could possibly go wrong with the exsting system model?
Firstly the entire industry is going through massive and irreversible change. The ownership model is part of that change. For many people a generation or two younger than us shared ownership and part time access is becoming the norm. Even older folk are getting in on the shared ownership/multiple access model with a range of manufacturers in the US, including Porsche, offering access to a range of cars for different occasions /time of the year in return for an agreed subscription cost.
The growth of EVs and especially AVs is going to significantly accelerate the subscription/shared model. It’s sad for many of us but within a relatively short period of time the concept of owning a car for day to use is going to become outmoded. Before much longer paying monthly, or even paying by usage , will be the de-facto standard in large parts of the developed world. Granted it’s a different underlying product but it’s the same regular, rather than one off capital, payment idea.
The rate raise issue we have discussed before. A change in the base rate will take longer to trickle down to auto credit than many think, simply because the very largest providers are self funded and hold the loans on their balance sheets. The default risk as seen with MBS/CDO in 2008 doesn’t exist. Manufacturers with captive finance houses, even those who go to the markets, can set their own rates and therefore their own levels of profit from finance.
I don’t disagree with you though if you are making a point that cheap money has made punters feel richer as a whole and thus they have more disposable income at hand.
Ultimately when the providers are eventually forced to catch up with the wider markets they will change the “selling” model again and hence the loop back to the first point about subs will tighten.
Thanks chaps for your informative replies.
Interesting stuff for sure.
One point......you say the finance houses etc will adjust the residuals according to the interest rate variation. Whilst the volume of used cars through the trade and ultimately retail CAN have some influence on residuals, it is invariably the market and the market itself through good old supply and demand which tends to have the biggest influence so how would this affect things from a residual perspective?
Interesting stuff for sure.
One point......you say the finance houses etc will adjust the residuals according to the interest rate variation. Whilst the volume of used cars through the trade and ultimately retail CAN have some influence on residuals, it is invariably the market and the market itself through good old supply and demand which tends to have the biggest influence so how would this affect things from a residual perspective?
Edited by av185 on Friday 18th January 19:02
av185 said:
Thanks chaps for your informative replies.
Interesting stuff for sure.
One point......you say the finance houses etc will adjust the residuals according to the interest rate variation. Whilst the volume of used cars through the trade and ultimately retail CAN have some influence on residuals, it is invariably the market and the market itself through good old supply and demand which tends to have the biggest influence so how would this affect things from a residual perspective?
Sorry my wording was ambiguous - my bad. For clarity, i meant that "a" rise in residuals could offset interest rates not that manufacturers could influence that greatly. Maybe a little but not greatly, as you rightly point out. Interesting stuff for sure.
One point......you say the finance houses etc will adjust the residuals according to the interest rate variation. Whilst the volume of used cars through the trade and ultimately retail CAN have some influence on residuals, it is invariably the market and the market itself through good old supply and demand which tends to have the biggest influence so how would this affect things from a residual perspective?
What i was trying to get at was we have low interest rates at the minute, but the best benefit of that has been offset because of low residuals. At some point in the future we might have higher rates but higher residuals for whatever reason which could offset the monthly premium change. Conversely we could have higher rates, but continued low residuals, and then i think the manufacturers would offset the rate.
Brooking10 said:
Before much longer paying monthly, or even paying by usage , will be the de-facto standard in large parts of the developed world. Granted it’s a different underlying product but it’s the same regular, rather than one off capital, payment idea.
Just linking the above back in with your phrasing of "subscription model". Does leasing fit in with that? I think its likely to become the next most prevalent method of "owning" a car.Does that translate to a subscription model? For example, a young family might know they will need a small 5 door people carrier for the next 2 years, perhaps a bigger one for the following 3. Maybe a lifestyle vehicle later as the children grow up. Each of those could be facilitated by leasing but effectively be a subscription for a period of time to a particular type of vehicle, without owning a depreciating asset. No one is then making a long term commitment to a specific type of car, when really they might need say a small hatch, medium hatch, people carrier, lifestyle vehicle over say a 10-12 year period?
Someone wanting a premium brand car would clearly pay more per month than someone who is happy with say a value brand.
Perhaps it wouldnt even be pitched as a subscription model per se, but if leasing becomes prevalent, is that not what it really is?
But effectively the 2 or 3 year terms are what the market offers at the moment.
I see more frequent changes of vehicles over much shorter periods being more suited to prescriptive models. So maybe 4x4 Suv throughout the winter with a small ev for the commute then perhaps sports cars/convertible for the summer heatwave etc.
Slightly contrived but this would be the basic idea.
I see more frequent changes of vehicles over much shorter periods being more suited to prescriptive models. So maybe 4x4 Suv throughout the winter with a small ev for the commute then perhaps sports cars/convertible for the summer heatwave etc.
Slightly contrived but this would be the basic idea.
av185 said:
But effectively the 2 or 3 year terms are what the market offers at the moment.
I see more frequent changes of vehicles over much shorter periods being more suited to prescriptive models. So maybe 4x4 Suv throughout the winter with a small ev for the commute then perhaps sports cars/convertible for the summer heatwave etc.
Slightly contrived but this would be the basic idea.
Yeah fair point. I hadnt thought of it like that.I see more frequent changes of vehicles over much shorter periods being more suited to prescriptive models. So maybe 4x4 Suv throughout the winter with a small ev for the commute then perhaps sports cars/convertible for the summer heatwave etc.
Slightly contrived but this would be the basic idea.
av185 said:
But effectively the 2 or 3 year terms are what the market offers at the moment.
I see more frequent changes of vehicles over much shorter periods being more suited to prescriptive models. So maybe 4x4 Suv throughout the winter with a small ev for the commute then perhaps sports cars/convertible for the summer heatwave etc.
Slightly contrived but this would be the basic idea.
Yep that’s exactly what has started happening the USI see more frequent changes of vehicles over much shorter periods being more suited to prescriptive models. So maybe 4x4 Suv throughout the winter with a small ev for the commute then perhaps sports cars/convertible for the summer heatwave etc.
Slightly contrived but this would be the basic idea.
https://www.porschepassport.com
GM has also recently registered GMscription as a trademark for a similar service having experimented with a similar service called Cadillac Book.
In the U.K. Drover is based on the same premise but using both new and second hand cars from a whole range of manufacturers and attracting VC backing.
av185 said:
But effectively the 2 or 3 year terms are what the market offers at the moment.
I see more frequent changes of vehicles over much shorter periods being more suited to prescriptive models. So maybe 4x4 Suv throughout the winter with a small ev for the commute then perhaps sports cars/convertible for the summer heatwave etc.
Slightly contrived but this would be the basic idea.
Mercedes used to do a similar thing to that years ago where you could change cars for different seasons,can’t remember what it was called though.I see more frequent changes of vehicles over much shorter periods being more suited to prescriptive models. So maybe 4x4 Suv throughout the winter with a small ev for the commute then perhaps sports cars/convertible for the summer heatwave etc.
Slightly contrived but this would be the basic idea.
Brooking10 said:
av185 said:
But effectively the 2 or 3 year terms are what the market offers at the moment.
I see more frequent changes of vehicles over much shorter periods being more suited to prescriptive models. So maybe 4x4 Suv throughout the winter with a small ev for the commute then perhaps sports cars/convertible for the summer heatwave etc.
Slightly contrived but this would be the basic idea.
Yep that’s exactly what has started happening the USI see more frequent changes of vehicles over much shorter periods being more suited to prescriptive models. So maybe 4x4 Suv throughout the winter with a small ev for the commute then perhaps sports cars/convertible for the summer heatwave etc.
Slightly contrived but this would be the basic idea.
https://www.porschepassport.com
GM has also recently registered GMscription as a trademark for a similar service having experimented with a similar service called Cadillac Book.
Maybe we should have a sweep-stake based on the number of pages this thread will reach! 
Some years ago I got a job that entitled me to a company car, but based on list price it came out at a 2 litre diesel Golf or the older 1.9 diesel A3.
I didn't want either of those so I opted out, took the monthly allowance and interest free loan.
Maybe a PCP that matched the monthly allowance would have worked for me but most PCPs seem to have such limited mileage limits, and I'd always owned my cars prior to that so wasn't really comfortable going down that route.
At the end of the day there surely is no wrong answer - it depends what you want. PCP has to be a cheap way to get a new car, but you just never own it. If you don't mind that it's fine!
Some years ago I got a job that entitled me to a company car, but based on list price it came out at a 2 litre diesel Golf or the older 1.9 diesel A3.
I didn't want either of those so I opted out, took the monthly allowance and interest free loan.
Maybe a PCP that matched the monthly allowance would have worked for me but most PCPs seem to have such limited mileage limits, and I'd always owned my cars prior to that so wasn't really comfortable going down that route.
At the end of the day there surely is no wrong answer - it depends what you want. PCP has to be a cheap way to get a new car, but you just never own it. If you don't mind that it's fine!
Mr Tidy said:
Maybe we should have a sweep-stake based on the number of pages this thread will reach!
Some years ago I got a job that entitled me to a company car, but based on list price it came out at a 2 litre diesel Golf or the older 1.9 diesel A3.
I didn't want either of those so I opted out, took the monthly allowance and interest free loan.
Maybe a PCP that matched the monthly allowance would have worked for me but most PCPs seem to have such limited mileage limits, and I'd always owned my cars prior to that so wasn't really comfortable going down that route.
At the end of the day there surely is no wrong answer - it depends what you want. PCP has to be a cheap way to get a new car, but you just never own it. If you don't mind that it's fine!
... erm as the previous 31 pages have shown, it's not a 'cheap way to get a new car' it is 'an easy way to get a new car' - and pay through the nose for it. Drip drip drip, month, month, month, you end up paying the list price over 3 years and acting like a financial genius for doing so. But in the parallel universe of this forum, financial laws don't exist and whatever anyone wants is somehow all equally good. There is no right or wrong in life anymore, just PCP apparently!! Some years ago I got a job that entitled me to a company car, but based on list price it came out at a 2 litre diesel Golf or the older 1.9 diesel A3.
I didn't want either of those so I opted out, took the monthly allowance and interest free loan.
Maybe a PCP that matched the monthly allowance would have worked for me but most PCPs seem to have such limited mileage limits, and I'd always owned my cars prior to that so wasn't really comfortable going down that route.
At the end of the day there surely is no wrong answer - it depends what you want. PCP has to be a cheap way to get a new car, but you just never own it. If you don't mind that it's fine!
InitialDave said:
No you don't. Why do you think that's how PCP works?
I've run the numbers Dave. £400 per month x 36 months plus a £3k deposit = £17,400. That's pretty much list price for a used 3 year old 3 series at 2 or 3 years old. So yeah pay that money for nothing over 3 years for it to be 'new' or buy outright at 3 years, choice is yours. Deep Thought said:
Gordon_Roslin said:
InitialDave said:
No you don't. Why do you think that's how PCP works?
I've run the numbers Dave. £400 per month x 36 months plus a £3k deposit = £17,400. That's pretty much list price for a used 3 year old 3 series at 2 or 3 years old. So yeah pay that money for nothing over 3 years for it to be 'new' or buy outright at 3 years, choice is yours. A new car costing more than a used one isnt really a big surprise and its not a big revelation that needs anyone to "run the numbers".
Edited by Deep Thought on Monday 21st January 08:15
Gordon_Roslin said:
I've run the numbers Dave. £400 per month x 36 months plus a £3k deposit = £17,400. That's pretty much list price for a used 3 year old 3 series at 2 or 3 years old. So yeah pay that money for nothing over 3 years for it to be 'new' or buy outright at 3 years, choice is yours.
You are aware that "list price" specifically means the manufacturer's price for a brand new car?The value of a used car is not "list price".
How much does the PCP cost over the term compared to the depreciation on that same car over that period? That's the comparison you use as part of your assessment whether a PCP is a good option for buying it.
InitialDave said:
Gordon_Roslin said:
I've run the numbers Dave. £400 per month x 36 months plus a £3k deposit = £17,400. That's pretty much list price for a used 3 year old 3 series at 2 or 3 years old. So yeah pay that money for nothing over 3 years for it to be 'new' or buy outright at 3 years, choice is yours.
You are aware that "list price" specifically means the manufacturer's price for a brand new car?The value of a used car is not "list price".
How much does the PCP cost over the term compared to the depreciation on that same car over that period? That's the comparison you use as part of your assessment whether a PCP is a good option for buying it.
HP interest, additional maintenance requirements, warranty extension, realistic future value etc. all have to be included if you're going to "run the numbers".
I've done it numerous times and whilst a new car is of course always more expensive the gap is never as big as many suggest on here, especially with better deals that come up.
SWoll said:
And if you are also going to compare a new car PCP/PCH with a 3 year old example you need to be realistic about the costs.
HP interest, additional maintenance requirements, warranty extension, realistic future value etc. all have to be included if you're going to "run the numbers".
I've done it numerous times and whilst a new car is of course always more expensive the gap is never as big as many suggest on here, especially with better deals that come up.
No. Its game over lads.HP interest, additional maintenance requirements, warranty extension, realistic future value etc. all have to be included if you're going to "run the numbers".
I've done it numerous times and whilst a new car is of course always more expensive the gap is never as big as many suggest on here, especially with better deals that come up.
Gordon has "run the numbers". We're beat.
Time to go home.
InitialDave said:
How much does the PCP cost over the term compared to the depreciation on that same car over that period?
This is all that matters. That's what makes the difference between a good deal and a bad one and it's the reason I currently lease (not quite the same as PCP but the principle is the same). The £5k I'm paying to 'rent' my car will be less than the depreciation owning one over the same period.
If that means that some bitter old men on a forum think I'm living beyond me means, fine.
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