Why the PH hatred for PCP?

[anonymous-user]

Wooda80 said:

Pure speculation, but I get the feeling that the hatred of PCP on here is more about the hatred of the democratisation of the prestige car.

Back in the day, buying a 2.0 BMW or Mercedes or Audi with cloth seats, hubcaps and no radio when for the same money he could have had a 2.8 Ford or Vauxhall with alloys, leather and a graphic equaliser would mark him out, in his own mind at least, as a man of discernment and taste.

Partially correct but I think in doing so, making prestige cars accessible to the great unwashed has put people into debt when years ago, they would have been happy settling for being Mondeo Man whilst their bank manager drove the BMW. There’s nothing wrong with living within your means which used to be the case. Now there’s an expectation that you can live outside them and we are all encouraged to get ourselves into financial trouble. No fun looking back at the age of 50 and instead of looking forward to retirement, you realise you haven’t got a pot to piss in and destined to be poor for the remaining part of life.

So it’s not PCP that’s the problem, it consumerism that makes us poor.

[Flumpo]

renmure said:

If you go into a Toyota Dealer to buy a new Aygo you can haggle to your heart's content and get the best price possible. Having done the hard bit, you then find you can buy the car at that price on PCP with 0% finance over 3 years.

Maybe I'm a mug, but that suckered me into shaking hands on my 1st ever PCP deal. In fairness, I was going to buy one anyhow 'cause Mrs R fancied one but it did seem like a win/win.

Funnily enough that’s what made me walk out of a Toyota dealer 2 years ago! I didn’t want pcp and they made it very clear they didn’t want to sell the car unless it was on pcp. They wouldn’t even Discuss hp.

I had already decided on a fiesta but wanted to see what they could offer. It really put me off.

[renmure]

Flumpo said:

renmure said:

If you go into a Toyota Dealer to buy a new Aygo you can haggle to your heart's content and get the best price possible. Having done the hard bit, you then find you can buy the car at that price on PCP with 0% finance over 3 years.

Maybe I'm a mug, but that suckered me into shaking hands on my 1st ever PCP deal. In fairness, I was going to buy one anyhow 'cause Mrs R fancied one but it did seem like a win/win.

Funnily enough that’s what made me walk out of a Toyota dealer 2 years ago! I didn’t want pcp and they made it very clear they didn’t want to sell the car unless it was on pcp. They wouldn’t even Discuss hp.

I had already decided on a fiesta but wanted to see what they could offer. It really put me off.

In my case they were delighted to sell the car and I could pay for it any way I wanted. Being honest, I was a wee bit out of my comfort zone. I've got 8 other cars including some flashy stuff and have never owed anything on any of them. I enjoyed the haggling process with the Toyota salesman and it was only at the end did he ask if PCP was anything I was interested in since it was at 0%. I'd given it no thought before and probably came across like a shifty character trying to see through the scam. In the end I think I'm paying something like £150/month for 3 years then the balance at the end... and it all adds up to exactly the same figure I was about to write a cheque for when I signed the order form. Anyhow it seemed to work for me in this instance.

[anonymous-user]

Flumpo said:

Funnily enough that’s what made me walk out of a Toyota dealer 2 years ago! I didn’t want pcp and they made it very clear they didn’t want to sell the car unless it was on pcp. They wouldn’t even Discuss hp.

I had already decided on a fiesta but wanted to see what they could offer. It really put me off.

I’ve been looking for a new car for my wife on Auto Trader. I can get (as an example) a pre registered top of the range Seat Ateca with all the gadgets and < 500 miles on the clock for £23k, that’s £7k off. Factor in a large cash deposit and 3% interest bank loan, purchasing still has its merits.

[TheStigsWeeBrother]

wormus said:

I’ve been looking for a new car for my wife on Auto Trader. I can get (as an example) a pre registered top of the range Seat Ateca with all the gadgets and < 500 miles on the clock for £23k, that’s £7k off. Factor in a large cash deposit and 3% interest bank loan, purchasing still has its merits.

“Large cash deposit”

That could be the stumbling block for many PCP’ers and the fact that it’s far easier for a lot of people to get cheap % PCPs than personal loans.

[Kermit power]

Inigo Montoya said:

Kermit power said:

Sure, big fees might've been a reason for an unscrupulous financial adviser wanting to sell you one, and the same may well be true of PCPs, but that's not in itself a reason for complaint.

We're not talking about reasons for complaints. We're talking about whether PCP or endowments or PPI are worth it or not. A poor deal which has been explained to you is still a poor deal.

Possibly so, but with regards to endowment mortgages, I think they got a bad rep because it wasn't properly explained to people that their endowment investment might not be enough to pay off the mortgage at the end of the term, not because of the size of the fees the brokers took.

[Deep Thought]

Welshbeef said:

Deep Thought said:

Welshbeef said:

Countless people literally live pay cheque to pay cheque - some as they cannot control spending whilst others it’s different in that they literally are on the breadline.
So the utaopia for them to build a number of months salary into savings is pie in the Sky.

Agreed. That doesn't make PCP deals or credit cards for that matter wrong for everyone else though?

Agreed. It’s a tool to transact - it could be cheaper or not or more convienient or not.

If going for a mortgage though getting a PCP or HP or bank loan is going to hurt affordability calculations

Yup. Everyone needs to look at each option and see what works for them.

[TheStigsWeeBrother]

Kermit power said:

Inigo Montoya said:

Kermit power said:

Sure, big fees might've been a reason for an unscrupulous financial adviser wanting to sell you one, and the same may well be true of PCPs, but that's not in itself a reason for complaint.

We're not talking about reasons for complaints. We're talking about whether PCP or endowments or PPI are worth it or not. A poor deal which has been explained to you is still a poor deal.

Possibly so, but with regards to endowment mortgages, I think they got a bad rep because it wasn't properly explained to people that their endowment investment might not be enough to pay off the mortgage at the end of the term, not because of the size of the fees the brokers took.

The similarity between how endowment was sold and PCP is quite relevant due to the fact both sold with the veiled promise of equity at the end.

[Carrot]

I have an electric car on pcp, it will be going back at the end and i have no illusions about equity at the end.

I certainly don't want to 'own' an electric vehicle right now due to reliability, resale value or potential repairs so this is perfect for me. I get to try them out for a few years them settle on one when the tech becomes more common.

Still I had better sign off now and turn the house off to save on electricity, as according to this thread I am one payment away from destitution and about to lose my job imminently

[Sheepshanks]

Flumpo said:

renmure said:

If you go into a Toyota Dealer to buy a new Aygo you can haggle to your heart's content and get the best price possible. Having done the hard bit, you then find you can buy the car at that price on PCP with 0% finance over 3 years.

Maybe I'm a mug, but that suckered me into shaking hands on my 1st ever PCP deal. In fairness, I was going to buy one anyhow 'cause Mrs R fancied one but it did seem like a win/win.

Funnily enough that’s what made me walk out of a Toyota dealer 2 years ago! I didn’t want pcp and they made it very clear they didn’t want to sell the car unless it was on pcp. They wouldn’t even Discuss hp.

I had already decided on a fiesta but wanted to see what they could offer. It really put me off.

On a Honda I bought for my daughter, on top of all the other discounts, 5yrs service and warranty etc etc, there was an extra £500 from Honda if you took the 0% PCP. A but of a faff when buying a car as gift for someone.

I asked why they did and was told Honda wants everyone on PCPs and is prepared to pay for that to happen.

[nickfrog]

wormus said:

Now there’s an expectation that you can live outside them and we are all encouraged to get ourselves into financial trouble. No fun looking back at the age of 50 and instead of looking forward to retirement, you realise you haven’t got a pot to piss in and destined to be poor for the remaining part of life.

I don't understand this thought process or any correlation between financing and being financially imprudent. I insist on new for the family or commute car and I always go for the method that I feel will be the cheapest. Over the past 4 years, the most cost effective method was to lease, not own. By quite a margin. Had I insisted on owning, I would have been worse off. Retiring at 55, in 6 years.

[Sheepshanks]

wormus said:

I’ve been looking for a new car for my wife on Auto Trader. I can get (as an example) a pre registered top of the range Seat Ateca with all the gadgets and < 500 miles on the clock for £23k, that’s £7k off. Factor in a large cash deposit and 3% interest bank loan, purchasing still has its merits.

I bought an Ateca a few months ago for a family member - I reckon you wouldn't be a million miles away from that kind of discount on a new one. We got another £1500 off for not taking the 0% PCP.

[anonymous-user]

Sheepshanks said:

I bought an Ateca a few months ago for a family member - I reckon you wouldn't be a million miles away from that kind of discount on a new one. We got another £1500 off for not taking the 0% PCP.

Thanks, that’s good to know. I always assumed pre reg was the way to go, especially as we tend to keep our cars for 9-10 years / 150k miles.

[anonymous-user]

nickfrog said:

I don't understand this thought process or any correlation between financing and being financially imprudent. I insist on new for the family or commute car and I always go for the method that I feel will be the cheapest. Over the past 4 years, the most cost effective method was to lease, not own. By quite a margin. Had I insisted on owning, I would have been worse off. Retiring at 55, in 6 years.

The tool of PCP may work for many but it’s also like pay day loans for some and can tempt people into getting themselves into situations they cannot afford long term.

[Sheepshanks]

wormus said:

Thanks, that’s good to know. I always assumed pre reg was the way to go, especially as we tend to keep our cars for 9-10 years / 150k miles.

I got a great deal on my Merc at 5mths old some years ago, but when we got our Tiguan 3yrs ago we needed it quickly so looked at nearly new - you had to go back a year before they were cheaper than discounted new. And the year old ones were the previous engine and didn't have sat-nav as standard. The discounts on new were helped by a £2750 PCP deposit contributuion, but it's standard practice to take that and then Withdraw after a few days.

I asked the salesman how they ever sell the nearly-new ones and he said some people come in with the mind-set that that's what they want. They have different salesmen for new and used so it's not in the used guys interest to point out the punter would be better having a new one.

[Funk]

Kermit - in amongst all this arguing and flim-flam about PCH/PCP/loan/leasing etc it's worth pointing out that certainly with leases they're not considered 'borrowing' on your credit file - it's just basically a lump sum up front and then rental payments (although there will be a credit search). A PCP will show on your credit file which might be important or worth considering.

Personally? I had so much aggro with my E46 330Ci in just over 12 months (it cost me over £4k) I decided that for that kind out outlay per annum I'd rather be driving something new, reliable, faster, better equipped and more economical with zero hassle. So I became the thing PHers love to hate and leased a Golf R. Works out at £5k/year (when taking into account the lump-sum initial rental), however this includes VED and is fully maintained which includes all consumables and servicing. I thought about work and what I'd do if I lost my job for some reason but as I leased it meant I kept my savings intact and have enough put by to see me through at least 6-8 months without an income, including the car which parks that issue somewhat.

I haven't yet considered what I'll do in 2020 when the car goes back but for now it's been great having hassle-free motoring. I no longer play the 'what's that new puddle under the car this morning' game which was a particular favourite of the E46, nor have I been left stranded or with a car refusing to start.

Work out what works for you and do it; just do it with a full understanding of what each option means and how they stack up for you.

Edited by Funk on Friday 28th December 21:07

[Aiminghigh123]

Recently I have been seriously considering PCP or PCH. I have an old petrol Saab 9-3 that I have put 20k miles in a year only cost me £500 to buy it was fine until a month ago when it’s needed clutch, calipers plus now possibly needs new fuel pump. All in nearly £1500 I have spent on it.

Guy at work does similar miles (20-25k) and has golf contract hire £300 a month with maintenance so they even change tyres when they need it. Gets better MPG than his old golf he owned. For hassle free motoring so tempting.

[Inigo Montoya]

Aiminghigh123 said:

Recently I have been seriously considering PCP or PCH. I have an old petrol Saab 9-3 that I have put 20k miles in a year only cost me £500 to buy it was fine until a month ago when it’s needed clutch, calipers plus now possibly needs new fuel pump. All in nearly £1500 I have spent on it.

Guy at work does similar miles (20-25k) and has golf contract hire £300 a month with maintenance so they even change tyres when they need it. Gets better MPG than his old golf he owned. For hassle free motoring so tempting.

Okay, so let's do the maths.

You've spent £1,500 on the Saab. Add in the £500k you paid for it and we're in for £2k. At any point we could sell the car and get something back, but not as much as we've put into it.

The golf costs £300 a month. You don't mention whether your mate had to pay a deposit. I'm in a generous mood, so we'll let that one go. I'd guess the deposit would be several thousands.

So in year 1, your Golf costs you £3,600 plus the deposit but you don't own the car. In year 2, it costs you another £3,600 and you still don't own the car. And it keeps on costing you £300 per month or £3,600 per year until you get to the end of the deal. At that point you still don't own the car. You either have to start another PCP deal or find the cash to buy the car.

Is your Saab going to cost you £3,600 a year in repairs?

Having a maintenance contract sounds like it's an easy life but it's very little difference from booking your car in the garage and paying for the repairs as you go. The cost of the contract is always set high so the garage makes a profit.

Your £300 a month Golf is actually £300 a month for the foreseeable future.

Still tempted?

[TheStigsWeeBrother]

Inigo Montoya said:

Okay, so let's do the maths.

You've spent £1,500 on the Saab. Add in the £500k you paid for it and we're in for £2k. At any point we could sell the car and get something back, but not as much as we've put into it.

The golf costs £300 a month. You don't mention whether your mate had to pay a deposit. I'm in a generous mood, so we'll let that one go. I'd guess the deposit would be several thousands.

So in year 1, your Golf costs you £3,600 plus the deposit but you don't own the car. In year 2, it costs you another £3,600 and you still don't own the car. And it keeps on costing you £300 per month or £3,600 per year until you get to the end of the deal. At that point you still don't own the car. You either have to start another PCP deal or find the cash to buy the car.

Is your Saab going to cost you £3,600 a year in repairs?

Having a maintenance contract sounds like it's an easy life but it's very little difference from booking your car in the garage and paying for the repairs as you go. The cost of the contract is always set high so the garage makes a profit.

Your £300 a month Golf is actually £300 a month for the foreseeable future.

Still tempted?

The new Merc A class has a very tempting headline monthly payment £269 but right at the end of the add they throw in you need a deposit of nearly £5k.
So almost £18k to rent a 1.6 diesel for 4 years.

[LarsG]

Typically a PCP lasts for 3 year and on average £250 per month.

That's £9000 over three years plus the deposit. At the end you hand it back and pay for any damage, excess mileage etc. But you have no asset after this except for a possible future value payment. As the glut of PCP cars makes their way to the second hand market you may get less back that you think. This is the bubble that may burst and leave you with no future value in the car. So the £9000+ deposit disappears and you leave with nothing.

If you buy a 1-2 years old car, the depreciation cost has been removed so a top of the range car can be bought for 60-40% of its original price. Remember that the person who had the car on a PCP paid the depreciation off for you.

Car manufacturers and dealers give better than the bank loans, typically 2-4% interest rates.

Cars last 10+ years now and unless German made are very reliable.

Buying a second hand car with a bit of warranty left (some have transferable 5-7 year warranties) and putting down a reasonable deposit could over a 3 year loan period cost you less than a PCP.

If you keep the car for 6 years it will still have second hand value if you sell it, enough for a deposit on a new second hand car.

In the 3 loan free years you keep it after getting the letter that you have paid the loan in full, you will save around £9000 ( the amount you would pay to continue with another PCP)

You could put that money aside each month and buy a house, save for children, a wedding, holiday etc.

The bottom line is that you should buy a car you can afford and can afford to service and repair and buy tyres for.

However if you want to be someone who rents all his life carry on.

Edited by LarsG on Saturday 29th December 13:01