PCP without a monthly payment

[va1o]

Just out of interest has anyone ever done a PCP deal without a monthly payment? By that I mean your deposit and the guaranteed future value together are enough to cover the total cost of the loan. I know MINI have offered this sort of thing in the past but I'm not sure whether most other marques/ finance houses offer it. Seems like it could be quite a financially sound way of running a new car if you know for sure you'll be replacing it 2/ 3 years down the line and don't want the monthly commitment.

[limpsfield]

Surely it's just the equivalent of eg 3 years worth of payments, lumped onto the deposit?

[justin220]

Lotus offer this. 50% up front, 50% at the end

[ajf]

Ford do it as well

Hoe that helps

[Ari]

Sound compared to what? Youve still got to suffer deprecation and pay interest surely? And you're taking the biggest deprecation hit and then having to give it back (or stump up the final payment).

I'm not sure what you are gaining.

[anonymous-user]

I was hoping to do this with a new Skoda Citigo. Unfortunately 33% deposit was the max, leaving a minimal interest free monthly payment...

[rehab71]

We do it at Ford. It's called Options Cashplan. Very popular as on normal PCP you can only put in 35% deposit.

Good for people who can't quite pay for the whole car upfront so can offset a few k for a couple of years. At the moment there's deposit allowances on most of the range which covers most, if not all the interest.

[M4cruiser]

It's all the same in the end, these plans are made for marketing, to appeal to different groups of people.

If you use the basic accounting principle of "present value" then you'll understand how these plans work.

It's just that some people prefer to pay a little each month, some have a large deposit ready, etc.

These PCP plans can be tailored to have any monthly payment, by varying the deposit, final payment, tweaking the interest rate etc, normally done so the monthly payment ends in a "9".

[va1o]

Thanks for the replies. I can afford to pay in cash for the car but I want to make my money work efficiently hence looking at all the different options. Reality is I wouldn't keep it forever!

[Ari]

But all you're doing is adding some extra interest payments to what you ultimately pay and making the purchase more expensive surely?

I'm sorry, I'm still not getting what the advantage is...

[M4cruiser]

Ari said:

But all you're doing is adding some extra interest payments to what you ultimately pay and making the purchase more expensive surely?

Yes, this is exactly what the OP is doing.
Borrowing money when you already have it in the bank usually means you pay more interest than you are earning on the savings.
But there may just be a reason for that .. that's up to the individual, some people like to have the security of some savings just in case, and are prepared to pay for the privilege.

The main point I think is that PCPs necessarily incur more interest than a loan of the full amount over the same period. The PCP has the lower "payment", but the higher eventual "cost", because you own nothing at the end.

[anonymous-user]

I asked VW about this today. Their max pcp deposit is 30%.
So let's say a 10k car, you pay 3k deposit . Final value 4k. 3k to pay @6% over 3 years.
I was told that after the 1st payment goes out you can make overpayment, eg the remainder if that 3k loan ...
so 6kish up front, leaving the final 4k in 3 years..

[blueg33]

M4cruiser said:

Ari said:

But all you're doing is adding some extra interest payments to what you ultimately pay and making the purchase more expensive surely?

Yes, this is exactly what the OP is doing.
Borrowing money when you already have it in the bank usually means you pay more interest than you are earning on the savings.
But there may just be a reason for that .. that's up to the individual, some people like to have the security of some savings just in case, and are prepared to pay for the privilege.

The main point I think is that PCPs necessarily incur more interest than a loan of the full amount over the same period. The PCP has the lower "payment", but the higher eventual "cost", because you own nothing at the end.

You don't really know how the op uses his cash. I have a chunk of cash in a VCT earning 10% tax free. For me it makes more sense to leave that in place and borrow to pay for a car. Some of my equity in other projects is earning 20% pa

[trashbat]

Jimboka said:

I asked VW about this today. Their max pcp deposit is 30%.
So let's say a 10k car, you pay 3k deposit . Final value 4k. 3k to pay @6% over 3 years.
I was told that after the 1st payment goes out you can make overpayment, eg the remainder if that 3k loan ...
so 6kish up front, leaving the final 4k in 3 years..

Does overpayment reduce the effective APR? i.e. when paying the remainder, do you have to pay £3k, or £3k+6%? I know what should happen, but it doesn't mean it does.

[SteBrown91]

SEAT were offering something similar when i was considering a new Leon in September, but on HP

50% deposit, then 300 and something quid a month over 3 years and you own the car outright. But they allowed 12 adhoc payments a year (basically every payment could be increased on top of the standard rate) so could pay 300 a month for 6 months then pay the lot off lump sum

[anonymous-user]

trashbat said:

oes overpayment reduce the effective APR? i.e. when paying the remainder, do you have to pay £3k, or £3k+6%? I know what should happen, but it doesn't mean it does.

I'm pretty sure you do not pay interest, but there could be other documentation fees, I didn't see the business manager to discuss the options. But the concept sounds ok, I guess other brands will do something similar..

[rfoster]

There's a common misconception on PCP's about how much you borrow - in the example mentioned above with a £10k car, £3k deposit and £4k balloon - you are borrowing, and paying interest on £7k; you are just deferring a capital payment of £4k until the end of the agreement. Certainly you can make overpayments on any regulated agreement, if you were to pay off £3k after the fist month leaving just £4k of capital to be paid at the end of the term, you'll still pay interest on this amount of money (unless, of course, it's 0% APR).