Question About PCP and losing a ton of cash?
Discussion
Just trying to get some info to help a friend out who makes really poor financial decisions.
A friend of mine has an M140i which he got to ‘1-up’ my 987.2 but a year in and he is bored of it and now that I’m looking at getting a Mustang he wants to try and ‘1-up’ me again by getting an M3.
He tends to keep cars for a year or 2 at most, he gets bored very easily. Same for other things too. He’s bored one day, buys a Playstation – plays it twice, trades it in, buys an Xbox. Repeat. He is never content with what he has.
I am concerned that getting the M3 is going to f
k him financially but want to get some advice before I speak to him.
I believe is 18 plate M140i was about £23,000 when he bought it in February and if I remember correctly he put about £6,000 towards it and PCP finance for the rest.
I believe he pays around £360 per month and presumably, there is a balloon payment at the end but I really don’t know. I think the PCP is 3 years, though he insists he has leased the car and not financed it - he said it’s a PCP lease - but to my knowledge a PCP lease is just PCP finance and also it’s not common to be able to lease a used car or have the option to buy it at the end of the term.
Anyway, he’s less than a year into this agreement and is now looking at M3s. I don’t know what his budget is but they seem to start at 30k or so with 40k miles or so, so I imagine he is probably looking at examples in the mid to high 30s.
I can’t see him upgrading to an M3 being a smart idea. I know the numbers I gave you on his existing finance are not detailed enough to properly answer my question but if he does go through with it, would he likely still come out of the M140i with the £6,000 he put in? Or would he have a bit more than that with the payments he’s made? Or would he come out of the existing contract with less than he started with going into it (£6,000)?
OR, could it be all 3 of the above as you’d need all the exact details to answer me?
A friend of mine has an M140i which he got to ‘1-up’ my 987.2 but a year in and he is bored of it and now that I’m looking at getting a Mustang he wants to try and ‘1-up’ me again by getting an M3.
He tends to keep cars for a year or 2 at most, he gets bored very easily. Same for other things too. He’s bored one day, buys a Playstation – plays it twice, trades it in, buys an Xbox. Repeat. He is never content with what he has.
I am concerned that getting the M3 is going to f
k him financially but want to get some advice before I speak to him. I believe is 18 plate M140i was about £23,000 when he bought it in February and if I remember correctly he put about £6,000 towards it and PCP finance for the rest.
I believe he pays around £360 per month and presumably, there is a balloon payment at the end but I really don’t know. I think the PCP is 3 years, though he insists he has leased the car and not financed it - he said it’s a PCP lease - but to my knowledge a PCP lease is just PCP finance and also it’s not common to be able to lease a used car or have the option to buy it at the end of the term.
Anyway, he’s less than a year into this agreement and is now looking at M3s. I don’t know what his budget is but they seem to start at 30k or so with 40k miles or so, so I imagine he is probably looking at examples in the mid to high 30s.
I can’t see him upgrading to an M3 being a smart idea. I know the numbers I gave you on his existing finance are not detailed enough to properly answer my question but if he does go through with it, would he likely still come out of the M140i with the £6,000 he put in? Or would he have a bit more than that with the payments he’s made? Or would he come out of the existing contract with less than he started with going into it (£6,000)?
OR, could it be all 3 of the above as you’d need all the exact details to answer me?
TREMAiNE said:
Just trying to get some info to help a friend out who makes really poor financial decisions.
A friend of mine has an M140i which he got to ‘1-up’ my 987.2 but a year in and he is bored of it and now that I’m looking at getting a Mustang he wants to try and ‘1-up’ me again by getting an M3.
He tends to keep cars for a year or 2 at most, he gets bored very easily. Same for other things too. He’s bored one day, buys a Playstation – plays it twice, trades it in, buys an Xbox. Repeat. He is never content with what he has.
I am concerned that getting the M3 is going to fk him financially but want to get some advice before I speak to him.
I believe is 18 plate M140i was about £23,000 when he bought it in February and if I remember correctly he put about £6,000 towards it and PCP finance for the rest.
I believe he pays around £360 per month and presumably, there is a balloon payment at the end but I really don’t know. I think the PCP is 3 years, though he insists he has leased the car and not financed it - he said it’s a PCP lease - but to my knowledge a PCP lease is just PCP finance and also it’s not common to be able to lease a used car or have the option to buy it at the end of the term.
Anyway, he’s less than a year into this agreement and is now looking at M3s. I don’t know what his budget is but they seem to start at 30k or so with 40k miles or so, so I imagine he is probably looking at examples in the mid to high 30s.
I can’t see him upgrading to an M3 being a smart idea. I know the numbers I gave you on his existing finance are not detailed enough to properly answer my question but if he does go through with it, would he likely still come out of the M140i with the £6,000 he put in? Or would he have a bit more than that with the payments he’s made? Or would he come out of the existing contract with less than he started with going into it (£6,000)?
OR, could it be all 3 of the above as you’d need all the exact details to answer me?
Quoted for posterity.A friend of mine has an M140i which he got to ‘1-up’ my 987.2 but a year in and he is bored of it and now that I’m looking at getting a Mustang he wants to try and ‘1-up’ me again by getting an M3.
He tends to keep cars for a year or 2 at most, he gets bored very easily. Same for other things too. He’s bored one day, buys a Playstation – plays it twice, trades it in, buys an Xbox. Repeat. He is never content with what he has.
I am concerned that getting the M3 is going to f
k him financially but want to get some advice before I speak to him. I believe is 18 plate M140i was about £23,000 when he bought it in February and if I remember correctly he put about £6,000 towards it and PCP finance for the rest.
I believe he pays around £360 per month and presumably, there is a balloon payment at the end but I really don’t know. I think the PCP is 3 years, though he insists he has leased the car and not financed it - he said it’s a PCP lease - but to my knowledge a PCP lease is just PCP finance and also it’s not common to be able to lease a used car or have the option to buy it at the end of the term.
Anyway, he’s less than a year into this agreement and is now looking at M3s. I don’t know what his budget is but they seem to start at 30k or so with 40k miles or so, so I imagine he is probably looking at examples in the mid to high 30s.
I can’t see him upgrading to an M3 being a smart idea. I know the numbers I gave you on his existing finance are not detailed enough to properly answer my question but if he does go through with it, would he likely still come out of the M140i with the £6,000 he put in? Or would he have a bit more than that with the payments he’s made? Or would he come out of the existing contract with less than he started with going into it (£6,000)?
OR, could it be all 3 of the above as you’d need all the exact details to answer me?
Perhaps you could take up a hobby.
I think, assuming he's a functioning adult, there's not much you can do or say. He's entitled to make his own choices, even if they don't look like smart choices. People who chop and change their possessions like that are driven by something deeper than what's rational anyway.
If you say anything you risk looking like you're interfering, or worse, patronising him. If he needs to play 'considerably richer than yaow' I think you just have to let him.
If you say anything you risk looking like you're interfering, or worse, patronising him. If he needs to play 'considerably richer than yaow' I think you just have to let him.
I think they would end up both being with BMW Finance, I really can't see this being an issue!
He has probably paid about £8k (£6k deposit, £2k in capital repayments??), at a complete guess towards the 140i, so if it is on PCP with a balloon, then he "may" owe about £15k on it, are they worth more or less?
I am sure BMW will happily trade it up for an M3, with no real issue, and if the GFV is higher than the 140i, then it may not cost him anymore.
But there is not enough info to give an exact answer, and maybe he knows better, and has an idea what he can afford. Maybe, just maybe he is not trying to one up you, and is just bored.
He has probably paid about £8k (£6k deposit, £2k in capital repayments??), at a complete guess towards the 140i, so if it is on PCP with a balloon, then he "may" owe about £15k on it, are they worth more or less?
I am sure BMW will happily trade it up for an M3, with no real issue, and if the GFV is higher than the 140i, then it may not cost him anymore.
But there is not enough info to give an exact answer, and maybe he knows better, and has an idea what he can afford. Maybe, just maybe he is not trying to one up you, and is just bored.
TREMAiNE said:
I am concerned that getting the M3 is going to fk him financially but want to get some advice before I speak to him.
So in effect, if the end result is that it's not a good idea are you going to tell him to stay in his "financial lane"?k him financially but want to get some advice before I speak to him. roll on the stanley videos please...
Taking all the rest of it out of the equation, your friend may well have entered into a lease purchase agreement which is very similar to PCP but is usually described as a lease.
The difference between lease purchase and PCP is that on a PCP the final payment is optional and you can just hand the car back and walk away regardless of the value of the car. This gives security that even if things change and the car depreciates much more than expected, the final payment is covered.
On a lease purchase, the final payment must be paid by the buyer no matter what. Are you in negative equity at the end of the deal? Tough, you can't just hand the car back, you must settle the finance.
It used to be that unscrupulous lenders could use lease purchase to give relatively low monthlies at relatively high APRs by kicking the financial can down the road, I'm not sure if that sort of practice is still possible with the current legislation.
The difference between lease purchase and PCP is that on a PCP the final payment is optional and you can just hand the car back and walk away regardless of the value of the car. This gives security that even if things change and the car depreciates much more than expected, the final payment is covered.
On a lease purchase, the final payment must be paid by the buyer no matter what. Are you in negative equity at the end of the deal? Tough, you can't just hand the car back, you must settle the finance.
It used to be that unscrupulous lenders could use lease purchase to give relatively low monthlies at relatively high APRs by kicking the financial can down the road, I'm not sure if that sort of practice is still possible with the current legislation.
AIUI PCP is designed so that at the point the balloon payment is due the car is worth approx. the same as the balloon.
The payment profile to get from the starting point to the balloon is a straight line. But the matching depreciation doesn't always work like that (i.e. it can be a curve).
He may strike lucky and find the car is worth the same as the outstanding finance, or that his 6k deposit has put him slightly ahead of the depreciation. But most likely is that he will still owe more than the car is worth in spite of his "deposit" (it's a part payment - he doesn't get it back) plus payments to date. In that case, any "negative equity" is going to have to be paid for somehow - likely rolled into the M3 finance deal.
Fair enough he's trying to keep up with you. Some people are fools like that. I'd be reasonably straight and say "Are you sure you want to chop in that fantastic 140i so quickly - won't that cost you a load in the swap?" And then whatever he does you've got a clear conscience.
The payment profile to get from the starting point to the balloon is a straight line. But the matching depreciation doesn't always work like that (i.e. it can be a curve).
He may strike lucky and find the car is worth the same as the outstanding finance, or that his 6k deposit has put him slightly ahead of the depreciation. But most likely is that he will still owe more than the car is worth in spite of his "deposit" (it's a part payment - he doesn't get it back) plus payments to date. In that case, any "negative equity" is going to have to be paid for somehow - likely rolled into the M3 finance deal.
Fair enough he's trying to keep up with you. Some people are fools like that. I'd be reasonably straight and say "Are you sure you want to chop in that fantastic 140i so quickly - won't that cost you a load in the swap?" And then whatever he does you've got a clear conscience.
Many thanks to all who offered helpful answers, I've found out exactly what I was asking.
To those implying that it's none of my business - you're right, it isn't - but that doesn't mean I shouldn't offer some advice. I've had people offer me advice about things that weren't their business, sometimes I've not listened and made a mistake they wanted to avoid and other times I have listened and followed their advice and it's saved me making a mistake. While it can be patronizing, I always appreciate friends trying to offer me advice. Especially when it comes to financial matters as for some reason it's massively tabboo to talk about that in this country...
To those implying that it's none of my business - you're right, it isn't - but that doesn't mean I shouldn't offer some advice. I've had people offer me advice about things that weren't their business, sometimes I've not listened and made a mistake they wanted to avoid and other times I have listened and followed their advice and it's saved me making a mistake. While it can be patronizing, I always appreciate friends trying to offer me advice. Especially when it comes to financial matters as for some reason it's massively tabboo to talk about that in this country...
OMITN said:
Fair enough he's trying to keep up with you. Some people are fools like that. I'd be reasonably straight and say "Are you sure you want to chop in that fantastic 140i so quickly - won't that cost you a load in the swap?" And then whatever he does you've got a clear conscience.
Yep - already have been dropping this in now and again, whilst not the car for me it's a mental-car and faster and better equipped than anything I have owned or am likely to own in the near future. Hopefully, he realises the M3 isn't the smartest choice just yet as I imagine the payments will be significantly more than on the 1 series.Downward said:
£23k for a less than year old M140i seems cheap.
You could well be right, knowing him he may very well have made the numbers look better so it seemed like he got a great deal. At the time, I had also looked at M140i lease deals and he was shocked that leasing a brand new one (which was poverty spec, admittedly) was significantly cheaper than what he was paying for his (barley) used one. Something like £60 per month over the same 36 months.
Butter Face said:
Sounds like he enjoys it rather than regrets it.
I wish he did enjoy it but I know he doesn't. A month into getting it he was talking about what he could get next. He gets bored very easily which combined with his competitive 1-up personality leads to lots of cars in not a lot of time. 
Unless he buys the cheapest practical transport possible then he’s not making a ‘good financial decision’. He’s making an emotional decision, weighing up the pleasure of getting the car vs the alternative uses he could put the money to.
As a friend, I think you can help him understand the cost (which he may not have appreciated), but you shouldn’t try and judge whether he’ll get enough pleasure out of the car to merit that cost. eg I bought a 911 when I was in my 20s and on paper it would have looked like a ridiculous decision financially. But I had an awesome time with it and thought it was worth every penny!
As a friend, I think you can help him understand the cost (which he may not have appreciated), but you shouldn’t try and judge whether he’ll get enough pleasure out of the car to merit that cost. eg I bought a 911 when I was in my 20s and on paper it would have looked like a ridiculous decision financially. But I had an awesome time with it and thought it was worth every penny!
Edited by 67Dino on Tuesday 1st October 14:17
TREMAiNE said:
To those implying that it's none of my business - you're right, it isn't - but that doesn't mean I shouldn't offer some advice. I've had people offer me advice about things that weren't their business, sometimes I've not listened and made a mistake they wanted to avoid and other times I have listened and followed their advice and it's saved me making a mistake. While it can be patronizing, I always appreciate friends trying to offer me advice. Especially when it comes to financial matters as for some reason it's massively tabboo to talk about that in this country...
Seems fair to me - perhaps I read wrong but it sounded a bit as if you felt you'd be failing somehow if you didn't talk him out of the decision. Nowt wrong with friendly advice, just have an exit plan. 
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