Why is PCP'ing a used car so bad?
Discussion
It isn't, but you need to be eyes wide open; the car is your problem by and large still, so if it breaks and doesn't have warranty cover you can't just say "it's bust, I ain't paying". You also lose a lot of the manufacturer "incentivised" finance options, so pre-registered and ex-demo cars and vehicles potentially anything up to a year old depending on brand can be more expensive than a brand new equivalent.
Other than that, usual detractors of the never-never and people who think others couldn't possibly understand what they're signing up for just hate on PCP full stop.
And just like that, one appears
Other than that, usual detractors of the never-never and people who think others couldn't possibly understand what they're signing up for just hate on PCP full stop.
And just like that, one appears
Warranty aside, it all boils down to the APR which is offered on new cars vs used cars.
If we use BMW as a prime example, their new cars are often supported by 2.9% APR charges, occasionally fantastic 0% deals pop up but it's not all that common. Their used approved cars don't tend to ever get lower than 7.9% and can be as high as 10.9% from what I've seen.
The GFV on a used car PCP also tends to be very pessimistic, which may result in you having equity in it at the end but the monthlies tend to be a little more eye-watering and you quickly find yourself paying the same or more than a brand new car with full manufacturers warranty.
If we use BMW as a prime example, their new cars are often supported by 2.9% APR charges, occasionally fantastic 0% deals pop up but it's not all that common. Their used approved cars don't tend to ever get lower than 7.9% and can be as high as 10.9% from what I've seen.
The GFV on a used car PCP also tends to be very pessimistic, which may result in you having equity in it at the end but the monthlies tend to be a little more eye-watering and you quickly find yourself paying the same or more than a brand new car with full manufacturers warranty.
Thanks for the replies, most helpful.
I am mulling over an 18 month old Toyota offered on a 3year PCP (so it will still only be 4.1/2 years old at the end of the agreement with the balance of the 5yrs manufacturers warranty remaining) at an APR of 4%.
It seems to be a very cheap way to 'run' a nicely specked daily for around £200.00 a month leaving plenty of funds available to upgrade the toy in due course.
I am mulling over an 18 month old Toyota offered on a 3year PCP (so it will still only be 4.1/2 years old at the end of the agreement with the balance of the 5yrs manufacturers warranty remaining) at an APR of 4%.
It seems to be a very cheap way to 'run' a nicely specked daily for around £200.00 a month leaving plenty of funds available to upgrade the toy in due course.
davidif said:
Thanks for the replies, most helpful.
I am mulling over an 18 month old Toyota offered on a 3year PCP (so it will still only be 4.1/2 years old at the end of the agreement with the balance of the 5yrs manufacturers warranty remaining) at an APR of 4%.
It seems to be a very cheap way to 'run' a nicely specked daily for around £200.00 a month leaving plenty of funds available to upgrade the toy in due course.
What is the purchase price of the Toyota?I am mulling over an 18 month old Toyota offered on a 3year PCP (so it will still only be 4.1/2 years old at the end of the agreement with the balance of the 5yrs manufacturers warranty remaining) at an APR of 4%.
It seems to be a very cheap way to 'run' a nicely specked daily for around £200.00 a month leaving plenty of funds available to upgrade the toy in due course.
J1990 said:
Warranty aside, it all boils down to the APR which is offered on new cars vs used cars.
If we use BMW as a prime example, their new cars are often supported by 2.9% APR charges, occasionally fantastic 0% deals pop up but it's not all that common. Their used approved cars don't tend to ever get lower than 7.9% and can be as high as 10.9% from what I've seen.
The GFV on a used car PCP also tends to be very pessimistic, which may result in you having equity in it at the end but the monthlies tend to be a little more eye-watering and you quickly find yourself paying the same or more than a brand new car with full manufacturers warranty.
Used car finance has more risk of default, and therefore typically higher APRsIf we use BMW as a prime example, their new cars are often supported by 2.9% APR charges, occasionally fantastic 0% deals pop up but it's not all that common. Their used approved cars don't tend to ever get lower than 7.9% and can be as high as 10.9% from what I've seen.
The GFV on a used car PCP also tends to be very pessimistic, which may result in you having equity in it at the end but the monthlies tend to be a little more eye-watering and you quickly find yourself paying the same or more than a brand new car with full manufacturers warranty.
davidif said:
Thanks for the replies, most helpful.
I am mulling over an 18 month old Toyota offered on a 3year PCP (so it will still only be 4.1/2 years old at the end of the agreement with the balance of the 5yrs manufacturers warranty remaining) at an APR of 4%.
It seems to be a very cheap way to 'run' a nicely specked daily for around £200.00 a month leaving plenty of funds available to upgrade the toy in due course.
Where as Toyota are currently offering 0% on most of their range over 2 years on a new car. I am mulling over an 18 month old Toyota offered on a 3year PCP (so it will still only be 4.1/2 years old at the end of the agreement with the balance of the 5yrs manufacturers warranty remaining) at an APR of 4%.
It seems to be a very cheap way to 'run' a nicely specked daily for around £200.00 a month leaving plenty of funds available to upgrade the toy in due course.
Muzzer79 said:
What is the purchase price of the Toyota?
Its a 2019 CH-R, it is significantly cheaper than a new one (both in terms of price and monthlies), its available immediately in an ideal spec.I am not at all bothered to have a brand new one and see it as a cheap (certainly in terms of minimal deposit and monthlies) way of driving a newish warranted car?
davidif said:
Muzzer79 said:
What is the purchase price of the Toyota?
Its a 2019 CH-R, it is significantly cheaper than a new one (both in terms of price and monthlies), its available immediately in an ideal spec.I am not at all bothered to have a brand new one and see it as a cheap (certainly in terms of minimal deposit and monthlies) way of driving a newish warranted car?
You can get a personal loan for £17k (assumed purchase price) over 5 years for £300 a month and you'll own the car at the end, rather than handing it back or clearing the GFV.
The very best 17k loan over 5 years would be at 2.8% APR and your going to need an excellent credit rating to get that rate for repayments of £303.
An average credit rating may result in being offered a loan at a higher rate and one example at 7.9% APR would mean repayments of £341, thats a huge difference over 60 months.
Assuming the OP has already been approved for the 4% PCP finance, I would say that is a reasonable deal if the purchase price is good and not inflated to take into account the low finance rate.
An average credit rating may result in being offered a loan at a higher rate and one example at 7.9% APR would mean repayments of £341, thats a huge difference over 60 months.
Assuming the OP has already been approved for the 4% PCP finance, I would say that is a reasonable deal if the purchase price is good and not inflated to take into account the low finance rate.
4% is a very good rate for used car PCP - are you sure they've quoted you APR there?
The killer for high interest rates on PCP is that you are always paying interest on the bubble too.
It may well still be cheaper to get a low rate bank loan over the full term, but on the face of it that sounds like a very good rate for used PCP. As with all of these things, you need to do the sums and compare different finance options based on your own personal situation and what APR you can achieve by funding the car in different ways.
The killer for high interest rates on PCP is that you are always paying interest on the bubble too.
It may well still be cheaper to get a low rate bank loan over the full term, but on the face of it that sounds like a very good rate for used PCP. As with all of these things, you need to do the sums and compare different finance options based on your own personal situation and what APR you can achieve by funding the car in different ways.
davidif said:
Its a 2019 CH-R, it is significantly cheaper than a new one
This is a critical piece of info that often gets missed in some peoples' rush to say that 'PCP on used cars is bad because of the interest rates'. By itself the interest rate tells you absolutely nothing about whether a deal is 'good' or 'bad'. Assuming you're not spending every last penny of disposable income you've got on the monthlies, all that really matters is the amount you will pay either over the term of the PCP (if you don't plan to keep it), or the total cost (if you do). If you don't place much value on having a brand new car then these costs might not have to be too much less than the equivalent cost on a new car to make you prefer the used one. If you do place a lot of value on having a brand new car, then the overall cost of the used one might have to be a fair bit less before you'd consider it. Only you can decide.charltjr said:
4% is a very good rate for used car PCP - are you sure they've quoted you APR there?
The killer for high interest rates on PCP is that you are always paying interest on the bubble too.
It may well still be cheaper to get a low rate bank loan over the full term, but on the face of it that sounds like a very good rate for used PCP. As with all of these things, you need to do the sums and compare different finance options based on your own personal situation and what APR you can achieve by funding the car in different ways.
A quick check on the Toyota website confirms that they are doing 4.9% APR on their approved used stock at the moment, so yes, the OP has it pretty close (maybe he's even getting a slightly better rate?).The killer for high interest rates on PCP is that you are always paying interest on the bubble too.
It may well still be cheaper to get a low rate bank loan over the full term, but on the face of it that sounds like a very good rate for used PCP. As with all of these things, you need to do the sums and compare different finance options based on your own personal situation and what APR you can achieve by funding the car in different ways.
OP, given that the usual problem with PCP on used cars is, as others have said, the high interest rate (usually starting at around 10%) so at 4-5% this deal doesn't look too bad.
Yes, if you take out a personal loan, you might be able to pay less interest (depending on the rate you are offered), but your monthly payment will be higher. You also have more flexibility with a personal loan, so there'd be a bit less faff if you want to change early.
If it works for you, go for it!
Super_G said:
Given that finance customers line dealership pockets. You would think there would be more attractive offers out there.
Except they don't - not directly, and not by the financing of the vehicle. At the very best they may make reasonable money on the additive products that "cash" buyers usually poo-poo like Alloy/Tyre Insurance, GAP Insurance etc. After that it's that the financed customers are more likely to continue returning for services where "cash" buyers are more likely to vanish to indies when the warranty is out.If you think places make fortunes out of flogging loans out when the financier is the one that makes all the money then you really aren't sharp on what dealers get.
Part of the return to service is because some PCP state that the car has to be maintained within the dealership network. Although legally using OEM parts and a specialist independent should suffice but sadly not all dealerships are amenable to warranty in the latter case.
OP this is something else to factor in. Go over the paperwork with a fine tooth comb as it may state where and where you cannot have it serviced/maintained.
Oh and yes more money and commission is made on selling paint coatings, tyre insurance etc.
Learning a lot here. Love this forum.
OP this is something else to factor in. Go over the paperwork with a fine tooth comb as it may state where and where you cannot have it serviced/maintained.
Oh and yes more money and commission is made on selling paint coatings, tyre insurance etc.
Learning a lot here. Love this forum.
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