PCP finance.

Soarer

Heat_Wave wrote: »

I would like to hear people's thoughts on the below, as I am torn and do not know what to do.

I am looking at a new Mini Cooper on PCP.

Price of the car - €30,500
Deposit - €8,500
Monthly repayments - €289

These are the only figures I have been given. I have not been given a GFV yet. Based on these figures, if I was to go on PCP again in 3 years time, what deposit might I be looking at?

I'm on a salary of €29,000 and I live at home. Is this doable?

Of course it's doable. I personally think you'd be mental though!

Why don't you do this?
You have €8500 saved.
Spend that on a secondhand car.
Save the €289 per month, giving you €3500 this time next year.
Come next year, if you fancy a change, you'll have a car that's lost very little in depreciation and €3500 to trade up with.
If you don't fancy a change, keep the car and keep saving.

The point is, you're always in charge.
You decide if you want to keep or change the car.
You decide if you want to put 30,000 kms or 3,000 kms annually on it.
You decide if you want to get a dent repaired as you're not worried about your GFV.

I've made oodles of stupid mistakes that I'm still paying for. You're in a position where you can buy a decent car, for cash, and stay out of debt. And yet you're looking to voluntarily get into debt for a car? Madness.

737max

You could get an early Cooper Sport for half your deposit which would deliver much the same experience.

noelf

737max wrote: »

You could get an early Cooper Sport for half your deposit which would deliver much the same experience.

My son got this for €8750 only 80000 km ..

Drummerboy08

mickdw wrote: »

Are you seeing cars coming in at 3 years. I believe vw are working out at about 15 percent to 20 percent equity.
How are audi looking?
Bmw?

Take a look at the amount of 131 BMW 3 series on carzone at the moment, and see if that answers your question... Very little equity in them and many have just handed them back and switched brands.

There should be around 15-20% equity with any VW Bank agreement, maybe more if you push hard with a few dealers when it comes time to change.

Lantus

Heat_Wave wrote: »

I would like to hear people's thoughts on the below, as I am torn and do not know what to do.

I am looking at a new Mini Cooper on PCP.

Price of the car - €30,500
Deposit - €8,500
Monthly repayments - €289

These are the only figures I have been given. I have not been given a GFV yet. Based on these figures, if I was to go on PCP again in 3 years time, what deposit might I be looking at?

I'm on a salary of €29,000 and I live at home. Is this doable?

Your initial deposit is very high. Probably the highest allowable. Ask the dealer what the expected equity will be after 3 years. Its probably 2-4k (I don't know) That means to keep your monthly repayments the same after 3 years you will need the difference between your initial deposit and the equity. So 4.5 to 6.5k.

Put in the deposit based on expected equity to match. After 3 years your payments will be very similar. If they are unaffordable and you are unable to raise a new deposit you will likely end up losing the car after 3 years.

30k for that salary seems bonkers.

Get a decent 2nd hand car imho. When you have a family and know your life won't be changing then a PCP deal will make more sense. Boring predictability over many years is the mainstay if family life.

26000 Elephants

^ top advise. :cool:

MuddyDog

What would happen in this scenario:

Car bought for 80k
Deposit of 24,800 (31% which is the max)
GMFV of 35k.

I pay the monthly installments whatever they may be and after 3 years I just have to pay 35k to own the car outright. Instead of paying the 35k say there is a car in the dealers with a price of 35k. Can I just hand my car in and take full ownership of the 35k car?

Zurbaran

MuddyDog wrote: »

What would happen in this scenario:

Car bought for 80k
Deposit of 24,800 (31% which is the max)
GMFV of 35k.

I pay the monthly installments whatever they may be and after 3 years I just have to pay 35k to own the car outright. Instead of paying the 35k say there is a car in the dealers with a price of 35k. Can I just hand my car in and take full ownership of the 35k car?

You owe them 35k so that is the amount you have to pay back. This is done by paying 35k or handing the car back (if the car is only worth the gmfv after 3 years you were a silly boy to begin with).It's the reason people keep bringing up the importance of equity. Equity is the amount on top of gmfv. So if you could get 36k for your above example you would have 1k equity to put into a new car deposit etc.

Needles73

MuddyDog wrote: »

What would happen in this scenario:

Car bought for 80k
Deposit of 24,800 (31% which is the max)
GMFV of 35k.

I pay the monthly installments whatever they may be and after 3 years I just have to pay 35k to own the car outright. Instead of paying the 35k say there is a car in the dealers with a price of 35k. Can I just hand my car in and take full ownership of the 35k car?

. I would suggest if this is your understanding PCP may not be for you....you would owe 35k not have 35k equity.......you then purchase the 35k car and owe 70k ? Maybe your not clear or I'm missing something

MuddyDog

Needles73 wrote: »

. I would suggest if this is your understanding PCP may not be for you....you would owe 35k not have 35k equity.......

I phrased my question poorly, it was the equity I was getting at! Zurbaran has explained it perfectly.

Needles73

MuddyDog wrote: »

I phrased my question poorly, it was the equity I was getting at! Zurbaran has explained it perfectly.

Ah ok, yes that makes sense. , yes is my thoughts

Lantus

MuddyDog wrote: »

What would happen in this scenario:

Car bought for 80k
Deposit of 24,800 (31% which is the max)
GMFV of 35k.

I pay the monthly installments whatever they may be and after 3 years I just have to pay 35k to own the car outright. Instead of paying the 35k say there is a car in the dealers with a price of 35k. Can I just hand my car in and take full ownership of the 35k car?

One thing to note about handing a car back is that you probably want to be inside your mileage limits as the finance company may apply charges compared to you getting a new car.

opinionated3

The more that i have read through this topic the more I'm agreeing with the OP.....can't see the big benefits in the long term with pcp....even for someone like me that does little mileage. ...

bidiots

opinionated3 wrote: »

The more that i have read through this topic the more I'm agreeing with the OP.....can't see the big benefits in the long term with pcp....even for someone like me that does little mileage. ...

It's just a different version of hire purchase, a different angle on owning a new car. I'm confused by the confusion.

Zurbaran

It works in three scenarios in my opinion.

1, You go in at around 20% deposit as this will mean you have enough for a deposit on a new one after the contract. Get the quote at around 20% and if you can't handle the monthly's? You can't afford the car.


2, Go the full 30% but save on top of the monthlys so you can make the deposit 3 years away.


3, Again go with the 30% but this time re-finance at the end and keep the car for another three or so years.

spuddy

opinionated3 wrote: »

The more that i have read through this topic the more I'm agreeing with the OP.....

To my eyes, a PCP is essentially a loan to pay for a car's cost of depreciation, with interest & fees on top. At the end of the term, if you're "lucky", you may have over-paid enough to have a contribution towards doing it all over again. Amazing.

grogi

spuddy wrote: »

To my eyes, a PCP is essentially a loan to pay for a car's cost of depreciation, with interest & fees on top. At the end of the term, if you're "lucky", you may have over-paid enough to have a contribution towards doing it all over again. Amazing.

Yes - but you pay interest on the depreciation and GMFV together.

26000 Elephants

grogi wrote: »

Yes - but you pay interest on the depreciation and GMFV together.

Yup, thats the catch. You only pay pack the depreciation part - but you pay interest on *both*

spuddy

26000 Elephants wrote: »

Yup, thats the catch. You only pay pack the depreciation part - but you pay interest on *both*

I think the 'catch' is being persuaded to take out this type of finance in the first place, as you own nothing at the end of the term. The fact that you're paying interest on the double for the privilege adds insult to injury.

mickdw

spuddy wrote: »

I think the 'catch' is being persuaded to take out this type of finance in the first place, as you own nothing at the end of the term. The fact that you're paying interest on the double for the privilege adds insult to injury.

You are paying interest on all the money you have been loaned so it's hardly a catch. The manufacturer had to be paid for the entire car not just the first 3 years depreciation.

EndaHonesty

spuddy wrote: »

I think the 'catch' is being persuaded to take out this type of finance in the first place, as you own nothing at the end of the term. The fact that you're paying interest on the double for the privilege adds insult to injury.

How is it any different to any other type of car finance?

If you take a loan out from your bank or credit union you still have to pay interest on the full amount.

There are plenty of PCP deals with extremely low rates, even zero rates, way lower in fact than any bank or CU loan rates.

There are no catches, injuries or insults.

Atlantic Dawn

Am I right in thinking that only the banks who gave the PCP finance are exposed if the "buyer" doesn't make payments on the car? Seems to be just Bank Of Ireland and VW Bank in the PCP game or are there any others?

EndaHonesty

Atlantic Dawn wrote: »

Am I right in thinking that only the banks who gave the PCP finance are exposed if the "buyer" doesn't make payments on the car? Seems to be just Bank Of Ireland and VW Bank in the PCP game or are there any others?

A new website I just found, Google Search, shows Peugeot, Toyota, Dacia, Audi, Hyundai, Nissan, Mazda, Renault, Kia & BMW are all offering PCP finance.

That's just the first page of the search.

Atlantic Dawn

EndaHonesty wrote: »

A new website I just found, Google Search, shows Peugeot, Toyota, Dacia, Audi, Hyundai, Nissan, Mazda, Renault, Kia & BMW are all offering PCP finance.

That's just the first page of the search.

Yes I know how to use a computer :pac:, I have read the small prints on the finance previous but just not on all 20 plus manufacturers websites who is actually providing the finance to buy the cars, so far it looks to be like BOI are mostly exposed...

Peugeots is provided by BOI
Toyotas is provided, by BOI
Audis is provided by VW Bank
Mazdas is provided by BMW Financial Services
Nissans is provided by AIB
Renaults is provided by ?
Kias is provided by BOI
BMWs is provided by BMW Financial Services

26000 Elephants

EndaHonesty wrote: »

How is it any different to any other type of car finance?

Completely different. PCP you rent a car. Finance you buy a car.

If you take a loan out from your bank or credit union you still have to pay interest on the full amount.

Of course. But its clear and up front. Have a look back at this thread and spot the characters who still think that GMFV is a big fat check the garage gives you towards your next car...

There are plenty of PCP deals with extremely low rates, even zero rates, way lower in fact than any bank or CU loan rates.

And if you think that is the headline cost of a PCP, then good luck to you.

There are no catches, injuries or insults.

Still some catches. Not sure where you are getting injuries or insults from. Perhaps I should use that new 'search' site you found? :-)

bidiots

26000 Elephants wrote: »

Completely different. PCP you rent a car. Finance you buy a car.
Not completely different. You are renting money to purchase a car.



Of course. But its clear and up front. Have a look back at this thread and spot the characters who still think that GMFV is a big fat check the garage gives you towards your next car...
It's not the fault of PCP that characters do not understand what GMFV is



And if you think that is the headline cost of a PCP, then good luck to you.
What other costs are you referring to?


Still some catches. Not sure where you are getting injuries or insults from. Perhaps I should use that new 'search' site you found? :-)
What catches are you referring to? Maybe you should enlighten the 'characters'

I am not for/against PCP, it fits some, not others. But there is a lot of crap been spouted in this thread. It's a simple process.
Basically, if you can afford a new car, PCP is another option of Finance. If you can't afford a new car, then PCP might not be for you at all.

grogi

bidiots wrote: »

I am not for/against PCP, it fits some, not others. But there is a lot of crap been spouted in this thread. It's a simple process.
Basically, if you can afford a new car, PCP is another option of Finance. If you can't afford a new car, then PCP might not be for you at all.

That's a great summary. PCP is a very smart way of convincing people that can't afford a new car that they can and keeping them paying as much as they can without giving back any asset.

A masterpiece of social engineering.

Soarer

Why do you have to finance the GFV part?

A €40k car.
€10k deposit.
GFV of €20k.
Why are you not just financing the €10k difference since, in 3 years' time, you're either giving the car back (so the €20k is paid back that way), or you buy the car (and the €20k is paid back that way)?

Marcusm

Soarer wrote: »

Why do you have to finance the GFV part?

A €40k car.
€10k deposit.
GFV of €20k.
Why are you not just financing the €10k difference since, in 3 years' time, you're either giving the car back (so the €20k is paid back that way), or you buy the car (and the €20k is paid back that way)?

Because someone has to finance the car cost in its entirety, ie the car has to be paid for now.

acronym Chilli

EndaHonesty wrote: »

How is it any different to any other type of car finance?

If you take a loan out from your bank or credit union you still have to pay interest on the full amount.

There are plenty of PCP deals with extremely low rates, even zero rates, way lower in fact than any bank or CU loan rates.

There are no catches, injuries or insults.

One difference from Bank/CU loans is that you're buying the finance and the car in a bundle, which makes it harder to know what the cost of each is. Whenever you've bundling, it's good to be skeptical since there's usually some element of segmentation/price-discrimination/obfuscation going on. (of course, there are other situations where people buy credit and product at the same time; the key lesson is that "free credit" is almost certainly not free, it's just the price is hidden somewhere else.)

An alternative is to get loan approval from the cheapest finance source you can find. Then take your cheque and drive the hardest deal you can on a car purchase.

bidiots

grogi wrote: »

That's a great summary. PCP is a very smart way of convincing people that can't afford a new car that they can and keeping them paying as much as they can without giving back any asset.

A masterpiece of social engineering.

That's the kicker, exceptional marketing. What happens when this bubble bursts?

EndaHonesty

26000 Elephants wrote: »

Completely different. PCP you rent a car. Finance you buy a car.



Of course. But its clear and up front. Have a look back at this thread and spot the characters who still think that GMFV is a big fat check the garage gives you towards your next car...



And if you think that is the headline cost of a PCP, then good luck to you.



Still some catches. Not sure where you are getting injuries or insults from. Perhaps I should use that new 'search' site you found? :-)

Have you ever bought a car using a bank or credit union loan?

Drummerboy08

OSI wrote: »

Similar finance packages have been running in the US, UK and Europe for decades, it's well tested as a market at this stage.

Pcp was developed in the 60's in the US.

It's not exactly a new product!

bidiots

OSI wrote: »

Similar finance packages have been running in the US, UK and Europe for decades, it's well tested as a market at this stage.

I'm sure it has. I'm afraid this would not instill my confidence in my fellow countrymen, and witnessing the 'people' who now own new cars, unfortunatly I can only see carnage on the horizon in the next few years. Hope Im wrong

EndaHonesty

bidiots wrote: »

I'm sure it has. I'm afraid this would not instill my confidence in my fellow countrymen, and witnessing the 'people' who now own new cars, unfortunatly I can only see carnage on the horizon in the next few years. Hope Im wrong

How do you know how random "people" have paid for their cars?

bidiots

EndaHonesty wrote: »

How do you know how random "people" have paid for their cars?

Who said anything about random "people"?

EndaHonesty

bidiots wrote: »

Who said anything about random "people"?

What "people" are you talking about then?

bidiots

EndaHonesty wrote: »

What "people" are you talking about then?

Maybe read the sentence first... :rolleyes:
and witnessing the 'people' who now own new cars

So enough dragging off topic!

EndaHonesty

bidiots wrote: »

Maybe read the sentence first... :rolleyes:
and witnessing the 'people' who now own new cars

So enough dragging off topic!

Do you work in a car dealers? If not, how can you witness how people buy their cars?!

Soarer

Marcusm wrote: »

Because someone has to finance the car cost in its entirety, ie the car has to be paid for now.

Why?

Basically you're borrowing €20k (GFV) over 3 years, paying interest on said €20k (GFV), and then giving back the €20k (GFV). All the while you're paying for the depreciation.

Drummerboy08 wrote: »

Pcp was developed in the 60's in the US.

It's not exactly a new product!

The US has also had student loans and sub-prime mortgages, both of which are ace!

Brian Scan

Soarer wrote: »

Why?

Basically you're borrowing €20k (GFV) over 3 years, paying interest on said €20k (GFV), and then giving back the €20k (GFV). All the while you're paying for the depreciation.



The US has also had student loans and sub-prime mortgages, both of which are ace!

Any time you borrow money commercially you pay interest and pay back the capital.

Drummerboy08

Who else pays for the GFV amount on day one?

Correct and right on the other types of Loans available in the US, however I pointed out where and when pcp was developed as there seems to be a question of "what will happen in 3 years time when these agreements mature".

Soarer

Brian Scan wrote: »

Any time you borrow money commercially you pay interest and pay back the capital.

Yeah, but the principal is always reducing.

This way, it's basically an interest only loan.

Brian Scan

Soarer wrote: »

Yeah, but the principal is always reducing.

This way, it's basically an interest only loan.

Agreed. I certainly wouldn't finance a car in that way.

EndaHonesty

Soarer wrote: »

Yeah, but the principal is always reducing.

This way, it's basically an interest only loan.

Brian Scan wrote: »

Agreed. I certainly wouldn't finance a car in that way.

Lads you clearly don't understand pcp car finance, or indeed interest and principle.

Soarer

EndaHonesty wrote: »

Lads you clearly don't understand pcp car finance, or indeed interest and principle.

Enlighten us clever clogs.

If I borrow €20k over 3 years, pay monthly repayments, and in 3 years still have to give back €20k, what else is it only interest only?

grogi

OSI wrote: »

But that's incorrect.
You're borrowing OTR Price - Deposit.
Paying back repayments on (Borrowed amount - GMFV) + Interest(Borrowed amount)
This then leaves you with the GMFV to pay at the end.

If the car is 40k and you pay 10k deposit with a 20k GMFV, you are borrowing 30k, paying payments on 10k and interest on the 30k, and left with 20k to pay at the end.

Did one ever borrowed 30k? One actually never got to own the asset, so technically she or he did not borrow any money but the asset itself. ;-)

EndaHonesty

Soarer wrote: »

Enlighten us clever clogs.

If I borrow €20k over 3 years, pay monthly repayments, and in 3 years still have to give back €20k, what else is it only interest only?

I'll use simple figures.

Buy a car worth €35,000
Deposit €5,000
GMFV €15,000
Interest Rate: 3.0%
Term: 36 months
Cost of Credit: 1388.44
Monthly Amount: €455.23
Total amount financed: €30,000

Total amount of monthly payments: €16388.28
GMFV: €15,000
Deposit: €5,000
Total amount: €36,388.28

Actual Value after 36 months: €18,500

So at the end of 36 months you owe the finance company €15,000.
You can pay them that and own the car, hand it back or use the equity (€3,500) to start a new PCP.

If you give them €15,000 you will own a car worth €18,500. A car that you know since it was brand new.

It's the same as a hire purchase system with smaller monthly payments and a large final payment.

It suits some people and doesn't suit others. It is neither good or bad.

I have bought a car on PCP with 0% interest, so free money. I paid the smallest deposit possible to get the most free money.
I will buy the car at the end of the 36 months and decide then what to do.

I did not trade at the beginning of the deal so I got the straight deal discount, €2,250 and I got 3 free services too.

My distance allowance was 12,000kms per year and after almost 12 months I already have 36,000kms done,
but it's not an issue for me because I intend to buy the car at the end of the term.

I am very happy with my arrangement.

grogi

EndaHonesty wrote: »

I have bought a car on PCP with 0% interest, so free money. I am very happy with my arrangement.

https://en.wikipedia.org/wiki/There_ain%27t_no_such_thing_as_a_free_lunch

EndaHonesty

grogi wrote: »

https://en.wikipedia.org/wiki/There_ain%27t_no_such_thing_as_a_free_lunch

Tell me where the "catch" is in my deal? I paid the same amount for the car as I would've if I had given them cash on day one.