PCP finance.

Lantus

I think of a car as a commodity rather than an asset. Even if a borrow 12k to buy a car and pay back 13 say inc interest and my car is worth 5 k after 3 years and my loan is paid off I have two choices.

Keep my now 8 year old + car and hope it keeps going and start saving for a new one and make monthly payments or trade it in for a new one and get back into debt.

Also 13k over 3 years is 360 a month so quite a repayment. You could drive a new car for less money and cover fuel and tax for that. How is that a bad deal?

But not all PCP deals are equal. I have a good value car well within my means.I have friends who have bought expensive cars with huge loans over 5 years with huge repayments and sunk thousands in as deposit. They wanted to because they loved the car but people can justify anything if they really want it. Cars and phones are prime examples. The normal gauge of value vs practicality doesn't always apply.

cuterob

I'm thinking of going PCP on a new car for myself and the missus, I can cycle to work but she needs something for the 15 min spin up to work, public transport is useless for her route, it'll prob do one motorway a week (1 hour trip each way). have an 02 almera to trade in,

At the moment what are the best PCP deals for a hatchback that is 1.0l-1.2l engine, polo, fabia, clio? i see a few are doing 0% interest until 31st july

Any help much appreciated

GavMan

cuterob wrote: »

I'm thinking of going PCP on a new car for myself and the missus, I can cycle to work but she needs something for the 15 min spin up to work, public transport is useless for her route, it'll prob do one motorway a week (1 hour trip each way). have an 02 almera to trade in,

At the moment what are the best PCP deals for a hatchback that is 1.0l-1.2l engine, polo, fabia, clio? i see a few are doing 0% interest until 31st july

Any help much appreciated

You wont get a much better deal than 0%

Do some research and see if those models are likely to launch new designs soon. That will affect the resale value in 3 years

jca

cuterob wrote: »

I'm thinking of going PCP on a new car for myself and the missus, I can cycle to work but she needs something for the 15 min spin up to work, public transport is useless for her route, it'll prob do one motorway a week (1 hour trip each way). have an 02 almera to trade in,

At the moment what are the best PCP deals for a hatchback that is 1.0l-1.2l engine, polo, fabia, clio? i see a few are doing 0% interest until 31st july

Any help much appreciated

There's a new 1.2 three cylinder TSI being launched by Skoda very soon, it might be worth waiting to see what cars they put it in.

Lantus

cuterob wrote: »

I'm thinking of going PCP on a new car for myself and the missus, I can cycle to work but she needs something for the 15 min spin up to work, public transport is useless for her route, it'll prob do one motorway a week (1 hour trip each way). have an 02 almera to trade in,

At the moment what are the best PCP deals for a hatchback that is 1.0l-1.2l engine, polo, fabia, clio? i see a few are doing 0% interest until 31st july

Any help much appreciated

For such small amount if driving a std loan and second hand may be better. Break out excel and crunch the numbers.

Ultimately if you can afford a new car and want one (who wouldn't?) Then it makes good sense.

With such minimal motorway driving the 1.2 engine isn't essential but it may be desirable.

Skoda and vw use the same engines and a myriad of other common parts. Your getting a different shell and a better internal finish in the vw.

Interest rates are often zero. No harm in taking 3 or 4 for a good spin one Saturday morning.

grogi

OSI wrote: »

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.

True... However many marketing materials claim otherwise...



This graphics suggests that you're financing only the part that's remaining after taking GFV and deposit... We all know, after sixtish pages, that's the lie...

Soarer

grogi wrote: »

True... However many marketing materials claim otherwise...



This graphics suggests that you're financing only the part that's remaining after taking GFV and deposit... We all know, after sixtish pages, that's the lie...

That's what I was trying to ask/say earlier.

Also heard an "expert" mention it on Matt Cooper(?) last week. ie. you finance the difference between (price - deposit) - GMFV.

Soarer

cuterob wrote: »

I'm thinking of going PCP on a new car for myself and the missus, I can cycle to work but she needs something for the 15 min spin up to work, public transport is useless for her route, it'll prob do one motorway a week (1 hour trip each way). have an 02 almera to trade in,

At the moment what are the best PCP deals for a hatchback that is 1.0l-1.2l engine, polo, fabia, clio? i see a few are doing 0% interest until 31st july

Any help much appreciated

You can get 0% finance. On the flip side, Nissan will give you €4k trade in on your Almera. So you'll have to do the maths.

drkdrk

I'm about a year into a year into a 3 year PCP agreement. No longer need the car.
(yes, i rushed into it and probably shouldn't have went the pcp route)
Is there any way out at this early stage? I don't mind taking a small hit financially if it's necessary. Is there a professional i should talk to?
Or am i stuck with the 3 year commitment?
Thanks for any advice

Drummerboy08

Call the company who it's through and get a settlement figure.

Call the garage you bought it from and ask if they'll buy it back.

If the figure they offer is higher than the settlement, happy days.

If it's lower, either sell it privately for more or take the hit.

drkdrk

Drummerboy08 wrote: »

Call the company who it's through and get a settlement figure.

Call the garage you bought it from and ask if they'll buy it back.

If the figure they offer is higher than the settlement, happy days.

If it's lower, either sell it privately for more or take the hit.

Thanks for the input, i'll try that.

MuddyDog

In my opinion, as long as you can afford the GMFV payment at the end of the 3 years then PCP is by far the best option for buying a new car (unless you've the full cash up front obviously).

If you pay the full 31% deposit at the start (for a 40k car that is 12.4k) and if the GMFV will be around 14.6k (these are actual quotes I've got) then you'll pay monthly payments to cover the 13k. Provided you know you can afford the 14.6k at the end then you actually end up paying very little interest.

I believe Soarer was baffled by someone wanting to pay the GMFV at the end of 3 years as the car is now 3 years old with say 100k on the clock. I'm not sure why that would be. You've entered into an agreement (and assuming you always planned to have the car outright after 3 years) then of course you should fork out the money. The car will always be worth more than the GMFV as well (unless unforseen circumstances come into play and for me anyway you can't not do something because something might happen) and it makes sense to buy it at this point as you're clearing off the loan and if rather than using the equity to trade up, you can more than likely sell it for a bit more privately if you wanted.

fits

MuddyDog wrote: »

If you pay the full 31% deposit at the start (for a 40k car that is 12.4k) and if the GMFV will be around 14.6k (these are actual quotes I've got) then you'll pay monthly payments to cover the 13k. Provided you know you can afford the 14.6k at the end then you actually end up paying very little interest.

You are wrong though. your monthly payments also cover i.e. include interest on the 14.6k, and it works out as higher than hire purchase equivalent because you are paying so little off the total. If you are getting 0% finance and a good deal on the car, it might make sense. Above 3% though, I think its very expensive.

MuddyDog

fits wrote: »

You are wrong though. your monthly payments also cover i.e. include interest on the 14.6k, and it works out as higher than hire purchase equivalent because you are paying so little off the total. If you are getting 0% finance and a good deal on the car, it might make sense. Above 3% though, I think its very expensive.

If you get 0% though which many dealers are then it makes so much sense. However, even at the top end at 6.9% PCP you'll still be paying less interest provided you come up with the GMFV after 3 years.

For example, if I paid 12.4k upfront now I'd have to finance 27.6k. Through HP over 3 years that's the guts of 4k interest paid. I've got numerous PCP quotes from different dealers and for a similarly priced car the max interest I was paying over 3 years was around 3.5k.

fits

At the same interest rate, PCP is more expensive over three years than Hire purchase over a three year term. Because of the low monthly repayments the capital does not reduce as fast, hence higher interest.

Eg. PCP At 5.9% over 3 years



Hire purchase at 5.9% over 3 years (with much higher monthly payments obviously). Almost 2k less interest.



(obviously that offer was mental and I wouldn't touch with a barge pole)

MuddyDog

Slightly dearer car alters it a little. But I know what you're getting at. I was only looking at HP through a bank though and 4,255 would be the interest over 3 years for that loan amount. Is 5.9% widely available for HP from somewhere?

R.O.R

fits wrote: »

At the same interest rate, PCP is more expensive over three years than Hire purchase over a three year term. Because of the low monthly repayments the capital does not reduce as fast, hence higher interest.

Eg. PCP At 5.9% over 3 years



Hire purchase at 5.9% over 3 years (with much higher monthly payments obviously). Almost 2k less interest.



(obviously that offer was mental and I wouldn't touch with a barge pole)

Can you get Hire Purchase at 5.9% though? Just had a quick look at AIB and €49,500 over 36 months is €1,559.75 per month.

BOI are quoting 7.3% on HP over €7,000

Is there a very cheap HP company you are aware of?

fits

I never looked into Hire Purchase. Have a pathological dislike of paying interest at all. Bought a second hand car straight in the end.

fits

R.O.R wrote: »

Can you get Hire Purchase at 5.9% though? Just had a quick look at AIB and €49,500 over 36 months is €1,559.75 per month.

BOI are quoting 7.3% on HP over €7,000

Is there a very cheap HP company you are aware of?

the financed amount was 33 660 though, not 49500.

MuddyDog

fits wrote: »

the financed amount was 33 660 though, not 49500.

Is there a HP loan out there at 5.9% though? I can't find one meaning PCP will be cheaper.

26000 Elephants

fits wrote: »

the financed amount was 33 660 though, not 49500.

People are always doing this when comparing PCP and HP. They forget to subtract the deposit from the HP sale price, thus leading to huge repayments compared to PCP.

grogi

26000 Elephants wrote: »

People are always doing this when comparing PCP and HP. They forget to subtract the deposit from the HP sale price, thus leading to huge repayments compared to PCP.

That's the beauty of PCP - it makes people forget about loads of things

bidiots

Maybe if the term 'Balloon Payment' was used instead of GMFV it would make things less confusing.....oh yeah, why the hell would they do that:D

Zonda999

bidiots wrote: »

Maybe if the term 'Balloon Payment' was used instead of GMFV it would make things less confusing.....oh yeah, why the hell would they do that:D

You mean to tell me the industry would use a nice ambiguous term like GMFV instead of a term such as "Balloon Payment" in order to make the whole thing more "cuddly"? Well I never!:D:D

26000 Elephants

Perhaps Visa could stop telling me that i owe them money each month, and instead tell me that my card now has a GMFV of €1200.....

Falcon L

What's with all the hatred of PCP? It's a financial product, nothing more. It will suit some, it won't suit everybody. If you don't understand the terms used, ask the questions. If you still don't understand, don't commit to it.

The GMFV is only a baloon payment if you actually decide to keep the car you have. Nothing to stop you handing the car back and walking away (not a good idea, financially) or roll into a new contract. If you decide to walk away, the best course would be to pay the GMFV, then sell the car privately. You should, at the very least, get your GFMV back.

I find it pretty simple. At the end of the contract, you will have paid in full for the car and for the cost of borrowing for it. If you want to enter into a new contract, no problem, but there is no guarantee that the terms will be exactly the same as the last one.

bidiots

Where is this hatred?
From this thread alone there is confusion about certain elements of the agreement. But I totally agree with you, it is useful for some.
From what I'm seeing, people who can afford a new car, can avail of PCP if it suits.
Flip side - people who would not have been able to afford a new car, see the low monthly repayment and go for the new car, without seeing the deposit/GMFV(Balloon) side of it.
I still think there will be a bubble in a couple of years when a lot of this group can't afford the balloon and do as you suggest, sell it privately. We'll go from a piss poor second hand market circa 08 - 12, to a flooded second hand market. Good news for me:)
Another consideration for some is when they want to trade up to a 3 or more year old car. Now the feeling is 'Why bother when you can get a new one on PCP'....
It's excellent marketing and financing tool. But I am still of the belief that there are a lot of people driving new cars that realistically can't afford them, but, sure what's new there!

GavMan

Skoda Superb PCP vs. HP Example.

PCP works out slightly cheaper on cost of credit but monthly's are much more manageable. HP is 5.9% and that has got to be one of the lowest around.

PCP
On the Road Price
€36,855.00

Deposit Amount
€9,213.75

Finance Amount
€27641.25

APR % Fixed
3.90%

Acceptance Fee
€75

Completion Fee
€75

Total Monthly Payments
€430.24

Guaranteed Minimum Future Value:
€14,502.00

Total Cost of Credit
€2,499.39

Date of quote
28 Jul 2016



HP
On the Road Price
€36,855.00

Deposit Amount
€9,213.75

Finance Amount
€27641.25

APR % Fixed
5.9%

Acceptance Fee
€75

Completion Fee
€75

Total Monthly Payments
€833.66

Total Cost of Credit
€2,520.51

Date of quote
28 Jul 2016

fits

Monthly payment definitely more manageable but you'd have to save an extra 14500/36 = 402 euro per month to meet final balloon payment.

bidiots

In that example, PCP has the manageable monthly, but surely you'd need to be saving the other 400pm to help with the balloon of 14k at the end?
Or just refinance the 14k at the end, but would it work out cheaper then?

Edit: as fits said

Falcon L

OK maybe hatred is too strong a word.

As for the market being flooded with 3 year old cars. Is it now? Was it last year? How about the year before?

VW have been selling cars on PCP finance since 2010. Other countries have had PCP for many years before that. The market hasn't collapsed.

GavMan

fits wrote: »

Monthly payment definitely more manageable but you'd have to save an extra 14500/36 = 402 euro per month to meet final balloon payment.

Surely the value of a low mileage, 3 year old Superb will exceed €14.5k to cover that

I wouldn't imagine you'll have €9k equity to get another one in 3 years without putting cash to it, but then again, it's a depreciating asset, not magic beans.

grogi

GavMan wrote: »

Surely the value of a low mileage, 3 year old Superb will exceed €14.5k to cover that

I wouldn't imagine you'll have €9k equity to get another one in 3 years without putting cash to it, but then again, it's a depreciating asset, not magic beans.

But your example clearly shows that despite significantly lower interest rate, PCP is not cheaper at all - €21 is not a difference really. I don't forget that one can still lodge the monthly savings and get some from the interest on it - but how much will that be? Another €50?

What I have a problem with is that PCP is a product that is purposely packaged in a way to confuse the customer. There are people who understand it and all the quirks of all financing products, but let's be honest - average Joe does not. PCP takes advantage of that: false advertising (it can be yours for only €59/week), purposely convoluted and misleading terms (Guaranteed Minimum Future Value - it sounds the more, the better) etc.

fits

GavMan wrote: »

Surely the value of a low mileage, 3 year old Superb will exceed €14.5k to cover that

I wouldn't imagine you'll have €9k equity to get another one in 3 years without putting cash to it, but then again, it's a depreciating asset, not magic beans.

Yes but you will still need a car at the end of it. so it needs to be covered in some way. whether that is paying the balloon payment, entering a new deal with new terms, or refinancing the balance.

bidiots

Falcon L wrote: »

OK maybe hatred is too strong a word.

As for the market being flooded with 3 year old cars. Is it now? Was it last year? How about the year before?

VW have been selling cars on PCP finance since 2010. Other countries have had PCP for many years before that. The market hasn't collapsed.

It's only the last couple of years that PCP has taken a stranglehold and become the norm, the next couple of years will tell a lot on it's affect on the market, imo.

Drummerboy08

bidiots wrote: »

It's only the last couple of years that PCP has taken a stranglehold and become the norm, the next couple of years will tell a lot on it's affect on the market, imo.

In Ireland yes, but it's been available in the UK since the 70's, via the same outlets as here.

Haven't seen the UK market crash yet as a result....

Jasper79

Drummerboy08 wrote: »

In Ireland yes, but it's been available in the UK since the 70's, via the same outlets as here.

Haven't seen the UK market crash yet as a result....

In the UK most used cars lose 50% of value in 3 years , not seeing that here at the moment due to the lack of supply I assume.

Myself I'm hoping to get a nice 3 year old car in 2018 that is not overpriced as they are now.

bidiots

Drummerboy08 wrote: »

In Ireland yes, but it's been available in the UK since the 70's, via the same outlets as here.

Haven't seen the UK market crash yet as a result....

I shudder when comparisons are made between us and other countries:p
The UK also have other options which we don't have here, eg affordable leasing, therefore PCP might not be as popular there as it is here at the moment....

I'd be all over something like this if it was available here http://www.hotukdeals.com/deals/audi-a4-1-4tfsi-sport-2-year-10-000-miles-p-a-6-23-lease-192-incl-vat-per-month-2479905 or http://www.hotukdeals.com/deals/insane-brand-new-scirocco-2-0tsi-gt-man-lease-106-69-per-month-2400-deposit-other-2475346

GavMan

grogi wrote: »

But your example clearly shows that despite significantly lower interest rate, PCP is not cheaper at all - €21 is not a difference really. I don't forget that one can still lodge the monthly savings and get some from the interest on it - but how much will that be? Another €50?

The cost of the HP will be upped by about 25-50% if you applied a more common available at banks and CU's. Hardly anyone is doing HP at less than 6% like Skoda.

This example is an outlier.

I don't disagree with you on PCP. People need to do more homework when getting one and if possible tweak the deal where they end up with the most equity possible in the car.

Drummerboy08

bidiots wrote: »

I shudder when comparisons are made between us and other countries:p
The UK also have other options which we don't have here, eg affordable leasing, therefore PCP might not be as popular there as it is here at the moment....

You do realise that leasing and PCP are pretty much the same, only without the 10% deposit up front on the lease agreement.

However the lease will have no equity at the end of the agreement either, so it's much of a muchness.

The only reason that personal leasing is cheap in the UK is volume.

Zonda999

grogi wrote: »

True... However many marketing materials claim otherwise...



This graphics suggests that you're financing only the part that's remaining after taking GFV and deposit... We all know, after sixtish pages, that's the lie...

Is this not completely misleading advertising then and should probably be reported?

In this regard, surely the APR on a PCP cannot really be compared to that of a HP, because in a HP, the total financed amount is paid down in the term of the loan, whereby with the PCP, it is not. I have no issue with PCP's in general but I just think some people (by their own fault, for the most part) fail to understand the big picture.

ablelocks

what happens if you go back to the dealer after 3 years and want a new car under the PCP arrangement - your 3 yr old car is the deposit, you continue on with more or less the same monthly repayments?

Zonda999

ablelocks wrote: »

what happens if you go back to the dealer after 3 years and want a new car under the PCP arrangement - your 3 yr old car is the deposit, you continue on with more or less the same monthly repayments?

In this situation, you can only continue to pay the same repayment if your cars value in excess of the GMFV is enough to cover the deposit. If it is not, you will have pay an amount to reach the required deposit

26000 Elephants

ablelocks wrote: »

what happens if you go back to the dealer after 3 years and want a new car under the PCP arrangement - your 3 yr old car is the deposit, you continue on with more or less the same monthly repayments?

You still haven't paid for your three year old car, so cant use t as a deposit.

you might have a little equity in it, but you would have to make sure you were paying enough each month to be sure.

Lantus

fits wrote: »

Monthly payment definitely more manageable but you'd have to save an extra 14500/36 = 402 euro per month to meet final balloon payment.

Why? I'd just get a loan or finance product. Otherwise your suggesting that all cars must be bought cash only?

fits

Lantus wrote: »

Why? I'd just get a loan or finance product. Otherwise your suggesting that all cars must be bought cash only?

Well then you should factor in the cost of interest on that finance product into the overall car cost.

The only way pcp makes sense Imo is if you are happy to change cars every three years and happy to take the risk that there will be equity in the car and that the interest rates might not always be as favourable as they are now.

Soarer

Lantus wrote: »

Why? I'd just get a loan or finance product.

Why wouldn't you just do that at the start?

EndaHonesty

Soarer wrote: »

Why wouldn't you just do that at the start?

PCP is a finance product.

Soarer

EndaHonesty wrote: »

PCP is a finance product.

Christ, look who showed up!

He mentioned he'd get a loan or finance product to pay for the balloon payment at the end of the PCP term. So I asked why wouldn't he get a loan at the start.

What's your issue with that?

bidiots

Drummerboy08 wrote: »

You do realise that leasing and PCP are pretty much the same, only without the 10% deposit up front on the lease agreement.

However the lease will have no equity at the end of the agreement either, so it's much of a muchness.

Of course I realise they are similar.
But, the leasing example I showed does not have a big deposit or balloon. Over a couple of years the car will cost around 8k. That's an option I would jump at, I wouldn't need equity, just sign up to another 2 years on another new car.

The only reason that personal leasing is cheap in the UK is volume.

They have the option, regardless, we don't.