PCP finance.

Atlantic Dawn

Andres Slimy Staircase wrote: »

I don't know why these programmes keep this nonsense up about comparing it to sub prime mortgages. There is no comparison at all and no "bomb" to go off.

Can't afford the car, hand it back. Repayments stop, garage sells car to recoup finance and that's it. Yes the person loses the deposit and equity but they aren't in debt.

The bomb going off is for the banks who gave the finance being stuck with cars that they can't sell in a possible market flooded with them down the line where the values are lower than expected. The dealers and customers will be fine.

grogi

jimmytwotimes 2013 wrote: »

Bought recently. Looked at PCP but the thought of hitting a point where every extra kilometre would cost extra didn't appeal.

Would be an sh1tty way to go driving with the little voice inside saying 'well those kilometres cost you X'.

But they still do! You just don't know exactly how much upfront

For people who can stay below the 15-20,000 kms it's worth thinking about but if probably just go over that each year.

The mileage penalties are really irrelevant. Very few people would give the car back and walk away - and that's when they apply.

If you want to keep the car - you have to pay the balance. It does not depend on how many miles you did.

If you want to roll the PCP, it is the trade-in price offered by the dealer that really matters (technically it is the equity you will have, but they are related). It does not matter if the km were done with a car bought with cash or on PCP. The trade-in price will be similar in both cases

An accident could be costly too.

It is in any new car anyway...

grogi

Atlantic Dawn wrote: »

The bomb going off is for the banks who gave the finance being stuck with cars that they can't sell in a possible market flooded with them down the line where the values are lower than expected. The dealers and customers will be fine.

Majority of the banks financing PCP are owned by the motor industry. It makes the money by selling the cars, not selling the loans.

Atlantic Dawn

grogi wrote: »

Majority of the banks financing PCP are owned by the motor industry. It makes the money by selling the cars, not selling the loans.

Yes VW bank would be the biggest operator in the country I would say for PCP deals but the same risk remains if there's no market for the car or the expected retail price was not as expected at the end. Your pobably looking at a margin at best of 10% for the manufacturer per car.

mickdw

I think its quite simple.
If you can afford your car, pcp is fine. If you cannot afford it and managed to just get into the car via pcp, its a bad idea regardless of collapse or not in prices.

So say you could always afford the car. You go back at 3 years mid collapse. You can buy your car out and ignore any collapse and drive happily for ever more at same cost as envisaged day one.
Or
You can look at the situation and decise to hand back the no worthless to you car, then make use of the collapse and buy a similar car even cheaper than envisaged day one.
A collapse would likely mean that alot of buyers might not be able to replace with new every 3 years but that would be the same if bought any other way- If the car going back is worth little, it will be hard to trade up to new again.

mickdw

I think its quite simple.
If you can afford your car, pcp is fine. If you cannot afford it and managed to just get into the car via pcp, its a bad idea regardless of collapse or not in prices.

So say you could always afford the car. You go back at 3 years mid collapse. You can buy your car out and ignore any collapse and drive happily for ever more at same cost as envisaged day one.
Or
You can look at the situation and decise to hand back the no worthless to you car, then make use of the collapse and buy a similar car even cheaper than envisaged day one.
A collapse would likely mean that alot of buyers might not be able to replace with new every 3 years but that would be the same if bought any other way- If the car going back is worth little, it will be hard to trade up to new again.

Skodafan

Getting a great deal on an Octavia RS and am deciding whether to PCP or CU loan.

Repayments on the Octavia are 1.9% interest for 3 years.

My logic is good PCP with my end goal always keeping the car and getting loan to pay the balance when the 3 years is up.

My logic is over 6 years I will be paying 1.9% for 3 years and around 6. 9% for the next 3.

Is this correct or am I missing something ?

grogi

Skodafan wrote: »

Is this correct or am I missing something ?

Yes, that's more less correct.

CeilingFly

Skodafan wrote: »

Getting a great deal on an Octavia RS and am deciding whether to PCP or CU loan.

Repayments on the Octavia are 1.9% interest for 3 years.

My logic is good PCP with my end goal always keeping the car and getting loan to pay the balance when the 3 years is up.

My logic is over 6 years I will be paying 1.9% for 3 years and around 6. 9% for the next 3.

Is this correct or am I missing something ?

- this is where pcp works best. Take the very cheap rate and at end of it, pay baloon payment off with cu loan.

bazz26

Skodafan wrote: »

Getting a great deal on an Octavia RS and am deciding whether to PCP or CU loan.

Repayments on the Octavia are 1.9% interest for 3 years.

My logic is good PCP with my end goal always keeping the car and getting loan to pay the balance when the 3 years is up.

My logic is over 6 years I will be paying 1.9% for 3 years and around 6. 9% for the next 3.

Is this correct or am I missing something ?

Is that the 15 reg grey one in the BMW garage or a brand new RS?

PCP option sounds good, pay 1.9% for 3 years and take out a normal loan to repay the balloon payment rather than paying a high interest rate over the entire 6 years.

Lantus

Skodafan wrote:

My logic is over 6 years I will be paying 1.9% for 3 years and around 6. 9% for the next 3.

Skodafan wrote:

My logic is over 6 years I will be paying 1.9% for 3 years and around 6. 9% for the next 3.

Sounds like a cheap way to buy a new car...

It's easy to compare credit and look at the total cost of ownership for the purchase. If you can save anything over the initial 3 years your total cost will be even lower as you will be able to reduce the outstanding capital.

Falcon L

All this talk of bubbles, bombs and collapses just shows that there is still a group of people that don't understand what PCP is all about. Mick and grogi show that some understand it fully.

When I took out my PCP The dealership owner an I were discussing the mileage limits. His attitude was "we won't fall out over the mileage". In fact he pointed out to me that there was a saving to be made contracting for 10k Kms and doing 15K Kms because the "penalty" for the extra 5K would be less than the increased monthly payment over the time of the contract.

FWIW, I can afford the payments without issue. I could have bought the car with cash, but I wanted to use that cash for something else.

Skodafan

bazz26 wrote: »

Is that the 15 reg grey one in the BMW garage or a brand new RS?

PCP option sounds good, pay 1.9% for 3 years and take out a normal loan to repay the balloon payment rather than paying a high interest rate over the entire 6 years.

Brand new. I said I would look at the options available as the vrs is the holy grail for me.

And was surprised I could actually afford one.

It all seemed a bit too simple for me. 20,000km a year milage limit on it but won't be too worried about that.

Servicing plan included in my monthly payments as well

TheShow

Skodafan wrote: »

Getting a great deal on an Octavia RS and am deciding whether to PCP or CU loan.

Repayments on the Octavia are 1.9% interest for 3 years.

My logic is good PCP with my end goal always keeping the car and getting loan to pay the balance when the 3 years is up.

My logic is over 6 years I will be paying 1.9% for 3 years and around 6. 9% for the next 3.

Is this correct or am I missing something ?

not sure where you are based, but Sheey skoda in Naas are doing 0% on used skodas atm. worth checking out.

bazz26

The mileage limitation is really a red herring on PCP and really only there to frighten away fleet or psv drivers. It only really applies if you have to hand the car back and walk away or if it's well above the threshold then it's factored into the trade-in value at the end of year 3 when you go PCP again.

EndaHonesty

bazz26 wrote: »

The mileage limitation is really a red herring on PCP and really only there to frighten away fleet or psv drivers. It only really applies if you have to hand the car back and walk away or if it's well above the threshold then it's factored into the trade-in value at the end of year 3 when you go PCP again.

+1

I've a VRS on 0% PCP and the mileage "limit" is 12,000 kms per year. So 36,000 kms for the 3 years.

I'm 22 months into the term and I've 75,000 kms on the car...

My plan was to buy the car outright at the end of the 3 years, but I'll see what the dealer will offer.

12,000 kms per year is generally considered too few for a modern diesel so IMO my car with 40,000 kms per year is "better" than one with 12,000.

ShadowHearth

Skodafan wrote: »

Getting a great deal on an Octavia RS and am deciding whether to PCP or CU loan.

Repayments on the Octavia are 1.9% interest for 3 years.

My logic is good PCP with my end goal always keeping the car and getting loan to pay the balance when the 3 years is up.

My logic is over 6 years I will be paying 1.9% for 3 years and around 6. 9% for the next 3.

Is this correct or am I missing something ?

That is correct. And thats how I personally would encourage people to look at pcp. Its cheapest way to buy brand new car and honestly, most convenient.

I said before, I took my cupra with 0% apr and 3k scrapage. Got way more for alfa, then if I would go second hand trade in.
Final payment will be 8.5k eu only. I am covering it by putting away 50eu every week to separate account. In 3 years I will have 8.2k. I see what dealer will offer me if I will want to take new cupra. If not, I got money ready.
Might even just pay 4k of my own and tale a loan for the rest over 2 years. So in the end I will pay only that little intrest on 4k, not on 25k.

sheff the ref

ShadowHearth wrote: »

That is correct. And thats how I personally would encourage people to look at pcp. Its cheapest way to buy brand new car and honestly, most convenient.

I said before, I took my cupra with 0% apr and 3k scrapage. Got way more for alfa, then if I would go second hand trade in.
Final payment will be 8.5k eu only. I am covering it by putting away 50eu every week to separate account. In 3 years I will have 8.2k. I see what dealer will offer me if I will want to take new cupra. If not, I got money ready.
Might even just pay 4k of my own and tale a loan for the rest over 2 years. So in the end I will pay only that little intrest on 4k, not on 25k.

PCP is not a problem in my book. I took on a PCP at 0% finance knowing I would have a lump sum at the end, and knowing that I would drive about 40-45,000km a year. Therefore I have 2 options, trade in with small equity or just continue the payments (with interest) on the remaining lump sum of around €6500 for another 3 years. You will buy very few three year old cars for €6500. It is certainly the best way to buy a new car when you only pay interest for year 4, 5 and 6 and own the car outright then.

I cannot understand why some people feel they will drive in after 3 years with a 161 and drive out with a 191 without any terms and conditions attached but for some reason, some people do.

DaveyDave

Correct me if I'm wrong but it's my understanding that the balloon payment can be financed through the dealer for another year or two or whatever it is. Is this not true? If it is, what kind of percentage would you have? I see people using a credit union or bank loan for the balloon payment (great way to get a new car to be honest) so I'm assuming a dealer would have a high interest rate?

mickdw

Its not in the dealers interest to offer you the cheapest way of keeping your car so im sure whatever rate they will offer will be easily beaten elsewhere.
Im sure the sales pitch will be targeted around this too asking why would you pay 7.9 percent interest to keep an old car when he can give you a new one on a zero interest deal.

sheff the ref

Whatever the rate is, it is on a smaller amount

Besides the dealer will want to retain you even on a payments plus interest basis as you will need to get a car further down the line. If the dealer lets you off to the credit union, he may never see you again

mickdw wrote: »

Its not in the dealers interest to offer you the cheapest way of keeping your car so im sure whatever rate they will offer will be easily beaten elsewhere.
Im sure the sales pitch will be targeted around this too asking why would you pay 7.9 percent interest to keep an old car when he can give you a new one on a zero interest deal.

Obsolete01

Thinking of PCP but I do approx 30,000kms per year..

Has anyone ever gone above and the 60,000kms and if so were the penalties massive?

Also I would like people opinions that are 5 or 6 years in pcp now. If you could turn back time would you do it again?

Lantus

Obsolete01 wrote:

Thinking of PCP but I do approx 30,000kms per year..

Obsolete01 wrote:

Has anyone ever gone above and the 60,000kms and if so were the penalties massive?

Obsolete01 wrote:

Also I would like people opinions that are 5 or 6 years in pcp now. If you could turn back time would you do it again?

Mrs lantus handed car back with 87k on the clock. Upgraded to a bigger car with the increase in monthlys only really a function of car inflation and the slightly increased price if bigger model. Dealer showed zero interest in mileage and never mentioned once.

This will vary between dealers do make sure you ask them.

Obsolete01

Lantus wrote: »

This will vary between dealers do make sure you ask them.

OK, and then at the end of the term, let's say you have a Seat Ateca and you gave a down payment. The of 8k and then the monthly payments were 300.

Then at the end of the three years are you still going to be paying g the 300 or would it be less since your trading in a 3 yr old car for a new car?

jca

Obsolete01 wrote: »

OK, and then at the end of the term, let's say you have a Seat Ateca and you gave a down payment. The of 8k and then the monthly payments were 300.

Then at the end of the three years are you still going to be paying g the 300 or would it be less since your trading in a 3 yr old car for a new car?

To keep the repayments at 300 you'll need to have 9K(the extra 1K is a guess for price increases) available at the end of the three years. This 9K will comprise of two parts, The equity in the car which is value over and above the gmfv(balloon payment) that the dealer offers + cash deposit. This is where people are going to be caught, when the 3 years are up there won't be enough equity in the vehicle they're trading in to keep the same monthly payments. Starting off with too high a deposit which gives artificially low monthly payments leads people into a false sense of security.

bazz26

sheff the ref wrote: »

Whatever the rate is, it is on a smaller amount

Besides the dealer will want to retain you even on a payments plus interest basis as you will need to get a car further down the line. If the dealer lets you off to the credit union, he may never see you again

The dealer will want to get you to roll over into another new car and PCP deal. If you're keeping the car and just borrowing to pay off the GFMV then it's the same as walking away to him. He will most likely offer you standard HP finance with a higher interest rate that is more close in line with what the CU or banks are offering and nowhere near as attractive as a new PCP deal.

Lantus

Obsolete01 wrote:

Then at the end of the three years are you still going to be paying g the 300 or would it be less since your trading in a 3 yr old car for a new car?

To keep your monthlys the same you need to enter the first deal with a modest or low deposit. Aim for 12 to 15%. This gives you the best set up to maintain steady payments not including car inflation.

If you cannot afford those payments at that deposit then be very wary.

Benildus

TheShow wrote: »

not sure where you are based, but Sheey skoda in Naas are doing 0% on used skodas atm. worth checking out.

Interesting, is this on used car pcp or on a normal finance package?

CeilingFly

DaveyDave wrote: »

Correct me if I'm wrong but it's my understanding that the balloon payment can be financed through the dealer for another year or two or whatever it is. Is this not true? If it is, what kind of percentage would you have? I see people using a credit union or bank loan for the balloon payment (great way to get a new car to be honest) so I'm assuming a dealer would have a high interest rate?

Yes in the same way any secondhand car can be financed. Usually a personal loan and the dealer gets a commission.

Obsolete01

Has anyone here done pcp and went over the annual 20k mileage? If so how did it affect you

bazz26

Go back a few pages of this thread as it has been discussed a few times.

Excessive mileage only comes into play if you plan on handing the car back and walking away, they will charge a penalty for excessive mileage based per km over the limit. Other than that it only affects the trade-in value when you decide to roll over to another new car and PCP deal. Buying the car outright at the end of the PCP deal and again it makes no difference as you just pay off the GFMV for the car to be yours.

ShadowHearth

bazz26 wrote: »

Go back a few pages of this thread as it has been discussed a few times.

Excessive mileage only comes into play if you plan on handing the car back and walking away, they will charge a penalty for excessive mileage based per km over the limit. Other than that it only affects the trade-in value when you decide to roll over to another new car and PCP deal. Buying the car outright at the end of the PCP deal and again it makes no difference as you just pay off the GFMV for the car to be yours.

We really really need FAQ here.

TheShow

Benildus wrote: »

Interesting, is this on used car pcp or on a normal finance package?

PCP on used skodas.

nebraska132

Hi,

Can you help? I'm trying to create an excel spreadsheet that will track various pcp quotes. I understand that the interest rate is applied to the full net financing amount after trade in/ dealer contribution etc but how do you apply the GMFV payment to reduce the monthly PCP plan?
Thanks in advance

mickdw

Basically the gfv amount is left as an outstanding amount at end of loan term so instead of your monthly payment being enough to fully repay funds within 36 months, your monthly is only enough to repay down as far as the gfv after 36 months.

R.O.R

nebraska132 wrote: »

Hi,

Can you help? I'm trying to create an excel spreadsheet that will track various pcp quotes. I understand that the interest rate is applied to the full net financing amount after trade in/ dealer contribution etc but how do you apply the GMFV payment to reduce the monthly PCP plan?
Thanks in advance

The leasing formula should work for this. If I remember in the morning I'll post it from work.

PMT calculation in Excel should work as well but you may need to de vat figures for capital cost and GMFV then re vat the result.

Lantus

nebraska132 wrote:

Can you help? I'm trying to create an excel spreadsheet that will track various pcp quotes. I understand that the interest rate is applied to the full net financing amount after trade in/ dealer contribution etc but how do you apply the GMFV payment to reduce the monthly PCP plan? Thanks in advance

Use the car manufacturers calculators to get going. The interest is only applied to the part you pay off over 3 years. The gmfv remains locked at its relative value.

grogi

Lantus wrote: »

Use the car manufacturers calculators to get going. The interest is only applied to the part you pay off over 3 years. The gmfv remains locked at its relative value.

You're wrong. The interest is applied to the whole financed amount: price less deposit.

Aka Ishur

grogi wrote: »

You're wrong. The interest is applied to the whole financed amount: price less deposit.

As someone just out of first PCP deal with VW, just into second pcp deal with ford- you are wrong gmfv is set aside and you finance price-(deposit+gmfv). explained nicely in the pic-

Jobs OXO

grogi wrote: »

You're wrong. The interest is applied to the whole financed amount: price less deposit.

Why lie and try and confuse everyone ?

R.O.R

You pay the depreciation between the cost price and the GMFV.

You pay interest on the cost price.

All in all

Jobs OXO wrote: »

Why lie and try and confuse everyone ?

He is not lying he is correct. Interest charged on total amount outstanding, GMFV is irrelevant to the calculation.

Lantus

Another example of confusion!

Interest calculations are quite complex but yes they are applied to the totsl finance amount which includes the gmfv. Its the total cost minus your deposit. But! You only pay that interest in the 3 years off the portion you pay.

So there is no second chunk of interest waiting for you on the gmfv. It's all dealt with up front.

Does anyone have an interest calculator or example? I was trying to work it out last night as I was falling asleep.

mickdw

Aka Ishur wrote: »

grogi wrote: »

You're wrong. The interest is applied to the whole financed amount: price less deposit.

As someone just out of first PCP deal with VW, just into second pcp deal with ford- you are wrong gmfv is set aside and you finance price-(deposit+gmfv). explained nicely in the pic-

It appears that way on the marketing stuff but where there is interest involved, it is paid on the total amount. Zero percent deals are the key to pcp imo as you really are then setting aside the gfv amount at zero finance cost otherwise you do pay interest on that outstanding motney all the way through the deal.

grogi

Jobs OXO wrote: »

Why lie and try and confuse everyone ?

A confused consumer makes less informed and rational decisions...

But that's not what you were asking about, is it?

mickdw

Do people not run basic figures themselves before signing for car deals.
If someone thinks they are not paying interst on the gfv, run the figures in a normal loan calculator. Take the finance amount less gfv. Put that in as loan amount, put in term and interest rate. You will find that you are paying more than what it says due to you also having to pay interest on the lump outstanding all through the term.

grogi

Lantus wrote: »

Another example of confusion!

Interest calculations are quite complex but yes they are applied to the totsl finance amount which includes the gmfv. Its the total cost minus your deposit. But! You only pay that interest in the 3 years off the portion you pay.

So there is no second chunk of interest waiting for you on the gmfv. It's all dealt with up front.

Does anyone have an interest calculator or example? I was trying to work it out last night as I was falling asleep.

Take Apr, multiply by average outstanding finance (price-deposit + gmfv)/2 and divide by 12. That's the monthly interest paid.

acronym Chilli

It doesn't matter what way interest is calculated. You're supposed to look at these things as a sequence of cash flows. E.g. €10k deposit today, 36xmonthly payment of €330, gfmv payment of €10k

That's what matters: money. Not percentages. The interest number can be communicated different ways. E.g I can charge you 10% on a small number or 5% on larger number. For VW/whoever it's unimportant. They only need to worry about their own WACC and the cashflows.
So they'll try to pick a way to communicate it that is most attractive to buyers.

R.O.R

nebraska132 wrote: »

Hi,

Can you help? I'm trying to create an excel spreadsheet that will track various pcp quotes. I understand that the interest rate is applied to the full net financing amount after trade in/ dealer contribution etc but how do you apply the GMFV payment to reduce the monthly PCP plan?
Thanks in advance

Try this - I've checked it against a few PCP figures that you can get online, and it's not giving exactly the same results but it's within a few Euro.

nebraska132

R.O.R wrote: »

Try this - I've checked it against a few PCP figures that you can get online, and it's not giving exactly the same results but it's within a few Euro.

Thanks you for that it's very helpful!