PCP finance.

artheb

carsfan2 wrote: »

If 0% finance available, the logical thing is to put minimal deposit of 10% in and then you get 0% interest rate on the other 90%.

You get 0% Apr on remaining 90% if you clear the balloon payment without additional loan or if you enter another pcp deal on 0% apr

Casati

artheb wrote: »

You get 0% Apr on remaining 90% if you clear the balloon payment without additional loan or if you enter another pcp deal on 0% apr

You get 0% finance on the full amount less whatever deposit for the length of the agreement. If you have a 3 year pcp on a 34k at 0% and put 4K deposit down, you get 0% finance on the full amount owed for the full 3 years.

walus

PCP must be the best way for buying a new car other than obviously a straight all-in cash purchase. It is designed to target those people who otherwise could not afford one as well as to develop relationship with the customer so he/she goes for a new model every 3 years. This scheme allows to predict future sales much easier and with time ensures nice and steady revenue stream.
Let’s consider a period of 12 years (4x 3 year PCP contracts, or otherwise owning a new car twice and keeping it for 6 years. Why such period? Simply because considering the current warranty periods (5, even 7 years), general quality of modern vehicles and their reliability, as well as technological progress, it is fair to say that buying a new car now and keeping it for 6 years will ensure, in very high majority of cases, trouble free motoring in a relatively modern and safe vehicle. Keeping the car beyond 6 years and 125-150k kilometres (typically) might incur more maintenance cost etc. and most likely is a right moment to buy a new vehicle with the current one still holding decent residual value to be used as a trade-in. Assuming all the above the worst case scenario is to suffer from a chronic upgradis and change cars under PCP scheme every 3 years or more often. One incurs the main cost of vehicle depreciation all the time throughout the full 12 year period without the benefit of owning the car beyond the period of 3 years where the depreciation is not as high and the vehicle is still in a good condition. It is far better/cheaper to do a PCP and buy-out the vehicle after 3 years, keep it for the following 3 years and use it as a trade in for yet another PCP contract after that and repeat the process. This way I feel the benefit of owning new/almost new vehicle is there all the time, yet the cost of ownership is minimized. Doing up quick numbers on a car worth 30k over the period of 12 years one would spend at least 50 % more on jumping on a new PCP every 3 years than doing it half as often.
The industry knows this well and will make sure that they will do their best to get people onto a new PCP deal as often as possible.
For the past 10-12 years I was always buying cars that were 5-7 years old and kept them for 4-6 years. Never had any issues other than the regular maintenance items (clutch, timing, discs and pads, bushes etc). If I was to buy a new car now I would get it on PCP and kept it for additional 3 years beyond the contract. That to me looks like the most beneficial arrangement.
Just my 3ps.

dil999

acronym Chilli wrote: »

Second and third parts are fine, but first is not: you don't have the car as a 12k trade in after 3 years. You still have the outstanding debt, which is why you might hand car back to clear debt, or why you would pay money to clear debt and hang onto car.

Thanks. You are absolutely correct. (It was late when I posted that) I have edited my post to ammend.

acronym Chilli wrote: »

PCP might be a grand option, might even be best in many situations, but it's not the only way, Lantus's post shows right approach/mind-set: get the details and Ts&Cs straight, run the numbers, find the optimum, tweak it with intangibles if necessary (e.g. reliability/disruption/etc.,) and then make a decision.

You are also correct, It is not the only way. Definitely educate yourself. The Competition and Consumer Protection Commission website is an excellent resource. https://www.ccpc.ie/consumers/money/loans/paying-for-your-car/


In my opinion, though, it is the most flexible and cheapest wasy to purchase a new car. Primarily because interest rates are much lower than HP or bank finance and you have the flexibility to decide what to do at any time during the arrangement. You don't have to wait for three years to pay off the remainder, you can do so at anytime.

Also if you get into financial difficulty and can't afford the payments, when 50% of the loan is paid off (usually the PCP is set up so this occurs after 24 months) you can hand back the car with no further payments required.
https://www.ccpc.ie/consumers/wp-content/uploads/sites/2/2017/04/Ending-a-hire-purchase-agreement.pdf


One thing to bear in mind with PCP if you are a high mileage purchaser is that PCP is structured based on a particular Km linit. Usually 15K or 20K Km per annum. If you exeed this your GMFV will be reduced by up to 8c per Km. so if you do 40K km per annum on a 20K km PCP deal, the GMFV will be reduced by almost €4K. In this case any trade in value will certainly be less than what you owe. You then have only 2 options left; pay off the GMFV and keep the car, or hand back the car and pay the €4K. Then again if you purchase up front you will still have the same problem trying to sell a 3 year old car with 120K Kms on it

thierry14

dil999 wrote: »

I recently did another PCP on a new car. This is definitely the best way to purchase a new car. A couple of important points that have been mentioned here that I can vouch for from experience.
1: A PCP in a financial arrangement for the purchase of a car at the present time. Nothing more nothing less. Its got nothing to do with buying a car in 3 years time.
2: Put in the minimum deposit, don't tie up your cash in a car.
3: If the monthly payments are too high with the minimum deposit, the reality is you can't afford the car. go for a different car.
4 Make the assumption that there will be no 'equity' in your car at the end. You won't be disappointed.
5 A car is an expense, not an asset. You buy a car to get you to work or school or wherever. It should not be thought of as a financial investment. in other words to repeat point 2, don't tie up your cash in a car. Tie up someone else's.

Is it not just better to lease a car then?

I see Kearys and Duffys have entry level i30/Golf tdi's for under 300 pm for 4 year 15k km

Zero deposit

Cyrus

thierry14 wrote: »

Is it not just better to lease a car then?

I see Kearys and Duffys have entry level i30/Golf tdi's for under 300 pm for 4 year 15k km

Zero deposit

lease has taken over in the UK from PCP, but we are a few years behind, i agree a functioning lease market with competition and 3rd party brokers is the best situation for consumers

acronym Chilli

Sam Kade wrote: »

You're only getting 0% finance on a third of the cost of the car as you pay a third up front and the balloon payment at the end.

I would say you're getting 0% on 2/3 of the cost of the car (assuming the three slices are equal size, let's say 10k, 10k, 10k). You obviously pay the deposit up front, so you forego the interest/investment income you could have gotten on that money. But since we usually work with Present Values, that has a PV of 10k. Then you pay 36 payments of €10k/36 monthly over 3 years. No interest, and you could work out a discounted present value of that money. Finally there's a balloon payment, which has a lower NPV than 10k (discount rate). So finally the price of the car is less than 30k in NPV terms (i.e. today-euros).

The beauty of 0% is that it doesn't matter what it's 0% interest on, it's always €0 (and it's € that matter, not %)

As Casati says, if you're certain you're not being stealth charged a financing cost somewhere else (e.g. not offered a discount a cash buyer might get, nor not being penalised on your trade-in value, etc.,), then it's absolutely rational to take the 0% financing.
You could negotiate the sale first as a cash sale, no PCP (but you could of course decide to finance outside of dealer). Then ask: "and how would a PCP work out on that", then take away the 2 sets of numbers and crunch them at home.

Also, as CarsFan2 says, with 0% finance, the rational thing is to put minimal deposit and pay the money as late as possible (i.e. most rational thing would be to pay 1/3 today, no monthly repayments, and then pay balloon of 2/3 lumpsum at the end of 3 years; assuming you've the discipline to save the lumpsum in the meantime).

Couple of caveats:

• PCP might be best deal today, might not be best deal in 3 years (e.g. maybe the cash discount isn't being taken away today, but might be in 3 years time), so it's mportant to scrutinise numbers and options each time. Keeps the sellers honest.
• There are other options (used cars, etc.,) to transport problem (that's always the case).
• As walus mentions, part of this is about trying to build brand loyalty. That has a cash value to the dealer/marque. There's a cost to winning a customer, and there's a cost to customer turnover. If offering something "free" reduces turnover such that it saves more costs than the cost of the freebie, that's a rational approach. (Paradoxically, many firms offer freebies to the new customers and punish the old; however e.g. with the energy companies you now see some of them rewarding loyal customers and stopping incentivising endless churn and turnover)

Casati

dil999 wrote: »

Thanks. You are absolutely correct. (It was late when I posted that) I have edited my post to ammend.



You are also correct, It is not the only way. Definitely educate yourself. The Competition and Consumer Protection Commission website is an excellent resource. https://www.ccpc.ie/consumers/money/loans/paying-for-your-car/


In my opinion, though, it is the most flexible and cheapest wasy to purchase a new car. Primarily because interest rates are much lower than HP or bank finance and you have the flexibility to decide what to do at any time during the arrangement. You don't have to wait for three years to pay off the remainder, you can do so at anytime.

Also if you get into financial difficulty and can't afford the payments, when 50% of the loan is paid off (usually the PCP is set up so this occurs after 24 months) you can hand back the car with no further payments required.
https://www.ccpc.ie/consumers/wp-content/uploads/sites/2/2017/04/Ending-a-hire-purchase-agreement.pdf


One thing to bear in mind with PCP if you are a high mileage purchaser is that PCP is structured based on a particular Km linit. Usually 15K or 20K Km per annum. If you exeed this your GMFV will be reduced by up to 8c per Km. so if you do 40K km per annum on a 20K km PCP deal, the GMFV will be reduced by almost €4K. In this case any trade in value will certainly be less than what you owe. You then have only 2 options left; pay off the GMFV and keep the car, or hand back the car and pay the €4K. Then again if you purchase up front you will still have the same problem trying to sell a 3 year old car with 120K Kms on it

BMW's might be a good example. They use 45% / 50% of sales price to estimate GMFV. A new 520d with rrp 60k might have 30k GMFV. Is a three year old 520d with 120km worth 30k today - I don't think so, but the depreciation is the same regardless of if PCP is used or not

dil999

walus wrote: »

PCP must be the best way for buying a new car other than obviously a straight all-in cash purchase. It is designed to target those people who otherwise could not afford one as well as to develop relationship with the customer so he/she goes for a new model every 3 years.

If you are buying a new car and planning to keep it for 5 years a PCP at anything less that 3.5% is cheaper than a straight all-in cash purchase. This has to do with the time value of money. If there is a €10K balloon payment to be paid in 3 years time, that 10K in 3 years costs less to you in real terms than €10K now because of inflation ( average inflation over last 50 years was about 3.3%) so 10K in 3 years is the equivalent of €9K now.

There are many cheap ways of buying a car. Buying a 10 year old every year will cost you a lot less per year than a new car every three years. It depends on what you want or can afford to do. If you think of a car as an expense rather than an asset its easier to understand what is really costs. If you buy a pair of jeans for €70, you don't go for the ones with the highest resale value, you buy the ones you want and can afford. If you want to sell them on after 3 years you might get €10 on adverts.

PCP is just a very useful financing structure tied to the purchase of a car. it has significant advantages, and some disadvantages. And I would agree that it is not always well explained by the car dealers. If you are going to use a PCP to buy your car, then research it properly and fully understand it before signing up. Most importantly make sure you can afford the real monthly costs before purchasing the car. (deposit+payments)/36. You will almost certainly have to find the same deposit again if you want to purchase another new car after 3 years

dil999

thierry14 wrote: »

Is it not just better to lease a car then?

I see Kearys and Duffys have entry level i30/Golf tdi's for under 300 pm for 4 year 15k km

Zero deposit

Now you tell me!
Leasing is definitely the best option if it is available with competitive interest rates

meep

Anyone know what's the usual upper limit on a deposit (% of purchase cost)? I can't find that info readily available.

dil999

acronym Chilli wrote: »

As Casati says, if you're certain you're not being stealth charged a financing cost somewhere else (e.g. not offered a discount a cash buyer might get, nor not being penalised on your trade-in value, etc.,), then it's absolutely rational to take the 0% financing.
You could negotiate the sale first as a cash sale, no PCP (but you could of course decide to finance outside of dealer). Then ask: "and how would a PCP work out on that", then take away the 2 sets of numbers and crunch them at home.

One of the beauties of PCP is that the finance company will not finance the 'list price" of the car. When you get your agreement, and before you sign, you will clearly see the list price, the dealer discount, the actual selling price, and the actual trade in value you are getting. Its fun watching the dealer explain these numbers vs the list prices and quoted trade ins.

acronym Chilli wrote: »

Couple of caveats:

• PCP might be best deal today, might not be best deal in 3 years (e.g. maybe the cash discount isn't being taken away today, but might be in 3 years time), so it's mportant to scrutinise numbers and options each time. Keeps the sellers honest.

If you enter a PCP arrangement now you are entering it to purchase a car now. What financial arrangements will be available in three years is irrelevant.

When or if you go to purchase a car in 3 years time, you will than have to make use of whatever financial arrangement are available to you then

dil999

meep wrote: »

Anyone know what's the usual upper limit on a deposit (% of purchase cost)? I can't find that info readily available.

Most of them were 30% when I was looking.

I would think you are much better off paying the minimum deposit. and the max monthly payments.
If you decide to purchase a new car in 3 years time using PCP you will need to pay the same deposit again to get the same monthly payments. Make the assumption that the GMFV and the trade in value of the car will be the same, then you won't be disappointed. If the trade in value is a little more than the final payment, then great! you have a couple of hundred to play with.

acronym Chilli

dil999 wrote: »

If you enter a PCP arrangement now you are entering it to purchase a car now. What financial arrangements will be available in three years is irrelevant.

When or if you go to purchase a car in 3 years time, you will than have to make use of whatever financial arrangement are available to you then

My point was that there's nothing intrinsically better (or worse) about PCP. It's all down to the details. However much of the debate can become dogmatic, as if it was black and white PCP=good or PCP=bad. So it's important that people crunch the full financials each time they enter into an arrangement or make a new deal.

dil999

acronym Chilli wrote: »

My point was that there's nothing intrinsically better (or worse) about PCP. It's all down to the details. However much of the debate can become dogmatic, as if it was black and white PCP=good or PCP=bad. So it's important that people crunch the full financials each time they enter into an arrangement or make a new deal.

Chilli, You are correct. If there is anything to be taken from this debate it is that the individual needs to fully research and understand all of their financing options.

Having gone through the process recently and having exhaustively examined all of the options, I thought I would share my experience with a view to assisting others in their decisions. But I would also advise people not to get into a financial arrangement soley based on something they read on boards.ie written by someone they don't know.

TheShow

meep wrote: »

Anyone know what's the usual upper limit on a deposit (% of purchase cost)? I can't find that info readily available.

30% normally

bazz26

meep wrote: »

Anyone know what's the usual upper limit on a deposit (% of purchase cost)? I can't find that info readily available.

General rule is that 30% is the ceiling.

Sam Kade

What about the limited mileage with pcp, it can be fairly restrictive.

mickdw

Sam Kade wrote: »

What about the limited mileage with pcp, it can be fairly restrictive.

Typically if trading in, the mileage will only effect your trade in value just like in any other car purchase / trade in so excess mileage will result in less equity to go to next deal.
If buying out the car, it doesnt matter if you have a million miles on it.
If handing it back, excess mileage will likely cost you the agreed cents per mile.

Lantus

Just done a quick comparison on Skoda's finance calculator. Hire purchase on a 17k car at 5.9pc. incurs 1700 interest over 4 years and a monthly of 356. Plus 150 credit cost.

PCP is zero interest and 235 monthly. If you can save the difference between the two you have nearly paid the remainder after 3 years leaving only a small outstanding sum.

Overall saving almost 1800 eu.

Just using pcp to make a cheaper purchase.

Both based on nominal 14pc deposit.

In that specific case PCP would appear to be significantly cheaper.

mickdw

ya that 5.9 rate on the hp is the difference.
Zero percent pcp is a no brainer as long as the same deal is available when opting for the zero percent pcp.
For example, if there was a straight sale discount of 2k available on that skoda but taking the zero percent pcp meant you had to pay full retail, then it would be a crap deal. To be honest, I dont think skoda / Vw operate like that so they are genuinely reasonable finance deals.

Lantus

There are plenty of PCP deals where the interest rate is higher which would affect the outcome. Desirability and fashion can allow some manufacturers to charge more comfortably in the knowledge that desirability and inflexibility in brand choice will override financial decision making.

vintagevrs

mickdw wrote: »

ya that 5.9 rate on the hp is the difference.
Zero percent pcp is a no brainer as long as the same deal is available when opting for the zero percent pcp.
For example, if there was a straight sale discount of 2k available on that skoda but taking the zero percent pcp meant you had to pay full retail, then it would be a crap deal. To be honest, I dont think skoda / Vw operate like that so they are genuinely reasonable finance deals.

I thought doing that was illegal, as in different price depending on the finance product. But I remember BM were doing something like that recently where the gave a deposit contribution on one finance option and not the other. Technically the price of the car was the same but a way of fudging it.

acronym Chilli

vintagevrs wrote: »

I thought doing that was illegal, as in different price depending on the finance product. But I remember BM were doing something like that recently where the gave a deposit contribution on one finance option and not the other. Technically the price of the car was the same but a way of fudging it.

I'd never heard that.

There's loads of ways of fudging/obfuscating it though. As you say, deposit contribution is one, but can also give discount/rebate; cheaper/free option-pack or upgrade; improve/reduce the price of your trade-in vehicle; service-pack; bundle something (AA membership/recovery service) etc., etc.,
Best way I can see to guard against it is to negotiate the price competitively without any reference to financing, and then try to switch to financing later on (assuming that financing is 0% or something else that's clearly an attractive option).

Sometimes financing can improve the deal profitability for a seller. I know from a friend who worked at Dell years back that they at least used to make great profit margin on the finance packages and extended warranties. I know that's applied to some car finance packages too at times.

However, 0% finance has to be a good deal, just so long as you're not being stiffed for it somewhere else in a stealth charge (in which case it might still not be a bad deal, just not quite as good as it looks).

DaveyDave

Just curious how does ordering a new car at the end of a PCP deal work? Do you order it 8-12 weeks before the 3 years is up and hope it arrives on time or further in advance? Or when the 3 years is actually up?

For all the information on PCP there is out there, it all seems geared towards getting someone into the first car. The posts on here are where I'm seeing information of people going into a second car

maidhc

Sone of the finance deals are actually ok. Opel have a very decent 0% hp one where the car is fully paid for over 36 months. The monthly payments are still high though, because, guess what, cars are EXPENSIVE! We have our second car (astra) on hp with Opel because it was genuinely cheaper than paying out the cash.

My concern with the pcp is it is almost designed to encourage people to buy cars they really cannot afford. It is grand to advertise an executive car at €300 pm, but that is a fraudulent figure when all is said and done. The true cost of such s car is three four times that figure.

I have a strict rule of just buying a car from my own reserves. I'm 35, and bought the newest car I have ever had last week, a 2016 avensis and only because my 2001 c class was getting a little costly to keep going. I could have comfortably afforded a new 530d or more, but when you are paying yourself the true costs come into sharp relief!

DaveyDave

maidhc wrote: »

Sone of the finance deals are actually ok. Opel have a very decent 0% hp one where the car is fully paid for over 36 months. The monthly payments are still high though, because, guess what, cars are EXPENSIVE! We have our second car (astra) on hp with Opel because it was genuinely cheaper than paying out the cash.

My concern with the pcp is it is almost designed to encourage people to buy cars they really cannot afford. It is grand to advertise an executive car at €300 pm, but that is a fraudulent figure when all is said and done. The true cost of such s car is three four times that figure.

I have a strict rule of just buying a car from my own reserves. I'm 35, and bought the newest car I have ever had last week, a 2016 avensis and only because my 2001 c class was getting a little costly to keep going. I could have comfortably afforded a new 530d or more, but when you are paying yourself the true costs come into sharp relief!

It's not really a fraudulent figure though, it's usually "FROM €300 p/m" and if you know a little about PCP you know that's with 30%. Sure you can have a €46,000 Golf R for only €453 a month but with 10% that shoots up to €733 a month, fair difference there.

I understand a lot of people would think they could afford it at first but they'd quickly realize they can't once the monthly payments shoot up. It's no different than the Carphone Warehouse saying you can get the Galaxy S8 or iPhone 7 Plus for free then you realize the monthly contract is a ridiculous €80 a month or whatever when I'm currently happy paying €25 a month.

They wouldn't get their foot in the door if they couldn't afford it. People are only being approved for PCP because they have the deposit in hand and can prove they can pay the monthly payments they've agreed to. This obviously doesn't take into account if someone lost their job a year later and couldn't afford it anymore. Of course this also means there is a lot of people who can't afford it looking into PCP because they see the low numbers and don't know the full details of it.

It's not like I'm walking in to put a 10% deposit on the R with the idea of paying €453 then needing to back out when I realize I'm actually supposed to be paying €733. It needs to be sent off for approval from a bank, I don't see them saying "feck it, go on" to make a sale on someone who is at risk. When I went in for PCP I had to prove I could pay more than the agreed amount, presumably to make sure I'm not scraping pennies to pay for it because if something came up I wouldn't be able to make a payment.

Lantus

DaveyDave wrote:

This obviously doesn't take into account if someone lost their job a year later and couldn't afford it anymore.

Well couldn't that happen to anyone who holds any loan?

Mortgages? All those thousands in arrears, many more who lost their homes. Credit card default, bankruptcy.

Those super expensive designer smart phones that cost 50 to 100 a month on a fixed 2 to 3 year contract.

Expensive furniture on credit, TVs, computers, and finally cars.

It's all existed long before PCP came along.

DaveyDave

Lantus wrote: »

Well couldn't that happen to anyone who holds any loan?

Mortgages? All those thousands in arrears, many more who lost their homes. Credit card default, bankruptcy.

Those super expensive designer smart phones that cost 50 to 100 a month on a fixed 2 to 3 year contract.

Expensive furniture on credit, TVs, computers, and finally cars.

It's all existed long before PCP came along.

Of course this could happen in all of those scenarios. The point I was making that PCP isn't just being handed out to people. The lad working minimum wage wanting to ditch his 2006 Golf for a 172 A3 S-Line isn't going to get it unless he has more than enough money to pay for it and has proof of savings.

Anyone could suddenly fall behind on payments. That doesn't mean they aren't perfectly suitable for being approved at the time of signing a deal.

MidMan25

DaveyDave wrote: »

maidhc wrote: »

Sone of the finance deals are actually ok. Opel have a very decent 0% hp one where the car is fully paid for over 36 months. The monthly payments are still high though, because, guess what, cars are EXPENSIVE! We have our second car (astra) on hp with Opel because it was genuinely cheaper than paying out the cash.

My concern with the pcp is it is almost designed to encourage people to buy cars they really cannot afford. It is grand to advertise an executive car at €300 pm, but that is a fraudulent figure when all is said and done. The true cost of such s car is three four times that figure.

I have a strict rule of just buying a car from my own reserves. I'm 35, and bought the newest car I have ever had last week, a 2016 avensis and only because my 2001 c class was getting a little costly to keep going. I could have comfortably afforded a new 530d or more, but when you are paying yourself the true costs come into sharp relief!

It's not really a fraudulent figure though, it's usually "FROM €300 p/m" and if you know a little about PCP you know that's with 30%. Sure you can have a €46,000 Golf R for only €453 a month but with 10% that shoots up to €733 a month, fair difference there.

I understand a lot of people would think they could afford it at first but they'd quickly realize they can't once the monthly payments shoot up. It's no different than the Carphone Warehouse saying you can get the Galaxy S8 or iPhone 7 Plus for free then you realize the monthly contract is a ridiculous €80 a month or whatever when I'm currently happy paying €25 a month.

They wouldn't get their foot in the door if they couldn't afford it. People are only being approved for PCP because they have the deposit in hand and can prove they can pay the monthly payments they've agreed to. This obviously doesn't take into account if someone lost their job a year later and couldn't afford it anymore. Of course this also means there is a lot of people who can't afford it looking into PCP because they see the low numbers and don't know the full details of it.

It's not like I'm walking in to put a 10% deposit on the R with the idea of paying €453 then needing to back out when I realize I'm actually supposed to be paying €733. It needs to be sent off for approval from a bank, I don't see them saying "feck it, go on" to make a sale on someone who is at risk. When I went in for PCP I had to prove I could pay more than the agreed amount, presumably to make sure I'm not scraping pennies to pay for it because if something came up I wouldn't be able to make a payment.

Out of curiosity, how did you prove you could pay more than the agreed amount? I've been using PCP myself for the last 3.5 years but probably as I had a track record with them, when I upgraded 2 years into my first PCP VW Bank didn't look for any documentation off me despite my repayments increasing by 50%.

maidhc

DaveyDave wrote: »

Of course this could happen in all of those scenarios. The point I was making that PCP isn't just being handed out to people. The lad working minimum wage wanting to ditch his 2006 Golf for a 172 A3 S-Line isn't going to get it unless he has more than enough money to pay for it and has proof of savings.

Anyone could suddenly fall behind on payments. That doesn't mean they aren't perfectly suitable for being approved at the time of signing a deal.

No, he will get the car because the pcp payments will always be ahead of the depreciated value of the car. The car is held by the finance house as security so they are in a no loose position. All it will mean is that if he looses his job he will have neither an 06 Golf or 172 Audi with a month or two.

Pcps are being given out far too freely. Also don't forget an average car loan will diminish your borrowing for a mortgage by close on 150k. Considerable if you plan on buying/moving during the currency of the agreement.

maidhc

MidMan25 wrote: »

Out of curiosity, how did you prove you could pay more than the agreed amount? I've been using PCP myself for the last 3.5 years but probably as I had a track record with them, when I upgraded 2 years into my first PCP VW Bank didn't look for any documentation off me despite my repayments increasing by 50%.

They don't. I have a client who was approved to buy a very fancy car she couldn't afford. She would be at the pin of her collar to manage a fiesta and she was getting pcp on a prestige German car. Bananas.

DaveyDave

MidMan25 wrote: »

Out of curiosity, how did you prove you could pay more than the agreed amount? I've been using PCP myself for the last 3.5 years but probably as I had a track record with them, when I upgraded 2 years into my first PCP VW Bank didn't look for any documentation off me despite my repayments increasing by 50%.

I just provided payslips and an additional bank statement for my savings account. The savings account had most of my salary going in weekly so they could see I was had saved X more than the monthly payment. I think it was also important for them to see that I was putting money in regularly too as they wanted to see the savings for the year.

The salesperson told me because I didn't have credit history or previous loans they'd like to see I could afford to put away 25% more than the monthly payments. I'm sure it's different for each individual.

Sean de

Just wondering if someone could do the basic maths for me. 160 pages later and I'm still confused.
My Senario.
New Car cost 31000
Trade in value 11000
Gmfv of New Car 14000
On what amount am I paying back over 3 years

At the end of the 3 years I go back with my car with the 14000 gmfv and want to upgrade to another car worth 31000.
Where that car is then given a gmfv of 14000. What am I paying back on the second term.
Please keep it as basic as possible. ðŸ˜Thanking you

Lantus

Sean de wrote:

Just wondering if someone could do the basic maths for me. 160 pages later and I'm still confused. My Senario. New Car cost 31000 Trade in value 11000 Gmfv of New Car 14000 On what amount am I paying back over 3 years

Well your trade in 30% which is the max ( in fact it's slightly higher but I'll disregard that)

Assuming 0% Apr you will pay 6000 over 3 years which is less than 180 a month.

However in your next term your equity will be 3 to 4.5k so your monthlys will be based on nearer 12k which is going to double your monthly. Bear that in mind....

Robertr

Sean de wrote: »

Just wondering if someone could do the basic maths for me. 160 pages later and I'm still confused.
My Senario.
New Car cost 31000
Trade in value 11000
Gmfv of New Car 14000
On what amount am I paying back over 3 years

At the end of the 3 years I go back with my car with the 14000 gmfv and want to upgrade to another car worth 31000.
Where that car is then given a gmfv of 14000. What am I paying back on the second term.
Please keep it as basic as possible. ðŸ˜Thanking you

You'll pay back the price of the car less deposit and GMFV. But thats just the capital amount.

The amount of interest added to your payment is based on the price of the car less the deposit. You still have to pay interest on the GMFV as they are still lending you this money even though you don't it back during the term of the loan.

bazz26

My understanding is that on the first deal you will be paying back 20k plus interest over the 3 years. The GFV at the end of year 3 only comes into play if you want to buy the car outright.

To go for a second deal, then you trade the car in again but you need to get a trade-in value greater than the GFV figure on the first deal. That is your deposit (equity) towards the second new car.

One thing you need to remember is if you put a large deposit into the first deal ie valuable trade-in, and you want to keep similar monthly payments in the second deal, you need to come up with a similar large deposit again either via a higher trade-in value and/or a lump sum.

artheb

Sean de wrote: »

Just wondering if someone could do the basic maths for me. 160 pages later and I'm still confused.
My Senario.
New Car cost 31000
Trade in value 11000
Gmfv of New Car 14000
On what amount am I paying back over 3 years

At the end of the 3 years I go back with my car with the 14000 gmfv and want to upgrade to another car worth 31000.
Where that car is then given a gmfv of 14000. What am I paying back on the second term.
Please keep it as basic as possible. ðŸ˜Thanking you

The finance amount is calculated as follows:

31000-11000(trade in)-14000(GFMV)=6000 to be financed

However it may not be possible in your case since the deposit cannot be more than 30% which would be 9300 from 31000. I would say that in your case taking HP over 5 years would make a sense.

ps: If above was possible on PCP you would pay 6000 over 36 months but APR would be calculated off 20000 as that what is left after taking off trading value.

maidhc

Sean de wrote: »

Just wondering if someone could do the basic maths for me. 160 pages later and I'm still confused.
My Senario.
New Car cost 31000
Trade in value 11000
Gmfv of New Car 14000
On what amount am I paying back over 3 years

At the end of the 3 years I go back with my car with the 14000 gmfv and want to upgrade to another car worth 31000.
Where that car is then given a gmfv of 14000. What am I paying back on the second term.
Please keep it as basic as possible. ðŸ˜Thanking you

At the of three years you will most likely have lost the value of your current car and the monthly payments for the new one.

You will be going to the market with nothing to trade basically.

Lantus

artheb wrote:

However it may not be possible in your case since the deposit cannot be more than 30% which would be 9300 from 31000. I would say that in your case taking HP over 5 years would make a sense.

The dealer often does a cash refund for the difference over 30pc. But yes if you have a high value car which is a third of the value of the new car then an hp or traditional loan to buy outright would seem to make more sense.

If the PCP offers very low or no interest then use it with a view to purchase. Save an extra amount each month so you can pay off the gmfv after 3 years without any additional loan. I'd be inclined to keep the car for another 3 to 4 years before trading in again.

dil999

bazz26 wrote: »

One thing you need to remember is if you put a large deposit into the first deal ie valuable trade-in, and you want to keep similar monthly payments in the second deal, you need to come up with a similar large deposit again either via a higher trade-in value and/or a lump sum.

I think what bazz has said above is the most important part of PCP to understand.

The GMFV is fixed. So the amount of money that you are putting towards the car is the deposit and the 36 payments. Its really important to make the assumption that after 36 months the car will NOT be worth more than the GFMV which means that after 36 months all of the money that you paid out up to that time is GONE.

You are then starting from scratch. you will need to come up with at least 10% deposit again.

You might be lucky and sell the car or get a trade in for slightly more than the GMFV. but it will be very little, so don't include it in any calculations

Lantus

dil999 wrote:

You might be lucky and sell the car or get a trade in for slightly more than the GMFV. but it will be very little, so don't include it in any calculations

No equity is a worst case scenario and not the norm, yet!

A 10 to 15% equity should be reasonable.

PCP is built around the equity principle so if a sudden change to the market eroded this it would be huge from a market and consumer perspective.

No one would be looking to roll over into a new deal. PCP would collapse.

carsfan2

Lantus wrote: »

No equity is a worst case scenario and not the norm, yet!

A 10 to 15% equity should be reasonable.

PCP is built around the equity principle so if a sudden change to the market eroded this it would be huge from a market and consumer perspective.

No one would be looking to roll over into a new deal. PCP would collapse.

I think this is the scenario a lot of of the nay sayers are predicting and one of the reasons a lot of people are wary.

ShadowHearth

dil999 wrote: »

I think what bazz has said above is the most important part of PCP to understand.

The GMFV is fixed. So the amount of money that you are putting towards the car is the deposit and the 36 payments. Its really important to make the assumption that after 36 months the car will NOT be worth more than the GFMV which means that after 36 months all of the money that you paid out up to that time is GONE.

You are then starting from scratch. you will need to come up with at least 10% deposit again.

You might be lucky and sell the car or get a trade in for slightly more than the GMFV. but it will be very little, so don't include it in any calculations

I mentioned it a few times here already, but with pcp the most important thing is to plan your exit tactics.
My payments are 272eu per month and baloon is 8.5kish eu. Every week I put 50eu in to separate account to cover my balloon if needed.
In 3 years time I will have ability to walk in and see if there is anything that interest me and if dealer giving me a good deal. If not, I can put that money on the counter and walk away stress free.
If I do decide to take on new car, I can use that saved up money. Lets say add another 4k eu and take new car again. I will still have that 4.5k left over in my savings. Add 50eu per week again to it to bring it up to next ballon.

Tl;dr version: dont just pay monthly payments, but open a savings account and put away few quid in there to cover any expenses after 3 years.

dil999

Lantus wrote: »

No equity is a worst case scenario and not the norm, yet!

A 10 to 15% equity should be reasonable.

PCP is built around the equity principle so if a sudden change to the market eroded this it would be huge from a market and consumer perspective.

No one would be looking to roll over into a new deal. PCP would collapse.

It depends on the car. but I think you are being very optimistic. The GMFV tends to be 40% of the list price. which would be 42 to 44% of the actual selling price. Residuals on a mid size family car Mondeo, Passat, Superb etc are no more than 48% to 50%. CBG and carzone prices tend to be about 40% higher than trade in prices.

PCP is marketed around the "equity principle." The reality is quite different.

maidhc

Lantus wrote: »

No equity is a worst case scenario and not the norm, yet!

A 10 to 15% equity should be reasonable.

PCP is built around the equity principle so if a sudden change to the market eroded this it would be huge from a market and consumer perspective.

No one would be looking to roll over into a new deal. PCP would collapse.

With the value coming in from the U.K. At the moment you can forget equity right now.

bazz26

If buying a new diesel I'd be cautious too around resale values as the diesel car market could potentially be in a spin in 3 years time just like the petrol car market was 10 years ago.

Lantus

maidhc wrote:

With the value coming in from the U.K. At the moment you can forget equity right now.

Really? And no one is reporting this? You'd think if equity was near zero someone would of mentioned it? The vast majority of new car sales are going to be people already on PCP deals.

I know figures for 172 were down but is there any evidence to support this?

Massive problem for the car industry. People would be furious and tell everyone yet not a whisper except for a few older leafs a year or two ago which was never substantiated fully.

maidhc

Lantus wrote: »

Really? And no one is reporting this? You'd think if equity was near zero someone would of mentioned it? The vast majority of new car sales are going to be people already on PCP deals.

I know figures for 172 were down but is there any evidence to support this?

Massive problem for the car industry. People would be furious and tell everyone yet not a whisper except for a few older leafs a year or two ago which was never substantiated fully.

I doubt the majority of sales are to repeat pcp customers. 2014 wasn't a vintage year for car sales.

What I can tell you is that I bought a 2016 Avensis diesel with only 12k klms recently in the U.K. for about 50% it's list price new. The garage in the uk was very honest that they were having a hard time selling the car because it was diesel firstly and not a babywagon or smaller car secondly.

Ivefoundgod

maidhc wrote: »

I doubt the majority of sales are to repeat pcp customers. 2014 wasn't a vintage year for car sales.

What I can tell you is that I bought a 2016 Avensis diesel with only 12k klms recently in the U.K. for about 50% it's list price new. The garage in the uk was very honest that they were having a hard time selling the car because it was diesel firstly and not a babywagon or smaller car secondly.

Anecdotal evidence is not evidence. You might have no problem heading to the UK to get a bargain but the majority have no interest in doing that. Yes there are greater numbers heading to UK/NI but to say that this means that the equity is gone from PCP deals is frankly ridiculous. If that really was the case the Irish motor industry would be in full meltdown mode, that clearly isn't the case.

Both of your posts are "i doubt" and "i did", not evidence or proof of anything and are at best misguided.