PCP finance.

Falcon L

mickdw wrote: »

Basically what you need to do is work out how much over the gfv the car will be worth at end of year 3. This is the deposit you would have on next car without further cash investment.
Now look at current Proposed purchase..... If you can afford the monthly payment with a deposit similar to what you will have next time around, you are in great shape and should be able to jump from new car to new car every 3 years without further cash deposit.
If on the other hand you can only afford the car now because you are going in with a large deposit that had built up in your old car, you will find yourself in trouble at year 3 as you will need to come up with cash or else much larger payments.

Thanks Mick.

So, am I right in summarising that PCP works best if you start off on the right foot, and the best way to work it is to keep monthly payments as high as you can comfortably live with?

vintagevrs

markad1 wrote: »

Had a loan of a 1.6 diesel with dsg, I didn't like it. The new highline has 5 speed box, I queried it thinking it should be 6.
The extras I put on are r line exterior, tech pack, xenon lights, rear led and winter pack.

Throw up a few pictures when you get a chance. The led rear lights are a nice extra as well as xenons.

markad1

vintagevrs wrote: »

Throw up a few pictures when you get a chance. The led rear lights are a nice extra as well as xenons.

This was a petrol one I looked at

https://www.dropbox.com/s/fh9rz7dix98hvkw/Golf%20Back.jpg?dl=0

vintagevrs

markad1 wrote: »

This was a petrol one I looked at

Aw sorry just realising you just ordered. Another poster posted an R line golf recently that they picked up, assumed it was the same car. What colour did you go for?

*I think your Dropbox photo is set to private as I can't see that btw.

markad1

Fixed the link. Went with the white same as the pic

vintagevrs

Looks well!

March/April delivery is it?

markad1

Thanks for fixing that. March delivery ordered Nov'15.
VW were offering the 1.9% on it

I looked at a few other brands using PCP and they were all offering insurance to make up any difference with the GFMV in case you had an accident.
Sounds good but I imagine they are getting commission from the insurance policies they sell

markad1

Double post ???

Ron Burgundy II

Are xenons worth the price? VW quoted me €1200 to add them to my car. A lot of my driving is mainly city so didn't see the need to add them.

But in saying that I do like the look the leds, and the xenons give the car.

I would ask VW about the five speed gearbox, the car is better suited to a six speed gearbox. I just got my r line golf on Friday last and its a six speed.

vintagevrs that may have been my car you're referring the black r line golf

mickdw

Falcon L wrote: »

Thanks Mick.

So, am I right in summarising that PCP works best if you start off on the right foot, and the best way to work it is to keep monthly payments as high as you can comfortably live with?

Well I would say if you can afford the car with about 15 percent deposit, you are fine.
It's only dangerous when people hand in their fully owned trade in to make up the max deposit and then can barely afford the repayments also. In that case, it is my opinion that they cannot realistically afford the car and won't be able to fund the next one.

markad1

Ron Burgundy II wrote: »

Are xenons worth the price? VW quoted me €1200 to add them to my car. A lot of my driving is mainly city so didn't see the need to add them.

But in saying that I do like the look the leds, and the xenons give the car.

I would ask VW about the five speed gearbox, the car is better suited to a six speed gearbox. I just got my r line golf on Friday last and its a six speed.

vintagevrs that may have been my car you're referring the black r line golf

I did ask about the 5 speed box, I even checked on the vw build page and the 1.6 is 5 speed.
If led headlights was an option I would have picked it over xenon headlights.
I had xenon on the last car and loved them.
Best of luck with the new car

vintagevrs

Ron Burgundy II wrote: »

vintagevrs that may have been my car you're referring the black r line golf

It was indeed Mr Burgundy. She looks well. How are you finding it? They are a well kitted out car as far as tech goes.

markad1

markad1 wrote: »

Had a loan of a 1.6 diesel with dsg, I didn't like it. The new highline has 5 speed box, I queried it thinking it should be 6.
The extras I put on are r line exterior, tech pack, xenon lights, rear led and winter pack.

I you drive in a lot of traffic DSG is good but yeah, you can go mad on extras.

One of the best ways to ensure more value in the car on PCP is to drive it as little as possible. Less miles mean more cash on trade in.

Drummerboy08

[Deleted User] wrote: »

One of the best ways to ensure more value in the car on PCP is to drive it as little as possible. Less miles mean more cash on trade in.

The difference between a 3 year old car with 40k on it and 60k on it is minimal.

vintagevrs

Drive it as little as possible!? I'd hate to own a car and be afraid to drive it for sake of trade in value. Drive it whenever you like.

markad1

Drummerboy08 wrote: »

The difference between a 3 year old car with 40k on it and 60k on it is minimal.

Bet the dealer would devalue it alot more if your pcp agreement was for 40k and you were handing it back with 60k.

If I go over the limit and the dealer devalues it I'll pay off the balance and drive it till the wheels fall off

Drummerboy08

markad1 wrote: »

Bet the dealer would devalue it alot more if your pcp agreement was for 40k and you were handing it back with 60k

If you're handing it back with 20,000 more km than it should have then you get hit with an excess mileage charge, which is very clear from the outset what happens and how much it costs.

Also if you're handing the car back, you're handing it back to the bank in most cases, not the dealer. Most banks underwrite the GFV, not the dealers themselves.

Drummerboy08

Drummerboy08 wrote: »

If you're handing it back with 20,000 more km than it should have then you get hit with an excess mileage charge, which is very clear from the outset what happens and how much it costs.

Also if you're handing the car back, you're handing it back to the bank in most cases, not the dealer. Most banks underwrite the GFV, not the dealers themselves.

I think he means trading it rather than handing it back and walking away ?

Drummerboy08

[Deleted User] wrote: »

I think he means trading it rather than handing it back and walking away ?

In that case the dealer will only hit the value as hard as he needs to, otherwise it's a pointless exercise because he won't get the business.

markad1

you couldn't hand it back and walk away leaving value in the car

Bigcheeze

markad1 wrote: »

I have a new VW golf on order and will be availing of pcp with an apr of 1.9% The gfmv is 10k. The financial person was upfront saying when the 3 years is up it will cost in the region of 4k to change into a new golf with the same spec I ordered.
I was surprised to hear this but appreciated the honest approach.

They have to be honest about it because they are selling a financial product and there are severe penalties for miss selling financial products.

Lantus

markad1 wrote: »

Bet the dealer would devalue it alot more if your pcp agreement was for 40k and you were handing it back with 60k.

If I go over the limit and the dealer devalues it I'll pay off the balance and drive it till the wheels fall off

I've been told that for anyone getting another car mileage is virtually ignored. The dealer wants your long term business. Those clauses exist to protect the market against high mileage fleet buyers.

Also if you hand the car back (madness) you can be penalised. This is because the lender wants to leverage the best deal possible. The customer loses all their equity carried over from 3 years ago. Another lose.

You don't have to wait 3 years though, I'm changing after a year ! Mad but hey, not costing a fortune to go to a new car, the reason ? longer EV range and faster charging + I'm an EV enthusiast.

Costing me about 100 PM more with no cash but I get about 40 or so back PM by not having to charge at home or at least much much less thanks to the work charge point.

You don't have to wait 3 years though, I'm changing after a year ! Mad but hey, not costing a fortune to go to a new car, the reason ? longer EV range and faster charging + I'm an EV enthusiast.

Costing me about 100 PM more with no cash but I get about 40 or so back PM by not having to charge at home or at least much much less thanks to the work charge point.

Ron Burgundy II

vintagevrs wrote: »

It was indeed Mr Burgundy. She looks well. How are you finding it? They are a well kitted out car as far as tech goes.

Finding it a very nice car to drive in comparison to the last car (Passat). The technology pack VW offered really adds to the car. So far so good.

carsfan

I was looking at the finance offers on the BMW website.
The figures they show for the 3 series have a GFV of about 45-46% after 3 years.
Is this not way too high to give you any equity at the end of the deal? I bought a golf and the figure is 38% which seems more reasonable.
I know Beemers are low depreciators but they're not that good.
Is this not just a ploy to keep the monthlies low on the surface? Surely this will come back to bite in a few years.

vintagevrs

The risk there though is for bmw and not the customer. No equity in the car is simply because you have paid less into it. When people talk about equity in the car at the end of their pcp agreement, it's their money. They have paid in more than the market value of the car. If the gfv is too high, throw the keys on their desk in three years and walk away knowing you handed in a car that is worth less than what you owe on it. It's then the finance company's issue.

flamegrill

vintagevrs wrote: »

The risk there though is for bmw and not the customer. No equity in the car is simply because you have paid less into it. When people talk about equity in the car at the end of their pcp agreement, it's their money. They have paid in more than the market value of the car. If the gfv is too high, throw the keys on their desk in three years and walk away knowing you handed in a car that is worth less than what you owe on it. It's then the finance company's issue.

I'd have to agree. But will say that in general BMW have done a pretty good job at keeping second hand prices high. They did it with Mini and they've done it with their own cars. Bit odd, but it works for them.

Whu557

Went for a PCP deal last year but finally thought well I'm not ever going to actually own it and I do more mileage than what most companies were asking I do a year. So went with HP least after the 5 years I will fully own the car. But at least the option is there for people to upgrade every 3 years keeps the 2nd hand car market alive

Voodoomelon

It was mentioned earlier on that the sweet spot for a deposit would be in the region of 10% for most cars, to keep the monthly payments realistically high and the future deposit after 3 years on a new car just as low as the first one.

Does that not mean paying a considerable amount more in interest, with a 10% deposit compared to say a 30% deposit?

Some of BMWs deposits are 30%, so €15,000 on a €50,000 car. Dropping that deposit to 10% or €5000, which is a €10,000 difference and at 3.9% is a €600 interest penalty.

vintagevrs

That's exactly right.

People like the idea that they pay a monthly repayment that will allow them to change in 3 years with no deposit for the 2nd pcp term as their first pcp term has equal equity to the new deposit. But as you say, this means more interest, which can be a fair chunk.

vintagevrs

That's exactly right.

People like the idea that they pay a monthly repayment that will allow them to change in 3 years with no deposit for the 2nd pcp term as their first pcp term has equal equity to the new deposit. But as you say, this means more interest, which can be a fair chunk.

Lantus

Voodoomelon wrote: »

It was mentioned earlier on that the sweet spot for a deposit would be in the region of 10% for most cars, to keep the monthly payments realistically high and the future deposit after 3 years on a new car just as low as the first one.

Does that not mean paying a considerable amount more in interest, with a 10% deposit compared to say a 30% deposit?

Some of BMWs deposits are 30%, so €15,000 on a €50,000 car. Dropping that deposit to 10% or €5000, which is a €10,000 difference and at 3.9% is a €600 interest penalty.

Again you have to work the numbers to satisfy yourself of the best deal. A very high interest rate would make a very low deposit less beneficial so use the manufacturers calculator to work multiple scenarios. Compare to a variety of loans at your disposal and if comparing different models asses tax and other running costs.

I got my PCP deal on zero interest so it made no odds where I shifted the deposit versus monthly. Of course I set it so the equity in 3 years would be roughly what my deposit was. That way I should get a similar monthly if I roll into a new cycle.

carsfan

I suppose I was looking at it from the point of view of having equity at the end of 3 years but fully appreciate the other side of smaller payments.
I suppose as ever with the whole pcp lark if you know what you're at and are realistic as to what to expect there is no great mystery to it.

Kaiser84

Hi,

I'm currently thinking of going for a Skoda Octavia on a PCP. For those of you that have already got a nee car this way, did you get to haggle on anything?

Get extras thrown in, get a deposit contribution, haggle on the price?

I'm only asking as I've always bought used cars with credit union loans or with my savings. I've never bought new before.

Skoda are offering 0% finance so I'm not sure if there'll be much room for haggling.

Any advice is greatly appreciated.

Thanks.

Drummerboy08

Haggle away on the price of the car, doesn't affect the PCP side of things

Kaiser84

Drummerboy08 wrote: »

Haggle away on the price of the car, doesn't affect the PCP side of things

Thanks for the reply.

For a car that's around 26/28k, how much couldI reasonably expect to get knocked off the price do you think?

sillysocks

For anyone that's signed up for PCP did you need much documentation by way of bank statements etc to get the approval? Need to talk to the dealer I know but won't be able to until after the weekend so just wondering what might be needed?

GavMan

sillysocks wrote: »

For anyone that's signed up for PCP did you need much documentation by way of bank statements etc to get the approval? Need to talk to the dealer I know but won't be able to until after the weekend so just wondering what might be needed?

Get together a few months payslips and bank statements I would guess.

markad1

I had to produce 3 months banks statements.
The statements had to have my name address and account number on it.
I had a print out from online account but it didn't have all the details on it so had to get it from the bank.

markad1

Double post

Drummerboy08

Kaiser84 wrote: »

Thanks for the reply.

For a car that's around 26/28k, how much couldI reasonably expect to get knocked off the price do you think?

If it's an ambition model then around 1250-1500 off.

No need for bank statements but we can be handy if they're easily available.

mickdw

For self employed looking to take dealer finance, what would generally be required in terms of getting approved. I would have a perfect credit history.

EDit

For anyone who has renewed their PCP (ie, got a second car after 3 yrs) how far in advance of the end date would you recommend talking with the dealership about next steps? Obviously, you don't want to be strolling in the weekend before the finance runs out as you may not find anything you want on the forecourt, but if you are likely to be ordering a brand new car, how early should you be going in and talking options (3 months, 6 months?)?

mickdw

I'd be in there 6 months early.

Stallingrad

I'm suspicious of anything that suits the car manufacturers and lenders so well. While interest rates are low now, what happens in three years if you want to roll onto another PCP contract and the interest rate gets hiked up to 6%?

I think PCP is a cheap credit scam to entice people into effectively renting new metal, it suits manufactures long term as people get hooked into 'renting' their cars, and customers short term, who in three years time may well have no car, no deposit, and will have no option but to use their GMV to continue with another contract.

EDit

mickdw wrote: »

I'd be in there 6 months early.

Thanks, good to know

I'm 2 years early !

Nonoperational

Stallingrad wrote: »

I'm suspicious of anything that suits the car manufacturers and lenders so well. While interest rates are low now, what happens in three years if you want to roll onto another PCP contract and the interest rate gets hiked up to 6%?

I think PCP is a cheap credit scam to entice people into effectively renting new metal, it suits manufactures long term as people get hooked into 'renting' their cars, and customers short term, who in three years time may well have no car, no deposit, and will have no option but to use their GMV to continue with another contract.

Calling it a scam is ridiculous. It's all perfectly clear. It's really not a difficult concept. Whether you deem it suitable for you or not is a different matter, but it's not a scam.