Continuation from IRC: Under what circumstance would you PCP?

[Jez]

Been thinking today about ways to run cars with little capital outlay, looking to change every 3 years - this is what PCP is designed for yeah?

Other than for someone with a very strict company car policy, why would you ever want to PCP something?

We had this discussion on IRC last night briefly and it just seems like a total rip off.

Boiling down to the numbers, with a car which i would typically want (997 C4), you are looking at a small £6k non refundable deposit, with payments of £1100pm over 3 years with a 10k mile cap, then there is a £17k GFV at 3 year end.

Cost of usage over 3 years ~£45000.

Now if i were to do the same thing privately with a used example of the same car, capital released against property equity at 6.4% compound.

Cost to buy £32000, same small deposit £6k as per previous. Capital outlay £26k. 3 years/36 repayments of ~£800pm, total repayment £28600.

Car value @ 6 years ~ £20k, total cost of usage £8600 over 3 years.

Ignoring soft costs, which are not massively different in either case.

Cheap and easy way to be in a 997 which makes a mockery of the PCP deals, unless i have missed something? Makes me wonder who bothers. You are driving the same car in both examples effectively.

 

[PMKeates]

I think you'll find the reason it works out better used than PCP is that.. the car is older. Older cars are generally worth less

It's no shock to me!

 

[[TW]Fox]

PCP is for people who want a brand new car car to show the neighbours and say yea yea I've got a new Porsche but can't afford to spend £70k on one so instead the hire one, or those with company car allowances, or business users.

It's not that different to turning up in an Enterprise Vauxhall Astra and saying check out my new wheels, it's just over a longer term. Effective as a business tool, laughable for private individuals.

 

[Jez]

I think you'll find the reason it works out better used than PCP is that.. the car is older. Older cars are generally worth less

It's no shock to me!

Well quite, its obvious. But if it is that obvious then why do people not do it Stick a choad plate on and no-one would know the difference between a 2006 and a 2009 997.

 

[Confused]

Some people just "want a 'new' car".

The general populous think that new cars are perfect, they never have any problems, and all second hand cars are complete nails.

Without people paying out for new cars, there'll be no decent second hand cars for us more sensible people

 

[PMKeates]

Well quite, its obvious. But if it is that obvious then why do people not do it Stick a choad plate on and no-one would know the difference between a 2006 and a 2009 997.

I'd notice the missing years of Porsche warranty! There's got to be something special about having a spanking new set of wheels that no one else has owned.

 

[[TW]Fox]

I'd notice the missing years of Porsche warranty! There's got to be something special about having a spanking new set of wheels that no one else has owned.

We are talking about PCP's, so you don't own the brand spanking set of wheels either, just like you dont own the Mondeo Avis hire you.

 

[PMKeates]

We are talking about PCP's, so you don't own the brand spanking set of wheels either, just like you dont own the Mondeo Avis hire you.

I said it must be nice "having" a spanking new set of wheels

For me they'd be little feeling of difference between owning a car and leasing it. I'd care about the latter less and that's about it.

 

[Housey]

Been thinking today about ways to run cars with little capital outlay, looking to change every 3 years - this is what PCP is designed for yeah?

Pretty much, though the real benefit of PCP is the GFV at the end of the period (even more so in todays climate) and the simplicity of the process come change time. It is still an expensive way of financing.

Other than for someone with a very strict company car policy, why would you ever want to PCP something?

We had this discussion on IRC last night briefly and it just seems like a total rip off.

It's aimed at people who opt out of their car scheme and get a sum each month so is often structured in a similar manner. It is also aimed at people who want to have a new car every 3 years and want no hassle at the end of the process. It is not a cheap way of buying or financing a car and it is something I wouldn't personally touch.

Boiling down to the numbers, with a car which i would typically want (997 C4), you are looking at a small £6k non refundable deposit, with payments of £1100pm over 3 years with a 10k mile cap, then there is a £17k GFV at 3 year end.

Cost of usage over 3 years ~£45000.

Now if i were to do the same thing privately with a used example of the same car, capital released against property equity at 6.4% compound.

Cost to buy £32000, same small deposit £6k as per previous. Capital outlay £26k. 3 years/36 repayments of ~£800pm, total repayment £28600.

Car value @ 6 years ~ £20k, total cost of usage £8600 over 3 years.

Ignoring soft costs, which are not massively different in either case.

Cheap and easy way to be in a 997 which makes a mockery of the PCP deals, unless i have missed something? Makes me wonder who bothers. You are driving the same car in both examples effectively.

As said PCP is not the way anyone with any brains in their head would buy such a car, though to be fair in the current climate some PCP's are looking good value based on the dive in used car prices.

 

[Dup]

Will it be worth it to those who rack up killer milages? They get a comfy new car and they can do 100k+ with a gauranteed end value towards another vehicle. Unless I got the wrong end of the stick with PCP.

With the market as it is, if you can get a good finance deal you might as well go that route, but the car might be worth naff all in 3 years if you do serious milage.

 

[Firestar_3x]

Will it be worth it to those who rack up killer milages? They get a comfy new car and they can do 100k+ with a gauranteed end value towards another vehicle. Unless I got the wrong end of the stick with PCP.

With the market as it is, if you can get a good finance deal you might as well go that route, but the car might be worth naff all in 3 years if you do serious milage.

No because the final value is linked in with the how many miles you can do and still keep that value, additional miles over this is charged at a crazy premium.

 

[[TW]Fox]

Will it be worth it to those who rack up killer milages? They get a comfy new car and they can do 100k+ with a gauranteed end value towards another vehicle. Unless I got the wrong end of the stick with PCP.

They are based on a set mileage and there is a heavy penalty for excess mileage. So as well as it not being your car you are not even free to use it as much as you like.

It's a long term hire car you can buy at the end if you like.

 

[Housey]

The mileage limit is not black and white as it may seem. If you cover more miles, yet the value of the car is greater than the final payment most dealers will work around it. If you cover to many miles and the value is worth less than the value stated you will get charged around 10p to 25p per additional mile!

 

[jamief]

They are based on a set mileage and there is a heavy penalty for excess mileage. So as well as it not being your car you are not even free to use it as much as you like.

It's a long term hire car you can buy at the end if you like.

You seem to have some odd views on leasing / PCP.

For a lot of people, they are an extremely good way of owning a new car. You can often get very good leasing deals (I don't know about PCP) by playing the relevant brokers off against each other. For example, a FN2 Civic Type-R for £210 a month over 24 months. If you bought the same car (£19100ish list price) you'd get a lot less than £14060 for it after 2 years. You then hand the car back at the end, without worrying about resale value or a ridiculously low trade-in value (I've heard of £11000 trade-in for a FN2 at the moment).

Plus, it REALLY isn't that hard to estimate your annual milegage - you generally pay between 5-7p per mile when you go over that.

 

[[TW]Fox]

they are an extremely good way of owning a new car

They are not a way of owning anything, are you sure its me who doesn't 'get' PCP?

 

[Firestar_3x]

For example, a FN2 Civic Type-R for £210 a month over 24 months. If you bought the same car (£19100ish list price) you'd get a lot less than £14060 for it after 2 years.

Plus, it REALLY isn't that hard to estimate your annual milegage - you generally pay between 5-7p per mile when you go over that.

I was under the impression it would be (taking your figures) £210 per month over a 24 month term so £5040 then to actually get the car you need a 10% + deposit which you don't get back so another 2k.

 

[jamief]

I was under the impression it would be (taking your figures) £210 per month over a 24 month term so £5040 then to actually get the car you need a 10% + deposit which you don't get back so another 2k.

No, you don't need a 10% deposit. On a 23+3 deal you pay 3 X rental as the deposit.

Fox - yes, semantically you don't own the car, in the same way that you don't own a mortgaged house. However, the car sitting on my drive is, to all intents and purposes, mine. I have no intention of modifying it, so what can you do with your car (other than sell it) that I can't do with mine?

Edit: taking into account the deposit

23 x £210 (I have seen the same car for £199, but I'll use these figures)
Deposit of 3x210 (£630)

Total cost - £5460

List - £19100 (for example - no discounts were available when the car came out). That means, after 2 years you'd need to sell it for £13460 or more for outright ownership to be cost effective.

You will not sell it privately for £13460 in the current market. Leasing wins.

 

[Fr0dders]

what car are your figures from ?

 

[Adz]

I'm not sure if this applies to PCP but I'd like to point out that there's another cost people (including myself) don't take into account with lease vehicles which is the charges levied by the finance company when you give the car back.

VWFS are trying to charge me £1200 + VAT for 'repairs' to the A6 which, to my eyes, looked almost as good as the day I got it 2 years prior. They're even charging me for putting W rated tyres on (instead of Y) when the car's top speed is 130 at best. I'm being totally swindled but it was to be expected.

It was still a good deal in hindsight - the lease payments were substantially less than the depreciation on the car which seems to have lost about 60% of its value over 2 years and 20,000 miles. I had to put very little money down which meant capital could be used elsewhere in the business.

If you get a good deal and/or need to keep liquidity (in a business for example) then it makes sense but if you a) don't mind a used car and b) have equity or access to 'cheap' money which you don't need elsewhere then it's probably not the best option.

 

[Sone]

I'm not sure if this applies to PCP but I'd like to point out that there's another cost people (including myself) don't take into account with lease vehicles which is the charges levied by the finance company when you give the car back.

VWFS are trying to charge me £1200 + VAT for 'repairs' to the A6 which, to my eyes, looked almost as good as the day I got it 2 years prior. They're even charging me for putting W rated tyres on (instead of Y) when the car's top speed is 130 at best. I'm being totally swindled but it was to be expected.

It was still a good deal in hindsight - the lease payments were substantially less than the depreciation on the car which seems to have lost about 60% of its value over 2 years and 20,000 miles. I had to put very little money down which meant capital could be used elsewhere in the business.

If you get a good deal and/or need to keep liquidity (in a business for example) then it makes sense but if you a) don't mind a used car and b) have equity or access to 'cheap' money which you don't need elsewhere then it's probably not the best option.

my old man is having to appeal on his going back, he scrapped the car had it done and they want a packet as it is non audi paint!

He was offered the car pretty cheap so if he had known would have bought it. (about £12k i think)