PCP finance

matthab · 25 Aug 2017 at 12:01

ultralaser said:
I found it difficult looking at the options and finding the right path to go down. Ultimately if it's a bank loan or a PCP deal the key is to make sure it's affordable. PCP deals and monthly repayments on a personal loan normally equate to a difference of about a 2-2.5 year gap in the age of the car.

For myself I ended up getting a personal loan over 2 years on a car that was 3 years old at £250 PCM, a PCP for the new version of the same car would have been £280 PCM (+ initial rental of about £1600) over two years.

So over a two year period it kinda works out like this :
PCP: Spend (1600 initial rental + 6740 in monthly payments == £8340) with a return of £0 (I.e. you dont own the car at the end of the PCP deal) at the end of 2 years
Personal Loan (£6000 in loan repayments to own the car) with a return of about £3,400 over 2 years.

So for me the cost of getting the new car on PCP vs a 3 year old one on a personal loan was about £5,740.... so the question for me was is £5,740 over 2 years worth it to drive new car.... for me the answer was nah.

EDIT: just to say that with a new car you get many benefits, such as warranty, no MOT for the first few years, etc. so need to factor those costs in too

I had the same issue with my Cupra, tried to buy a used one 2-3 years old but payments were coming out at £350+ on a bank loan. When I looked at a new one with PCP at 0% it was a lot less, as I got the usual discounts and manufacture help. Also got 3 years free servicing.

My view is I would want to change in 3-4 years anyway so made sense in my eyes.

peige · 25 Aug 2017 at 12:15

The thing with the deals is not to get too sidetracked by the "new car" element of it and try and concentrate on the cost to own it over the time. Also make sure your getting a good deal on the car to start with before the PCP element comes in, in the case of a BMW for example if you just walk in and go pcp then your going to be much worse off than if you work a deal first with somebody like TRL (well known for no nonsense 1/2 series deals) for example.

Big Chris · 25 Aug 2017 at 13:29

Having read the replies, I see the reasons why a bank loan might make sense, in that I'd own the car at the end and would have something of value to show for the payments I'd made. I guess it comes down to affordability, and whether I want to keep changing the car every few years or not. I swing either way to be honest, some days I think it's just a car, buy one that does what I need it to then keep it, save money for other things... other days I remind myself that I actually like cars, the way they drive, the way they look, the toys you get etc so changing up every few years and having something nice to begin with is something I'm prepared to pay for. I'm lucky enough to be in a position where affordability, to an extent, isn't a problem. I could comfortably afford more than £350pm, but I set that limit as I know I can get something nice (whether you consider a Skoda estate to be nice is obviously a matter of taste!!) for around that.

I think leasing is the way to go, for now at least. I need £2-3k deposit, then payments of £200-300pm if the deal posted previously is anything to go by.

ultralaser · 25 Aug 2017 at 18:42

matthab said:
I had the same issue with my Cupra, tried to buy a used one 2-3 years old but payments were coming out at £350+ on a bank loan. When I looked at a new one with PCP at 0% it was a lot less, as I got the usual discounts and manufacture help. Also got 3 years free servicing.

My view is I would want to change in 3-4 years anyway so made sense in my eyes.

Yeah I totally think there are times it's better go PCP especially if you can't get a good loan rate from the bank

tatts · 26 Aug 2017 at 12:20

I would never buy another new car on pcp, it would be cheaper and more cost effective having a lease car if you want something new and change it every couple of years.
I put 5k down on a new black edition A5 and it's still in 4k negative equity. It's 3 year old next week so I will just be handing it back.

jpaul · 28 Aug 2017 at 21:12

interesting programme on PCP's this evening on C4 http://www.channel4.com/programmes/dispatches
seem to be predicating that may naive people are being mis-sold PCP's under the belief that car value will have inflated at end of term
and that suppliers do not scrutinize the state of the returned car - suggesting it will be the next ~~PPP~~.PPI
A few comparison between PCP and PCH contracts included too.

DereksDontRun · 29 Aug 2017 at 08:34

jpaul said:
interesting programme on PCP's this evening on C4 http://www.channel4.com/programmes/dispatches
seem to be predicating that may naive people are being mis-sold PCP's under the belief that car value will have inflated at end of term
and that suppliers do not scrutinize the state of the returned car - suggesting it will be the next ~~PPP~~.PPI
A few comparison between PCP and PCH contracts included too.

interesting, might have to watch if I get the time.

Yeah, I think a lot of people think they will be in credit at the end of the term and thus have a healthy deposit for the next car, but they also shop about for the smallest monthly payments possible... Isn't it in the car manufacturer's interest to cover the depreciation (and a little for their pockets) and that's it? The smaller the monthly payment, the more accurate they need to be with the market rate of that car at the end of the term, so they know the scheme will cover the depreciation and that's all... Surely there's no way you can get close to any descent deposit unless they got their calculations wrong and the customer was overpaying, or markets changed dramatically during the term which meant that type of car is suddenly more desirable and depreciation is far less than expected (which is unlikely as a lot of pcp-ers seem to go for the thirstier/quicker cars).

and yes, I'm pcp-ing atm... I went into it thinking it's pretty much a lease deal with the option to buy at the end, nothing more. I'm expecting to shop around at the end of the term, see what I'll get trade in at other car manufacturers/dealers etc. with the thought I need to have that info before taking the car back to bmw to see what they would offer me. If I can get more for a trade in elsewhere then it's either bargaining power against bmw, or just the reality i'll have to pay the balloon cost and buy the car to get the best return for it elsewhere. I (personally) don't think anyone can expect to be in credit at the end of the term, and thus to get the best deal they might have to expect to front the balloon costs, which might be a shock for some.