Advice to potential first time new car buyer (PCP)

Shadowness

Shadowness

Shadowness

Soldato
Joined
17 Sep 2006
Posts
4,478
Location
Gloucestershire
Hi all. I’m in a bit of a quandary over possibly buying a new car. I’m 32 and not had the longest car history, but I’ve always been a bit old fashioned, and if I wanted a car, I would save up for it and buy it (second hand cars that is).

It seems these days it’s the norm (or not, correct me if I’m wrong), that you ‘buy’ a new car on finance (PCP). I’ve been having a look at various deals, and the cars I’m interested in, and the one that seems to fit the bill is the 140i (I currently have a RenaultSport R26, so hot hatches are something I’m not new to).

A few guys at work (who have BMW company cars) keep banging on about how BMW are desperate to get rid of these at the moment, and there are great deals about. He was offered a shadow edition for 1k down and £349 monthly. Now that seems incredibly tempting, as in my situation I could easily afford that……..but it’s the whole entering a world of finance that’s a) completely new to me and b) a tad scary if I’m honest! Apart from a mortgage, I always buy anything outright, and that’s why I have no debt at the moment.

I guess I’m not asking if I should go ahead, that’s up to me and of course I know my financial and personal situation. But I think I’m after some sort of validation that this is the norm these days, and it wouldn’t be a financially stupid thing to do (that thought of it lingering over me everyday sort of feeling).

Has anyone else been in a similar position and bit the bullet and gone for it?
 
it is the norm, it is a way to get into cars yo couldn't usually afford.

but calculate it properly.. add up the monthy, the baloon at the end etc. And see if it makes sense.

it's too easy to get into a bad deal.

also checkout carwow and drivethedeal.
 
Its not the norm per se.
Its certainly the norm for people who want it now, who dont have the funds to buy it outright.

There are some other factors. The motor industry likes it, it encourages more people to buy new(er) cars, and as such helps create churn, and churn makes them money.

There are pros and cons to PCP, you need to look at every deal on its merits. You can also take a PCP and withdraw, this will often be cheaper than buying the car outright initially in cash due to incentives. As most people dont do it they havent really clamped down on it.
 
It's fairly normal these days.

I tend to always point out a few things to people considering it and let them weigh up if it's a good idea/bad idea:

  • Buying new is almost always more expensive than buying 1-2+ years old via a bank loan or cash due to the depreciation that hits in the first couple of years
  • You'll be in negative equity for about 3 years in a 4 year deal
  • You can 'voluntary terminate' the contract, but only after 50% of TOTAL payable has been paid, including the balloon payment at the end, i.e total cost of car + interest.
  • You may not end up with any equity in the car at the end of the deal, so if you go new again you'll need to find a deposit
  • One you're in the PCP loop, they want you to stay there so it's hard to 'get out' so to speak.
  • PCP deals on nearly new cars usually have a much higher APR rate, so shop around and look at other finance options like a bank loan.
 
Cheers for the replies.

When you talk about little or no equity in the car, isn't that what the GFV (guaranteed future value) is for? So then you can then sell it back to the dealer at the end of 4 years (for example).
 
Shadowness said:
Cheers for the replies.

When you talk about little or no equity in the car, isn't that what the GFV (guaranteed future value) is for? So then you can then sell it back to the dealer at the end of 4 years (for example).
Click to expand...


Yes exactly, so in the scenario that your M140 has a GFV of around 14k after 4 years, you'll have paid your £349 for 4 years and then hand the car back. You've got no deposit to go towards the new car. Technically, the car may be worth 16k - so if you trade in against a new car you'd effectively have a 2k deposit against a new car, but it's never guaranteed and some salespeople will use this as a 'selling point' when in actual fact you've got no assurances the car will be worth more than GFV.

The GFV is only there to make sure you don't owe more money on the car at the end of the agreement.
 
Shadowness said:
So if you just wanted to stop after 4 years (end the contract completely), what would be involved?
Click to expand...

either buy the car in one big lump - balloon payment
hand it back and take new one
walk away with no car
re-finance for the remaining amount

basically anything..

if you go HP you pay it off, much higher monthlies but no balloon at the end and the car is yours - often cheaper to get a personal loan from the bank at low apr.

most dealers seem to sit around 4-6% as their "lowest" APR.
 
TRL on Babybmw is notorious for good M135/M140 deals (I got my M135i through him and fully recommend)
check his offers here and/or email him for a quote:
https://www.babybmw.net/forum/viewforum.php?f=80

PCP is basically a loan to cover the car's depreciation (plus a bit).
APR on new cars is usually good, presumably as they can quite confidently work out a GFV. But, APR on used is usually horrific and thus a bank loan usually a better option.

near the end of the contract check how much the car is worth, get trade in offers and see what BMW will offer for trade in etc. and choose. if the GFV is more than any trade in then complete the contract and walk away (but I'm sure BMW will offer something to try and keep you on their books). If the trade in is more than the GFV then it's used as a deposit against a new car (don't need to even go back to BMW, can be deposit elsewhere. Can also trade in in the VT window and pay a bit to settle early) or find the balloon payment and you own the car and car what you want... As i understand.

The only bit that I get confused about - I was originally under the impression that if the car is worth more than the GFV and you want to walk away at the end of the term, then they will give you the difference in cash, which I'm not sure happens. I think that if there's value in the car then it needs to be traded in somewhere?
 
Last edited:
Thanks again.

I think I have in my favour very low monthly mileage limits. As I cycle to work mostly, 5000 a year is more than enough for me.

I'll have a read of that link too @grudas thanks!
 
I'm not trying to sway you for or against a PCP. I'm on my 3rd now and am quite happy with the arrangement, just think about how much it's costing though. It's easy to swallow £x per month and not think about it, but £349 per month for 4 years is over £16k and you're just handing the car back afterwards - something to think about.
 
Scottland said:
I'm not trying to sway you for or against a PCP. I'm on my 3rd now and am quite happy with the arrangement, just think about how much it's costing though. It's easy to swallow £x per month and not think about it, but £349 per month for 4 years is over £16k and you're just handing the car back afterwards - something to think about.
Click to expand...

well yes you're essentially covering the cost of "assumed" depreciation.

but that would be the case either way, buy a new car and it'll depreciate over 3-4 years and be worth less.

if you want a brand new car then you need to be ready to pay for it, either way the cost will be similar unless you get lucky and buy something that doesn't depreciate as much.

for e.g. when the new 5.0 uk mustangs came out, those were very SOLID value wise for a long time.

same with other cars, VW UP GTI? too rare to depreciate much.
 
get a used m135i/m140i? they're a dime a dozen on autotrader.
the ~2 year old m140i 66 reg are going for sub-£20k. that's how much they hold their value. lol.
also coming to the end of the production run, and new 1 series is coming out next year.
(granted that there wont be a RWD 6-pot 1 series anymore)
 
Shadowness said:
True, and I'm not sure if this will help the 3L cars value, as I dare say most people would prefer that engine to a 2L?
Click to expand...
hard to say. suspect it could be a future classic. but then the one you'd want is the M140i finale, if you want to take your chances
(sauce: https://www.pistonheads.com/news/ph-germancars/bmw-m140i-finale-says-bye-to-rear-drive-six-pot/39604)
i suspect reason bmw is changing to FWD 4 pot is because most people don't care (or rather, don't even know) which wheels are being driven or what engine it has. and most of their sales are made up of PCPed 116d from chavs boi ricers who think they've made it in life driving a poverty spec bmw.
 
Scottland said:
I'm not trying to sway you for or against a PCP. I'm on my 3rd now and am quite happy with the arrangement, just think about how much it's costing though. It's easy to swallow £x per month and not think about it, but £349 per month for 4 years is over £16k and you're just handing the car back afterwards - something to think about.
Click to expand...
yeah, but how much will it depreciate in that same time?

say a new car is £32k and depreciates about 20% a year, so after 4 years is worth about £16400 - so the depreciation is £15600k.
If the pcp for 4 years is £16k then you've paid £400 more than the depreciation...

If you don't have that £32k in the bank, then you need a loan... so it's down to whether that loan's interest is more than the £400, at which point you can talk yourself into the pcp being good "value".

If the bank loan is still less, then the difference is the headache of trading in/selling.

*edited* as i think my maths was wrong last time
 
Last edited:
grudas said:
well yes you're essentially covering the cost of "assumed" depreciation.

but that would be the case either way, buy a new car and it'll depreciate over 3-4 years and be worth less.

if you want a brand new car then you need to be ready to pay for it, either way the cost will be similar unless you get lucky and buy something that doesn't depreciate as much.

for e.g. when the new 5.0 uk mustangs came out, those were very SOLID value wise for a long time.

same with other cars, VW UP GTI? too rare to depreciate much.
Click to expand...

DereksDontRun said:
yeah, but how much will it depreciate in that same time?

say a new car is £32k and depreciates about 20% a year, so after 4 years is worth about £16400 - so the depreciation is £15.6k.
If the pcp for 4 years is £16k then you've only paid £400 more than the depreciation...
Click to expand...


Yep, agree with all the above. Like I said I wasn't trying to say for or against a PCP. You can never really know the depreciation or market in 3/4 years, but you do know how much the payments are going to cost you - so worth considering it before making a decision.
 
You must log in or register to reply here.
Back
Top Bottom