Absolute rubbish, and you're one of the worst people I was referring to in my post
It's an interesting debate to have though - its interesting for others to see both sides of the argument and decide which side they like
Yes there are people who this applies to, but there is also a large percentage of those who would just rather not chuck tens of thousands of pounds in to a depreciating asset,
But this is the fallacy - this is EXACTLY what they are doing. Just because they do it a bit every month doesn't change that, it just hides it from them. By the time they hand the car back they have done exactly as you describe and chucked tens of thousands of pounds in to a depreciating asset.
Cars depreciate - they just do. Every single method of financing a car effectively means you pay the depreciation, not the finance company. Nobody else is going to pay for the depreciation - its you, the driver, who pays for it. You cannot avoid it. The asset loses value, the finance company wants that loss of value off you *and* some interest.
There is no reason you'd take a PCP at a higher rate over borrowing with say a loan unless you couldn't or wouldn't stomach the monthly repayment that goes with it. That's the only reason. Because in terms of overall cost, the PCP costs you more. You're borrowing the same amount of money - but at higher interest - it cannot do anything other than cost you more*
If I wanted to go and buy a brand new C63S (the car I want next) tomorrow in cash, I could comfortably. But I never would, and I think anyone that does is a moron, as I'd much rather invest that money and make it work for me, and get far more back than you'd pay in interest over the course of a 24-36 month term
I'll caveat this by saying that I understand and appreciate that sometimes, NEW CAR PCP rates are good. Therefore, my thoughts are on the assumption they are not good (As this is mostly about used where the rates always suck).
If you genuinely have a scenario whereby you can get a return on cash that yields at higher than the interest on a PCP then you are doing very, very well indeed! Getting returns of over 5% on cash is virtually unheard of.
But the 5.4% Maccy quoted, that is hardly terrible
Except it actually is, that's the point. It isn't terrible in the context of a PCP - its actually quite good - but compared to alternative ways of funding a car, it's terrible. Which is the point those of us who are not on the PCP side of the fence are making. Maccy doesn't realise it, but he's actually agreed with me by outlining how in his circumstances, PCP was the only way for him to get into that car. Which is what I am saying as to why people do it. Because it's the only way to get into the particular car they've decided they want. The alternative is to pick a less good car...
You get monthly payments that are profiled to a far lower loan value by virtue of the fact half the loan is basically at the end of the repayment profile, at a cost of higher interest. So, overall, it costs more. But the monthly payment is less....
*Occasionally you'll win the lottery, sorry, end up with a car with loads less than the GFV in which case the PCP has shielded you. But it's you versus the finance company in calculating the chances of that and I wouldn't take those odds. They do it for a living.