Buying a car on PCP, good? bad? sensible if done right?

JBod

JBod

JBod

Soldato
Joined
1 Sep 2007
Posts
5,315
Location
Santa Monica, California
*Carefully puts on flame retardant suit*

##### SKIP TO NEXT HASHES IF YOU NOT INTERESTED IN BACK STORY #####

I am looking at buying a better family wagon, I live in Surrey so clearly I need an SUV AWD Crossover type vehicle. All the reviews point to a snazy, ugly thoroughly boring yawn inducing Mazda CX-5. On looks alone I am thinking I'd prefer a Ford Kuga, but I haven't visited or test driven any in the flesh yet so maybe it is all academic and I end up with another Civic (eww).

Pricing seems to be £26,000->£30,000 depending on the car and the options etc... (that Titanium X Sport is actually quite nice). Anyway... I don't have savings (I leave that to the wife) she spends my money so she doesn't have to spend hers and strangely she gets savings and I don't. However I can easily afford about £350 a month now (currently paying back £208 on a regular bank loan that is just finishing for current car).

Residual value of car is approx £8500 according to that Parker guide jobby so I can expect that on part ex. 3.5 years old and done 13k miles pretty good nick Honda Civic Si.


###### TL;DR ##### CONTINUE FROM HERE #####

Options are clear, usual bank loan type affair. Problem is for this price vehicle to get it down to my monthly affordable repayments I am looking at 5 years most likely. Longer than I want to keep a car or have a loan that isn't a mortgage.

Enter the PCP. A guy I work with spent 10 years in the tech side of the financy industry writing the algorithms that determine what rates a person can get and how it is all calculated etc... his basic message is if you plan on buying new cars every 3 years then the absolute best value for money is to get a PCP and get the dealership to pay the deposit.

I've always dismissed PCP and HP as one of those evil finance deals the sales guys try to foist off on you but the more I read as long as you go in eyes open and understanding what it is, then it is fine. In fact it is pretty much the norm in many parts of the world where they don't get hung up on ownership (brits obsess about house ownership and car ownership etc..).

The best way to think of it is flipping around the finances, if you buy a car with "cash" for £16,000 (either from loan or savings) you sell it in 3 years (typical depreciation is 50%) you will have "lost" £8000. Or spent £8000 to drive it around and call it "yours" for 3 years. PCP means you are paying the depreciation and at the end can either buy it, finance it again or use it as a deposit on another new car and drive around with updated driveway bling for 3 years.

So thoughts?
 
Its fine if you go in eyes open and effectively never plan to own a car.

The biggest issue on a value for money basis is that inevitably a 6 month old version of the same car comes with a lower buying price and less interest...generally
 
The Mini is on PCP.

I am debating wheter to up the payments so I own it out right at the end of the term or saving for a deposit on a new car when this is up.

I had planned to pay it off after a year, but decided against it.
 
You fail at TL;DR.

As for the question itself, PCP is an ideal way to finance a car especially if you want trouble and worry free motoring at an affordable monthly cost, with little or no deposit.

However, the offset here is the mega depreciation, which you'll take the brunt of. If you're happy with this, and completely understand it, then no problem.
 
The problem with PCP for me is you essentially get stuck in a finance trap. You are unlikely to save up the balloon payment in the 3 years, so by the end of it you go back to the dealers with your tale between your legs forced to change cars (or take another finance package out on the same car). If I was to go for a new car I'd definitely go for PCP and accept the monthly cost for ever.
 
What I meant was a personal loan right at the end of the PCP deal. Perhaps the same monthly payments with a bank loan.

This was the person owns the car themselves and is not tied down with the finance company, but owns a car that they know inside out.
 
Why not just keep the civic it's practically brand new with only 13k on the clock? The Kuga hardly will you really get £350p/m of enjoyment out of owning a new car if not your just throwing money away.

If your going to get a new car anyway, PCP is probably the best way to finance it but you will never own said car and its a pain to get out of if you decide you want to change early.
 
Gambisk said:
If your going to get a new car anyway, PCP is probably the best way to finance it but you will never own said car and its a pain to get out of if you decide you want to change early.
Click to expand...

You can exit early, you just have to pay off the entire remaining loan.
 
Trifid said:
You can exit early, you just have to pay off the entire remaining loan.
Click to expand...

I know that's what I ended up doing, but as most people don't have the value of the loan sitting about then you end up refinancing and carrying something over into the next car. Its not as simple as handing the car back which the dealer led me to believe (it was a pretty crap dealer).
 
We went PCP last September on SWMBO's A1, whereas previous car purchases had been either on HP (last new one bought in 2002!) or personal loan (nearly new) in between. Made sense for the A1 as the residuals are particularly good and we don't plan to keep the car after 3yrs - IMO, PCP makes good sense as long as you don't intend to 'buy' the car at the end - i.e. either trade it in for a newer version or walk away.

With my XF, being nearly 3yrs old, PCP was not an option really - could have gone down the route, but prefer to just pay for it over a few years so tradtional chunk of deposit down and the remainder paid by loan. This is affected by the likelihood I will want to trade it in for a nearly new in about a year's time, all things going well :)
 
It makes sense when you get a low/0% APR and the dealer contributions towards the car by taking the finance are decent.

If you look through my old posts about my Clio 200 that may give you some information.
 
You can PCP a nearly new car, which will take a hit of depreciation out of the calculations.

If you accept that you are basically borrowing a car forever rather than making a single big payment once every 3 years then its fine. There are some good deals out there on PCP at the moment too (the APR at Mercedes on the new A Class is very low, and they throw dealer contributions at you too).
 
If you are looking at getting a new car every 2-3 years and not worried about owning then PCP is a good way to do this whilst keeping the capital outlay and repayments low.

Another alternative is leasing a car. If you study the lease deals there are often cars available at such low payments that they wouldn't even cover the depreciation. Often, these deals come with a lower deposit and monthly payment than the equivalent PCP.

Here are some deals I came across in the past to give you an idea:

LEXUS CT 200H Advance SPECIAL EDITION
Deposit: £1,720
23 Monthly payments of £286

MERCEDES SLK 250 CDI AMG Sport Auto
Deposit: £1,800
23 Monthly payments of £300

MERCEDES C220CDI Executive SE Coupe
Deposit: £1,620
23 Monthly payments of £270

(all include VAT)
 
Super-Spy said:
*snip*
Click to expand...

The difference between Leasing and PCP is a Lease is far more difficult to get out of. You cannot use the current market value of the car to offset the outstanding payments as you haven't been paying towards ownership of the car, you've just been hiring it.

If you take out a lease for £300 a month over 2 years the lease company will want £7200 cash from you regardless. The value of the car has no bearing on this.
 
Ownership of something that depreciates over time isn't something worth shouting about. I agree with Super-sy above about leasing, it can make a lot more sense economically.
 
Skeeter said:
The difference between Leasing and PCP is a Lease is far more difficult to get out of. You cannot use the current market value of the car to offset the outstanding payments as you haven't been paying towards ownership of the car, you've just been hiring it.

If you take out a lease for £300 a month over 2 years the lease company will want £7200 cash from you regardless. The value of the car has no bearing on this.
Click to expand...

Why would you need to get out of it though?
 
You must log in or register to reply here.
Back
Top Bottom