Downfalls of PCP

ste_bla

ste_bla

ste_bla

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Been lookig at dealers etc at cars and been offered a nearly new car at what i think is a reasonable price.

Its a 2007 56' plate (Feb 07) its got 6k miles and looks new. It is a Renault Grand Scenic 2litre 6sp petrol @ 11k

Now finance wise they've given me these figures (inc some care packages which will be taken off but anyway..) ;

Buying 7.5%

300 Deposit
264 monthly over 5 years

Total cost including credit £16140

PCP @ 12k miles (what?)
300 Deposit
232 monthly over 4 years
Final optional Payment 3612

Total cost including credit £15048

So if i went the PCP route I would save over a grand, great!
So what are the downfalls of it?
 
the downfall being when your 4 years of £232 a month are over you've either got to stump up £3612 to pay off the finance and keep the car or hand it back to the dealership and have nothing to part-ex for a new car, unless you want what the dealership are willing to offer you.

Personally I avoid PCPs
 
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Spunkey said:
the downfall being when your 4 years of £232 a month are over you've either got to stump up £3612 to pay off the finance and keep the car or hand it back to the dealership and have nothing to part-ex for a new car.

Personally I avoid PCPs
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Fair enough, however Im after this car long term as in 8 years hopefully so i would stump up the 3k (even if it meant a 6 month loan) as i would save 1k and would still finish early or the same time as the other sort.

So would it be bad for me knowing what i just said?
 
Spunkey said:
unless you want what the dealership are willing to offer you.
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Rubbish

I always PCP my cars so I've done this a lot.
You can go and trade it in with any dealer you like. They will pay off the bubble and give you the difference towards your new motor. You can even trade it in mid term as long as you have paid more than the trade-in value of the car. I did this with my Audi A8 when it proved to be stupidly unreliable.

I used to like to own my cars outright but I discovered that PCPing a car is pretty convenient if you never really want to own the vehicle. I just pay the PCP cost and then trade the car in against something else when I'm bored. I buy 1 year old cars usually so I don't lose to much wedge.
 
Obviously you have to factor in interest on the final payment if you have to take that out at a loan, and you run the risk of additional payments if you go over the allowed annual mileage (Assuming thats what the 12k is). As long as you factor everything in, and its cheaper then go for it.

Have you tried getting a lower rate through a bank?
 
Rilot said:
Rubbish

I always PCP my cars so I've done this a lot.
You can go and trade it in with any dealer you like. They will pay off the bubble and give you the difference towards your new motor. You can even trade it in mid term as long as you have paid more than the trade-in value of the car. I did this with my Audi A8 when it proved to be stupidly unreliable.

I used to like to own my cars outright but I discovered that PCPing a car is pretty convenient if you never really want to own the vehicle. I just pay the PCP cost and then trade the car in against something else when I'm bored. I buy 1 year old cars usually so I don't lose to much wedge.
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Snap done this with my Fiesta from new then ST170, then cooper S now BMW all through PCP. Just careful you do not fall into negative equity on it, I did when I purchased my BMW so decided to pay £2000 to clear it. This was only because I had the Mini for 6 months only because it was a pile of poo.
 
roboffer said:
..and you run the risk of additional payments if you go over the allowed annual mileage (Assuming thats what the 12k is)...

Have you tried getting a lower rate through a bank?
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YEah they said 12k (miles) but we do 10k tops so theres room if needbe and they said also its only a avg so one year if we did go over..

Err yes but dont have a lot of credit so i got offered 8.9 and 10.2 rates

I didn't think of the interest on the final payment although at a rough look it seems about £150 so would still save best part of a grand

Also do they normally offer a guaranteed value? As the guy said i could either give the car back, pay the ballon payment or trade it in as i wouldnt be in neg equitity, i did ask and he said no to guarantee trade and said this was the norm, but he would say that wouldn't he..
 
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ste_bla said:
Buying 7.5%

300 Deposit
264 monthly over 5 years

Total cost including credit £16140
Click to expand...

Where did the numbers for your 'buy' calculation come from? I'd check them.

Using the calculator here I get:

11k over 5 years at 7.5% = 219.13 p/m £13147.80 total
11k over 4 years at 7.5% = 264.71 p/m £12706.08 total

Suddenly we're talking about saving a lot more than a grand....
 
kaiowas said:
Where did the numbers for your 'buy' calculation come from? I'd check them.

Using the calculator here I get:

11k over 5 years at 7.5% = 219.13 p/m £13147.80 total
11k over 4 years at 7.5% = 264.71 p/m £12706.08 total

Suddenly we're talking about saving a lot more than a grand....
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They are either using 7.5% flat, or 7.5% front loaded onto the total, rather than calculated daily or monthly.
 
housemaster said:
I have said it before, PCP is an expensive way to buy a car, there are much better finance options.
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So why dont you help out by posting some relevant information, instead of a completely useless one line post? Financing a major purchase like a car differs from person to person and if you cant get finance at a suitably low rate from a bank then maybe PCP is a good option.
 
roboffer said:
So why dont you help out by posting some relevant information, instead of a completely useless one line post? Financing a major purchase like a car differs from person to person and if you cant get finance at a suitably low rate from a bank then maybe PCP is a good option.
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I have financed over 20 cars, I need no lessons from you.

A quick search under "PCP and my username" will find you my previous posts, such as..
housemaster said:
PCP's are designed to be easy to sell and to attract people who want to spend X per month on a car, and then give it back at the end of the term, hopefully with a little equity to allow them into a new car without further cash deposit. They were designed for the company car buyer who opts out of his scheme, and has an amount each month to spend on a car. They are far from the best way to finance a car even if you exclude bank or building society loans as they are an 'opening offer', and this is never the best offer to take. The rates you have quoted seem like a typical PCP, but you need to forget APR and focus on the flat rate. This is the % they are charging you for the loan. Now, this can also be something that is twisted, and you need to be aware of this.

If you walk into a BMW dealer for example, you will often hear things like 3% flat rate, which on the surface sounds very good, and cheaper than the Bank of England base rate, so amazing. However, what they mean, best case, is 3% on top of the base rate, which is currently 5.75%, so in real terms 8% flat. Worse than this, many car manufacturers actually quote Finance House Base Rate (FHBR) which is typically 1-2% over the Bank of England rate of 5.75%, so in real terms 9-10%.

It is VERY confusing, but you should be looking to get a deal around 2% or less over the Bank of England base rate. ALL DEALERS will tell you this is impossible, but all dealers can do it if pushed hard at the right time of the month, quarter or year, but you won't be on a PCP. The finance people they put you in front of have links to other funders, outside of the Manufacturer, and it is these people who will offer you the best rates. Packaged PCP's are not good value more often than not, unless a special promotion is in place as they are pitched to be attractive per month, but also high in profit for the manufacturer.

I know of people who have bought cars at 3% flat, so 2.75% below the Bank of England rate, but to be fair they are somewhat more 'serious' cars, and that needs to be looked at in that context. So, push them hard, don't be worried about annoying them, and tell them where THEY need to be to make you buy the car. I hope this helps and please not I am NOT a financial advisor and share this as a little experience, no more.
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So a word of advice, wind your neck in!
 
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