PCP and GFV question

Belloni

Belloni

Belloni

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Joined
17 Feb 2009
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So I'm looking at 3 similar cars, same price basically bar a few a hundred. Two companies are offering basically £210 a month but one is £281 with a lower GFV by just shy of £1,000. All over the same year and mileage. My brief understanding is if it's lower at the end it's better as I have that equity? £70 a month extra is quite the jump, would you consider it due to the lower GFV? I'm new to pcp so don't shoot me!
 
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Your understanding is correct, if the cars are actually worth the same thing at the end of the term then the lower GFV means higher equity.

Most finance companies will let you lower the GFV so you could always go to one of the £210 ones and ask them to lower the GFV slightly to give a middle ground
 
To semi hijack the thread how do companies actually deal with the difference between GFV and actual value at the end of the term? If you decide to hand the car back but not get another PCP do they give you the difference?
 
Skillmister said:
To semi hijack the thread how do companies actually deal with the difference between GFV and actual value at the end of the term? If you decide to hand the car back but not get another PCP do they give you the difference?
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If you hand it back, its handed back. No money changes hands (except for damage and excess mileage) regardless of the cars value.

The GFV is only applicable if you buy it. The normal upgrade route is to part ex the car - the dealer you're part exing with will settle the finance for you and give you the difference as a deposit for the next one. You are still effectively buying the car from the finance company and immediately selling it to the dealer.
 
Yes they would ultimately give you the difference, after pushing and pushing for you to roll it into another PCP or deposit on another form of finance.
 
iaind said:
Your understanding is correct, if the cars are actually worth the same thing at the end of the term then the lower GFV means higher equity.

Most finance companies will let you lower the GFV so you could always go to one of the £210 ones and ask them to lower the GFV slightly to give a middle ground
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Phew, I've asked the company that offered £281 to increase the GFV slightly to bring down the monthly payment. I'd prefer that car as it has heated seats over the others!
 
Belloni said:
Phew, I've asked the company that offered £281 to increase the GFV slightly to bring down the monthly payment. I'd prefer that car as it has heated seats over the others!
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Just do yourself a favour and try and get a good idea of what the car will actually be worth at the end of the term. Looking at comparable cars now is a good way but also bear in mind what your intentions would be. If you're going to keep it then it's not too big a deal, but if you want to p/x it then you have to really think about what the trade value will be in comparison to the GFV. You dont want to be in negative equity at the end!

Alternatively, just get a low rate 5 year bank loan rather than a 3 year PCP. Payment profile is similar, just spread over 2 years at the end rather than a baloon. You can still sell/px it for the "equity" whenever you like and the rates are lower
 
iaind said:
If you hand it back, its handed back. No money changes hands (except for damage and excess mileage) regardless of the cars value.

The GFV is only applicable if you buy it. The normal upgrade route is to part ex the car - the dealer you're part exing with will settle the finance for you and give you the difference as a deposit for the next one. You are still effectively buying the car from the finance company and immediately selling it to the dealer.
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monkey_boy said:
Yes they would ultimately give you the difference, after pushing and pushing for you to roll it into another PCP or deposit on another form of finance.
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Fair enough, thanks.
 
iaind said:
Just do yourself a favour and try and get a good idea of what the car will actually be worth at the end of the term. Looking at comparable cars now is a good way but also bear in mind what your intentions would be. If you're going to keep it then it's not too big a deal, but if you want to p/x it then you have to really think about what the trade value will be in comparison to the GFV. You dont want to be in negative equity at the end!

Alternatively, just get a low rate 5 year bank loan rather than a 3 year PCP. Payment profile is similar, just spread over 2 years at the end rather than a baloon. You can still sell/px it for the "equity" whenever you like and the rates are lower
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Thanks for the help. Not sure I like the idea of 5 year bank loan, would prefer 3, decisions. I definitely won't keep it I'd trade it in for something else probably.
 
Belloni said:
Thanks for the help. Not sure I like the idea of 5 year bank loan, would prefer 3, decisions. I definitely won't keep it I'd trade it in for something else probably.
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Thats the thing, it's basically the same as a 3 year PCP in terms of repayment but more flexible. At 3 years, you'll have about the same to pay so can still p/x or sell it at that point. A PCP is basically a fairly high rate 5 year loan, with the last 2 years squished into a single payment.

Don't get too focussed on the 5 year term, it doesnt mean you're stuck with that car or that finance agreement for the whole 5 years.
 
What if the PCP rate is lower than the bank rate (0.9% v 4%)? Would more sense to go with the PCP for the first 2 years then take a loan out for the balloon?
 
Skillmister said:
What if the PCP rate is lower than the bank rate (0.9% v 4%)? Would more sense to go with the PCP for the first 2 years then take a loan out for the balloon?
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If its low enough then fair enough - assume its a new car then, just watch out for inflated prices on the car compared to cash
 
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