PCP's

panthro · 4 Apr 2006 at 23:06

I was just interested to see how many people here are in favour of buying a car through this method, i.e. low deposit, low monthly payments and a final balloon payment/hand the car back?

Personally I dont think I would like to, but it seems like the only way I will be able to afford a car that I really desire. Anyone here bought their car through this method? Sorry if I am being rude asking this type of question, just want to hear some pros and cons.

Conanius · 4 Apr 2006 at 23:46

id do it on something like a clio 182 trophy.. or a focus RS, something that I know that if I got as soon as it came out, I could keep for 2 years, and hand back and be given some of what I paid back as it would be worth more than the GFV

[TW]Fox · 4 Apr 2006 at 23:49

Not a fan really, its not your car is it - you basically hire it until it's worth not that much, then you buy it. Hmmm, great, buy a car after you are sick of it for 3 years. So what people end up doing is chopping it in for another new car and keeping the same monthly payment.

So they never actually own their dream car, they merely rent it. IMHO it's only one step up from hiring an E Class from Avis and saying 'look at my posh Merc'.

Not against finance, but IMHO, bank loan is the way forward. That way its YOUR car.

panthro · 4 Apr 2006 at 23:53

/\/\/\/\/\/\

Thats a good point.

But what if the car was something in the region of 30k and you put something like £5000 deposit on it? A bank loan wouldnt be able to cover that?

Conanius · 4 Apr 2006 at 23:55

you cant afford the car then is probably going to be you answer

personally, if I was looking at 30k cars (and I guess when I was looking at the s2k, I was..) id probably want to be putting at least 15k cash before a loan into the deal

(To be fair, I was lookin at 12k s2ks

)

Scuzi · 4 Apr 2006 at 23:55

It seems to make sense if you plan to get a new car every three years but if you want to keep it any longer, you're delaying the inevitable by leaving the bulk payment to the end. I considered it but for the price bracket I was looking in and for the term I wanted to keep the car, PCP worked out more expensive than straight finance. I *might* consider getting my next car on PCP, depending on whether I decide to buy myself a used car outright or just get a new car.

I like your sig BTW

panthro · 5 Apr 2006 at 00:07

/\/\/\/\

Thanks, it has had me in stitches all day. Its so true.

Am I right in saying that PCP's would be more worthwhile on something like a Boxster S, where the residuals would be strong and you would possibly be gaining some of your money back at the end of the term?

[TW]Fox · 5 Apr 2006 at 00:59

panthro said:
But what if the car was something in the region of 30k and you put something like £5000 deposit on it? A bank loan wouldnt be able to cover that?

Then perhaps you should think long and hard about whether you have ideas above your station or not, and whether you can truely afford a £30k car yet

MrMoon · 5 Apr 2006 at 08:42

I do it its a good idea if you want to change your car every 3 years, which I do cos it keeps them in warranty and you never have to get MOTs

Morba · 5 Apr 2006 at 09:09

are you able to mod cars on pcp? or would it be against t's&c's ?

Toast · 5 Apr 2006 at 10:10

Don't forget, if you're bored of your car within 3 years then good luck trying to get rid of it

Someone with more experience might shed some light but isn't PCP different to a HP agreement? I know that on HP there's the rule of halves and thirds. After a third of the payments have been made they can't repossess the car and after half the payment is made you can just hand it back and start again. I'm not sure if you can do that on PCP (I know there's at least one type of car finance that doesn't allow it).

A bank loan really is the best bet, that way, should you get bored sooner it'll make it simpler for you.

What car are you looking at?

iv-tecman · 5 Apr 2006 at 11:26

I considered PCP, I really didn’t like the idea of having a sum of money to pay after three years. I intended to keep my car for four years, and just bought a used car in the end on straight finance at a pretty low 7.2%.

I do sometimes wish I’d gone for the bank loan, but once I’d sold my old car, I had a 2K deposit, and after I mulled over some figures, Honda finance just worked out about £30 a month cheaper then what my bank could offer me.

They say car finance is for those who can’t get bank loans, I dunno. PCP seemed like too many restrictions, you cannot go over a certain mileage without penalty, you can’t do anything to the car, has to be serviced (this is mostly in your package though) but you do get a brand new car.

If you want to buy a car, I’d recommend only buying one if you can afford straight finance or bank loan only. If you cannot afford this, then perhaps the car is above your means. I saw PCP was a way to buy something you really couldn’t afford, so it was basically a way to lower payments to get a car you really shouldn’t have bought.

Honda told me I could buy a BRAND new Honda Accord for my monthly budget on PCP, instead I declined. And bought a second hand car. I think I made the right choice to stay away from PCP TBH.

Koncordski · 5 Apr 2006 at 13:02

[TW]Fox said:
Not a fan really, its not your car is it - you basically hire it until it's worth not that much, then you buy it. Hmmm, great, buy a car after you are sick of it for 3 years. So what people end up doing is chopping it in for another new car and keeping the same monthly payment.

So they never actually own their dream car, they merely rent it. IMHO it's only one step up from hiring an E Class from Avis and saying 'look at my posh Merc'.

Not against finance, but IMHO, bank loan is the way forward. That way its YOUR car.

It's not renting a car from avis scenario because then you can't do anything with the vehicle. PCP gives you a way of managing your running costs and is perfect if you want a nice car and have a car scheme at work. I know that for a set cost every month i get a nice car, then after two years i give it back and get another new car. If i bought it outright with a bank loan and then decided to chop it in a few years down the line i'll have lost 40% of the loan in depreciation costs. Any car you run will have a monthly cost over a year (fuel, repayments, tyres, servicing, insurance etc...) at least with PCP it's a fixed amount.

Secondly if you choose a desirable model then the GFV of the car will leave you with a few grand if/when you trade in making the next one even cheaper by having a larger deposit.

PCP is only a bad idea if you aren't in a stable job or you have a habit of changing cars every 6 months.

thepharcyde · 5 Apr 2006 at 13:56

i do this with ford, chopped in my fiesta early to get a focus st. Hastle free motoring IMO, no mot, no repairs to fork out. Insure, tax fill it up with petrol and you are on your way.

Dolph · 5 Apr 2006 at 14:48

If you choose the right car, and plan on changing every 3 years or so (when the PCP plan runs out) it can work out very well. The right car, of course, being one that's got low depreciation and the right plan being one with a fairly low final payment. This combination gives you a good amount of cash towards your next car without the outright payments of a loan.

I would not recommend taking a PCP plan on something like an astra or a basic focus, for example, chances are the car value will be barely more (or maybe actually less) than your GFV.

When I was last looking at cars, there were some fantastic PCP deals on the new minis, but I don't know if they are still going.

As with any form of large purchase, it's different things for different situations. There are many situations where a bank loan or straight finance package is better than PCP, but there are also situations where PCP is better.

iv-tecman · 5 Apr 2006 at 15:07

Dolph said:
If you choose the right car, and plan on changing every 3 years or so (when the PCP plan runs out) it can work out very well. The right car, of course, being one that's got low depreciation and the right plan being one with a fairly low final payment. This combination gives you a good amount of cash towards your next car without the outright payments of a loan.

I would not recommend taking a PCP plan on something like an astra or a basic focus, for example, chances are the car value will be barely more (or maybe actually less) than your GFV.

And that’s the risk, PCP is a gamble and I wouldn’t want to take the chance that in 3 years time you’d be able to afford to swap or even pay off the balance. If you are looking to get PCP you really need to find out how much the option to buy cost is, how much servicing would have cost, and try and find out what used values are.

If you take a PCP, and after three years you still own 5K, and servicing was say £200, then this is £600 saved, leaving just under 4.5K remaining. Can you afford to make this payment? If not, then I’d not recommend it, as the car after 3 years might not be worth this. If the car is worth say 6K then this is 1K towards the next scheme, but if you’d taken a 2 year old car on straight finance, over four years and you paid say 10K, and your car is then worth 3K after four years then this is 3K you have, and the car is yours. 3K towards you next motor, and I think this is much better then paying for a car, in essence you never own.

I’d rather have a four year loan, after four years I can then decide to keep the car and pay no more, or sell up and use the 3K towards a new car, or even keep the 3K and start a new agreement. PCP makes no sense to me, I see it as a scheme to try and sell newer cars to those who couldn’t afford it.

When buying any car on loans and finance I feel you are in this till the car is paid for. I found this out 6 months ago. I tried to sell up, but didn’t, as the penalties, and lose I too great.

Some may see if differently, but I can’t honestly recommend the schemes TBH.

Dandle · 5 Apr 2006 at 15:08

I have a friend that used to work in a Ford dealer and the way he explained it to me was that your basically renting a car of them then at the end of the three year term they are selling you a second hand car for a higher value than its worth(when you add the deposit and last payment together). a lot of people see it as a good deal as they dont see that last payment paying for a three year old car as they are blinded by the fact they had it from new. Then he explained if they are a really good customer then they chop the car in and you get them again on payments for another three years. He explains it really well how good it is for the dealer and not the customer(my explination doenst do his justice).

IMO if you cant afford the car in one hit then get a bank loan to top up your sum.

iv-tecman · 5 Apr 2006 at 15:31

Dandle said:
I have a friend that used to work in a Ford dealer and the way he explained it to me was that your basically renting a car of them then at the end of the three year term they are selling you a second hand car for a higher value than its worth(when you add the deposit and last payment together). a lot of people see it as a good deal as they dont see that last payment paying for a three year old car as they are blinded by the fact they had it from new. Then he explained if they are a really good customer then they chop the car in and you get them again on payments for another three years. He explains it really well how good it is for the dealer and not the customer(my explination doenst do his justice).

IMO if you cant afford the car in one hit then get a bank loan to top up your sum.

Yep, I thought PCP plans are in favour of the dealer. Honda seemed keen to sell me one, but I declined. It was tempting to drive off with a BRAND new Honda Accord, but no matter now snob or materialist I can be, when I’d got a set budget in my mind, and didn’t mind buying a two year old car, that was essentially the same just that it had 20K more on the clock, this is what I bought. And I screwed Honda for four new tyres, and it had a full service history.

7K saving to me, 2K deposit, rest on finance over 4 years, just over two to go, and after that car is MINE..!! I can choose to buy a new car, keep it, or sell it, keep the money and take another agreement or whatever really.

I knew PCP was a bad idea. It has to be. If it’s too good to be true, it normally is. I mean servicing costs me £200 a year. MOT is £45, OK it might fail. But at least after 3 years I’m not faced with a massive settlement bill.

I think the recommendation here mate, is to buy on a loan or normal finance, and steer well clear of PCP.

Toast · 5 Apr 2006 at 15:48

It'd be rather daft to take out PCP on a new accord when you can get relatively new ones, with low mileage and lots of options for around £12k.

Did you get a new shape Accord? I quite like the look of those.

iv-tecman · 5 Apr 2006 at 15:54

Toast said:
It'd be rather daft to take out PCP on a new accord when you can get relatively new ones, with low mileage and lots of options for around £12k.

Did you get a new shape Accord? I quite like the look of those.

Absolutely. I got the new shape Accord 03 for less then 12K. Around 18 – 19K for the one I got brand new. I saved a small fortune. By the time I’d got new tyres and a service (which I think they skimped on) and paid my deposit from my old Mondeo, I only needed a 9K loan. The car was almost new in my eyes, under two years old when I got it like 14 – 15 months ago…

PCP wasn’t a good idea, glad I didn’t go for it, but Honda were keen to sell me it. I see why…!!