PCP's

Tinders · 5 Apr 2006 at 21:10

I would say its only worth getting a PCP on a decent car which will have a decent residual.

To me its no different to when buying your house, its never yours untill its paid for....twice over!

FWIW vauxhaul were doing a 0% finance scheme, which was to all intents and purposes a PCP scheme.

[TW]Fox · 5 Apr 2006 at 21:14

Tinders said:
To me its no different to when buying your house, its never yours untill its paid for....twice over!

It's completely different, it's actually like renting your house with the landlord saying 'In a couple of years, I might sell it to you for about market value'.

Dandle · 5 Apr 2006 at 21:55

[TW]Fox said:
It's completely different, it's actually like renting your house with the landlord saying 'In a couple of years, I might sell it to you for about market value'.

Thats how I see it although you've also put down a large non-refundable deposit and he will sell you it at the current market value for a three year old vehicle(near enough anyway).

Rilot · 5 Apr 2006 at 22:06

[TW]Fox said:
It's completely different, it's actually like renting your house with the landlord saying 'In a couple of years, I might sell it to you for about market value'.

That's not actually how it works.

The bubble payment is calculated up front to be well below the projected market value of the car after 3 years.

Example. My RX8 had a bubble payment of £7k after 3yrs and 36k miles. The actual predicted value after that period is £11k.
You pay the bubble payment and then sell the car for market value, thus making £4k back.

panthro · 5 Apr 2006 at 22:07

Rilot said:
That's not actually how it works.

The bubble payment is calculated up front to be well below the projected market value of the car after 3 years.

Example. My RX8 had a bubble payment of £7k after 3yrs and 36k miles. The actual predicted value after that period is £11k.
You pay the bubble payment and then sell the car for market value, thus making £4k back.

Just out of interest if you dont mind me asking, how much were you paying per month and what was the initial deposit?

EDIT: Just realised you live in Reading. Whereabouts? Im in Wokingham but work at Foster Wheeler in Shinfield.

wesley · 5 Apr 2006 at 22:50

i've been thinking about PCP lots lately

ie,

brand new Honda Civic Type R for £16,950 A/C

PCP (quote from www.broadspeed.com):
£1,695 (10% deposit)
36 X £327 (3 X 15000 miles) @ 8.9% APR
final payment = £6379 or take the car back

Tesco loan:
£1,695 (10% deposit)
£15255 to borrow
36 X £519.46 @ 5.9% APR

so PCP save you £192.46 monthly so mite as well go for a better car!

u can get 5% APR from Honda dealer so even more saving

iv-tecman · 6 Apr 2006 at 00:44

There are some good arguments for, and against PCP. I had the option to buy on one, it actually worked out the same payment for a brand new Honda, then what I’m paying now for what is now a three year Honda.

The problem I had with PCP was the gamble of the car being worth the GFV. In which I felt it wouldn’t be. Paying 36 x £300 is around 11K. I think the car had to be worth about 9K after three years to break even. My car is now three years old, and I’m sure I’d be hard pushed to get 9K for it.

Whereas I purchased my car for £12500. It was a little more then what I’d been seeing, but it was in such nice condition, and I got lots of extras, that I went for it. Took a 11K loan. Paying £250 a month, which is actually £50 cheaper, but remember the car is a lot older. If I’d bought a new Honda Accord the payments per month would have been a lot lot higher, hence PCP would have been cheaper per month. Remember, most PCP is only for new or VERY newish cars.

48 x £285 just under 14K. 3K more then what I’d took on a loan to pay for the car if I complete the term, After the term, no more to pay, and the car will be 6 years old. Be worth 3K or less I reckon. Better for me to have a car worth 3K with nothing to pay, then have a car I “hope” is worth 9K after 3 years that I still owe 9K on. And still have to pay what is essentially 2K less then what I have actually took a loan for to buy a 2 year Honda.

I have no mileage restrictions, if need be I could sell the car by getting a loan and paying the HP off and selling, and after the term, nothing else to pay. Car is mine.

For those who have company car allowance, I do see your point. It’s not your money, so I do see why this is now of benefit to you all….

I think we have to agree that PCP has its place. For some it’s beneficial, for others, not a good idea. And for those who use the scheme to buy something they cannot really afford, then this is just the snob in some people really. I myself “could” have been driving a brand spanking new Honda Accord, but instead I’m driving a 3 year old Honda Accord, and I still love the car, I’m happy, and I’m not worried about GFV, mileage, and dreading a payment at the end of the term.

HEADRAT · 6 Apr 2006 at 01:01

Toast said:
Well he owns two houses (one of which he bought recently) and he's only 28, I'd say he's done pretty well myself.

Cool, well top tip from Toast's mates there if the baliffs come around just tell 'em to "eff off" and you're in clover, didn't realise it was so easy were's that credit card

HEADRAT

Maz · 6 Apr 2006 at 11:16

Wow no one here.

Except for Rilot understands how a PCP works.

No wonder you guys are against it.

[TW]Fox · 6 Apr 2006 at 11:56

So you are going to tell us a PCP on a depreciation magnet Fiat is a great idea?

Really? So, if I PCP'd a brand new Fiat Stilo you are telling me the baloon payment would be a lot less than the market value of the car after 3 years, right?

Go on then...

Maz · 6 Apr 2006 at 12:03

The way PCP works is :

1: you go and pick a car.

2: you put a SMALL deposit on it.

3: you pay between 24 - 42 small monthly payments on it (PCP Terms are 24-42 months)

4: At the end of the agreement you have what is called a GFV (Guaranteed Future Value) which you have 3 options in what you want to do with it.

You can
A: Pay it off and buy the car.
B: Hand it back to the finance company and walk away
C: use the difference between the GFV and what the car is actually worth as a deposit towards you next car - ANY CAR.

Ie : (A Hypothetical Example) Car price is £8495 GFV after 3 years is £3005. you pay X as deposit and X as a monthly payment.

After 3 years you car is worth £3600 trade and you only owe £3005 on it - so you have £595 as a deposit towards your next car.

Which you can use to lower your monthly repayments or upgrade to a more expensive car.

Any car you want aswell be it a Fiat or a Ferrari.

Sounds great yeah?

Drawbacks - Mileage restriction, ONLY IF YOU HAND THE VEHICLE BACK TO FINANCE COMPANY! you have agreed a band of 12k a year, after 3 years you have 38k on it? no problem so long as you dont have it back.

Modifications - Again ONLY IF YOU HAND THE CAR BACK

Don't own the car? - Ownership is overrated TBH, fancy owning on 05 reg Rover just before they went pop? Neither did I - but people who PCP'd and HP'd them just handed them back!

Locked in for full term of agreement? - NO YOUR FREE TO CHANGE YOUR CAR AT ANYTIME

PCP Guarantees that at the end if your term your NEVER in negative equity, which is a GAMBLE with HP. If you are in Negative Equity you can hand the car back and walk away.

[TW]Fox · 6 Apr 2006 at 12:06

Maz said:
PCP Guarantees that at the end if your term your NEVER in negative equity, which is a GAMBLE with HP. If you are in Negative Equity you can hand the car back and walk away.

But then you've nothing to show for the 2-3 years of paying several hundred quid a month.

Are you really saying the GFV on every car you sell on a PCP is above the value of the car after 3 years?

Maz · 6 Apr 2006 at 12:10

[TW]Fox said:
But then you've nothing to show for the 2-3 years of paying several hundred quid a month.

Are you really saying the GFV on every car you sell on a PCP is above the value of the car after 3 years?

The GFV is also the same amount you owe.

The GFV is designed to be LOWER than the value of the car, so you have equity between that value and what the car is worth.

And you can use this equity towards your next car.

With a PCP all your doing is splitting the depreciation of the car into smaller more managable chunks, and then building some deposit towards your next car.

It works VERY well for people who don't want to spend a lot of money per month and want a new car every 3 months.

I mean on a £9000 Grande Punto - we can do PCP's which cost less than intial £175 deposit and £175 a month.

BIGWEB · 6 Apr 2006 at 12:31

Ive gotta say I'm dubious of all PCP and finance schemes to be honest. I can see the benefits of them but it would always worry me that after 36x£250+£2000 deposit I have no metal to show for it.

That said these examples shown mean I could probably afford a brand new Elise as opposed to the second hand one I am looking to buy.
Thinking about it deeper I would have no maintenance costs and wouldnt have to worry about things going wrong with the car because I would have a warranty, which i wouldnt have on the 4 year old elise.

One big bill on the used elise could make PCP look very attractive!

MrMoon · 6 Apr 2006 at 12:39

[TW]Fox said:
But then you've nothing to show for the 2-3 years of paying several hundred quid a month.

Are you really saying the GFV on every car you sell on a PCP is above the value of the car after 3 years?

You can never go into negative equity with PCP becuase the future value is guarenteed at the time of purchase, if the car is worth less and you hand it back at the end of the 3 years its the finance company that take the hit not the customer,
the only downside with PCP as I have found is that you are tied to a manufacturer if you want to use the equity in the car you are handing back to purchase another car you have to either buy it and then sell it for the profit which is not a dead cert, or hand it back and have another car from the same manufacturer.

Also whats the point in having nothing to show for it in 3 years the car will only ever lose money and will only cost you more money as servicing costs MOTs etc go up, why not just get a brand new car every 3 years it keeps it in warranty, and requires very little maintenance. I thinks its personal preference if you want to change your car every 3 years then do it, It suits me just not everyone.

BIGWEB · 6 Apr 2006 at 12:45

Im assuming on PCP you still pay for consumables!? i.e. tyres, pads etc?

[TW]Fox · 6 Apr 2006 at 12:56

MrMoon said:
You can never go into negative equity with PCP becuase the future value is guarenteed at the time of purchase, if the car is worth less and you hand it back at the end of the 3 years its the finance company that take the hit not the customer,

I've not once said you get into negative equity becuase you don't - I'm saying that you will sometimes find the GFV is higher than the value of the car. This is NOT negative equity - its not your car - but it does mean you are then forced to make a choice between:

a) Giving up and handing the car back. You now have nothing to show for 3 years of paying every month.

b) Buy the car for the GFV. Problem is, car isn't worth as much as the GFV so you are now buying a very expensive 3 year old used car.

c) Use the value of the car to string yourself up for another PCP - pretty much the only sensible option in this sort of situation.

Also whats the point in having nothing to show for it in 3 years the car will only ever lose money and will only cost you more money as servicing costs MOTs etc go up

I don't think I will ever understand this. An MOT costs what, 25 quid a year tops? It's such a small amount it's not even worth considering. Servicing costs don't really 'go up' - if anything they go down as you no longer need to use main dealers.

Just strikes me as a way to say 'Look ive got a posh brand new car' when you couldn't have afforded to buy it..

Rilot · 6 Apr 2006 at 13:03

[TW]Fox said:
Just strikes me as a way to say 'Look ive got a posh brand new car' when you couldn't have afforded to buy it..

ANd getting a loan for the money is different in what way? You still get a posh car that you couldn't afford to buy. If you could then you would have paid for it outright.

It seems your complaint is that you have nothing to show for your money after 3 years. Lets run an example:

£30k car.
You borrow £30k and at the end of 3 years it's worth £10k. You have spent £30k but have a £10k car. £10k of equity to go towards your next car. Difference between what you spent and what the car is worth = £20k

You PCP the car. GFV is £10k so you borrow £20k. You have spent £20k and you have a car that is worth £0k as you don't own it.

In both cases the delta between what you started with and what you end up with is £20k so what's the difference?

The bonus is that with the PCP you have spent less on interest on the loan as the amount borrowed was less in the first place.

I guess at the end of the day it depends on how you view a car financially.
Do you view it as an asset or an expense? I view my car as an expense that I can't avoid.

At the end of the day, I have £4000 of expenses every month which includes mortgage, car, gym, insurance etc.
£550 on a PCP or £800 on a loan is neither here nor there. I go with the one which is most convinient.

wesley · 6 Apr 2006 at 13:09

fox, its no difference if u get a bank loan of £15k for a car, you dont actually 100% own the car, its bank money

u dont 100% own a house if u got a mortgage on the house

[TW]Fox · 6 Apr 2006 at 13:09

I view a car as an asset - although I do hasten to add if I was on a company car scheme I would probably go for a PCP as it's easier especially with rules most companies have regarding the age of the car.

From a private point of view, however, to me a car is an asset - you buy it, and its yours. It belongs to you.