PCP finance.

meep

Anyone know what's the usual upper limit on a deposit (% of purchase cost)? I can't find that info readily available.

dil999

acronym Chilli wrote: »

As Casati says, if you're certain you're not being stealth charged a financing cost somewhere else (e.g. not offered a discount a cash buyer might get, nor not being penalised on your trade-in value, etc.,), then it's absolutely rational to take the 0% financing.
You could negotiate the sale first as a cash sale, no PCP (but you could of course decide to finance outside of dealer). Then ask: "and how would a PCP work out on that", then take away the 2 sets of numbers and crunch them at home.

One of the beauties of PCP is that the finance company will not finance the 'list price" of the car. When you get your agreement, and before you sign, you will clearly see the list price, the dealer discount, the actual selling price, and the actual trade in value you are getting. Its fun watching the dealer explain these numbers vs the list prices and quoted trade ins.

acronym Chilli wrote: »

Couple of caveats:

• PCP might be best deal today, might not be best deal in 3 years (e.g. maybe the cash discount isn't being taken away today, but might be in 3 years time), so it's mportant to scrutinise numbers and options each time. Keeps the sellers honest.

If you enter a PCP arrangement now you are entering it to purchase a car now. What financial arrangements will be available in three years is irrelevant.

When or if you go to purchase a car in 3 years time, you will than have to make use of whatever financial arrangement are available to you then

dil999

meep wrote: »

Anyone know what's the usual upper limit on a deposit (% of purchase cost)? I can't find that info readily available.

Most of them were 30% when I was looking.

I would think you are much better off paying the minimum deposit. and the max monthly payments.
If you decide to purchase a new car in 3 years time using PCP you will need to pay the same deposit again to get the same monthly payments. Make the assumption that the GMFV and the trade in value of the car will be the same, then you won't be disappointed. If the trade in value is a little more than the final payment, then great! you have a couple of hundred to play with.

acronym Chilli

dil999 wrote: »

If you enter a PCP arrangement now you are entering it to purchase a car now. What financial arrangements will be available in three years is irrelevant.

When or if you go to purchase a car in 3 years time, you will than have to make use of whatever financial arrangement are available to you then

My point was that there's nothing intrinsically better (or worse) about PCP. It's all down to the details. However much of the debate can become dogmatic, as if it was black and white PCP=good or PCP=bad. So it's important that people crunch the full financials each time they enter into an arrangement or make a new deal.

dil999

acronym Chilli wrote: »

My point was that there's nothing intrinsically better (or worse) about PCP. It's all down to the details. However much of the debate can become dogmatic, as if it was black and white PCP=good or PCP=bad. So it's important that people crunch the full financials each time they enter into an arrangement or make a new deal.

Chilli, You are correct. If there is anything to be taken from this debate it is that the individual needs to fully research and understand all of their financing options.

Having gone through the process recently and having exhaustively examined all of the options, I thought I would share my experience with a view to assisting others in their decisions. But I would also advise people not to get into a financial arrangement soley based on something they read on boards.ie written by someone they don't know.

TheShow

meep wrote: »

Anyone know what's the usual upper limit on a deposit (% of purchase cost)? I can't find that info readily available.

30% normally

bazz26

meep wrote: »

Anyone know what's the usual upper limit on a deposit (% of purchase cost)? I can't find that info readily available.

General rule is that 30% is the ceiling.

Sam Kade

What about the limited mileage with pcp, it can be fairly restrictive.

mickdw

Sam Kade wrote: »

What about the limited mileage with pcp, it can be fairly restrictive.

Typically if trading in, the mileage will only effect your trade in value just like in any other car purchase / trade in so excess mileage will result in less equity to go to next deal.
If buying out the car, it doesnt matter if you have a million miles on it.
If handing it back, excess mileage will likely cost you the agreed cents per mile.

Lantus

Just done a quick comparison on Skoda's finance calculator. Hire purchase on a 17k car at 5.9pc. incurs 1700 interest over 4 years and a monthly of 356. Plus 150 credit cost.

PCP is zero interest and 235 monthly. If you can save the difference between the two you have nearly paid the remainder after 3 years leaving only a small outstanding sum.

Overall saving almost 1800 eu.

Just using pcp to make a cheaper purchase.

Both based on nominal 14pc deposit.

In that specific case PCP would appear to be significantly cheaper.

mickdw

ya that 5.9 rate on the hp is the difference.
Zero percent pcp is a no brainer as long as the same deal is available when opting for the zero percent pcp.
For example, if there was a straight sale discount of 2k available on that skoda but taking the zero percent pcp meant you had to pay full retail, then it would be a crap deal. To be honest, I dont think skoda / Vw operate like that so they are genuinely reasonable finance deals.

Lantus

There are plenty of PCP deals where the interest rate is higher which would affect the outcome. Desirability and fashion can allow some manufacturers to charge more comfortably in the knowledge that desirability and inflexibility in brand choice will override financial decision making.

vintagevrs

mickdw wrote: »

ya that 5.9 rate on the hp is the difference.
Zero percent pcp is a no brainer as long as the same deal is available when opting for the zero percent pcp.
For example, if there was a straight sale discount of 2k available on that skoda but taking the zero percent pcp meant you had to pay full retail, then it would be a crap deal. To be honest, I dont think skoda / Vw operate like that so they are genuinely reasonable finance deals.

I thought doing that was illegal, as in different price depending on the finance product. But I remember BM were doing something like that recently where the gave a deposit contribution on one finance option and not the other. Technically the price of the car was the same but a way of fudging it.

acronym Chilli

vintagevrs wrote: »

I thought doing that was illegal, as in different price depending on the finance product. But I remember BM were doing something like that recently where the gave a deposit contribution on one finance option and not the other. Technically the price of the car was the same but a way of fudging it.

I'd never heard that.

There's loads of ways of fudging/obfuscating it though. As you say, deposit contribution is one, but can also give discount/rebate; cheaper/free option-pack or upgrade; improve/reduce the price of your trade-in vehicle; service-pack; bundle something (AA membership/recovery service) etc., etc.,
Best way I can see to guard against it is to negotiate the price competitively without any reference to financing, and then try to switch to financing later on (assuming that financing is 0% or something else that's clearly an attractive option).

Sometimes financing can improve the deal profitability for a seller. I know from a friend who worked at Dell years back that they at least used to make great profit margin on the finance packages and extended warranties. I know that's applied to some car finance packages too at times.

However, 0% finance has to be a good deal, just so long as you're not being stiffed for it somewhere else in a stealth charge (in which case it might still not be a bad deal, just not quite as good as it looks).

DaveyDave

Just curious how does ordering a new car at the end of a PCP deal work? Do you order it 8-12 weeks before the 3 years is up and hope it arrives on time or further in advance? Or when the 3 years is actually up?

For all the information on PCP there is out there, it all seems geared towards getting someone into the first car. The posts on here are where I'm seeing information of people going into a second car

maidhc

Sone of the finance deals are actually ok. Opel have a very decent 0% hp one where the car is fully paid for over 36 months. The monthly payments are still high though, because, guess what, cars are EXPENSIVE! We have our second car (astra) on hp with Opel because it was genuinely cheaper than paying out the cash.

My concern with the pcp is it is almost designed to encourage people to buy cars they really cannot afford. It is grand to advertise an executive car at €300 pm, but that is a fraudulent figure when all is said and done. The true cost of such s car is three four times that figure.

I have a strict rule of just buying a car from my own reserves. I'm 35, and bought the newest car I have ever had last week, a 2016 avensis and only because my 2001 c class was getting a little costly to keep going. I could have comfortably afforded a new 530d or more, but when you are paying yourself the true costs come into sharp relief!

DaveyDave

maidhc wrote: »

Sone of the finance deals are actually ok. Opel have a very decent 0% hp one where the car is fully paid for over 36 months. The monthly payments are still high though, because, guess what, cars are EXPENSIVE! We have our second car (astra) on hp with Opel because it was genuinely cheaper than paying out the cash.

My concern with the pcp is it is almost designed to encourage people to buy cars they really cannot afford. It is grand to advertise an executive car at €300 pm, but that is a fraudulent figure when all is said and done. The true cost of such s car is three four times that figure.

I have a strict rule of just buying a car from my own reserves. I'm 35, and bought the newest car I have ever had last week, a 2016 avensis and only because my 2001 c class was getting a little costly to keep going. I could have comfortably afforded a new 530d or more, but when you are paying yourself the true costs come into sharp relief!

It's not really a fraudulent figure though, it's usually "FROM €300 p/m" and if you know a little about PCP you know that's with 30%. Sure you can have a €46,000 Golf R for only €453 a month but with 10% that shoots up to €733 a month, fair difference there.

I understand a lot of people would think they could afford it at first but they'd quickly realize they can't once the monthly payments shoot up. It's no different than the Carphone Warehouse saying you can get the Galaxy S8 or iPhone 7 Plus for free then you realize the monthly contract is a ridiculous €80 a month or whatever when I'm currently happy paying €25 a month.

They wouldn't get their foot in the door if they couldn't afford it. People are only being approved for PCP because they have the deposit in hand and can prove they can pay the monthly payments they've agreed to. This obviously doesn't take into account if someone lost their job a year later and couldn't afford it anymore. Of course this also means there is a lot of people who can't afford it looking into PCP because they see the low numbers and don't know the full details of it.

It's not like I'm walking in to put a 10% deposit on the R with the idea of paying €453 then needing to back out when I realize I'm actually supposed to be paying €733. It needs to be sent off for approval from a bank, I don't see them saying "feck it, go on" to make a sale on someone who is at risk. When I went in for PCP I had to prove I could pay more than the agreed amount, presumably to make sure I'm not scraping pennies to pay for it because if something came up I wouldn't be able to make a payment.

Lantus

DaveyDave wrote:

This obviously doesn't take into account if someone lost their job a year later and couldn't afford it anymore.

Well couldn't that happen to anyone who holds any loan?

Mortgages? All those thousands in arrears, many more who lost their homes. Credit card default, bankruptcy.

Those super expensive designer smart phones that cost 50 to 100 a month on a fixed 2 to 3 year contract.

Expensive furniture on credit, TVs, computers, and finally cars.

It's all existed long before PCP came along.

DaveyDave

Lantus wrote: »

Well couldn't that happen to anyone who holds any loan?

Mortgages? All those thousands in arrears, many more who lost their homes. Credit card default, bankruptcy.

Those super expensive designer smart phones that cost 50 to 100 a month on a fixed 2 to 3 year contract.

Expensive furniture on credit, TVs, computers, and finally cars.

It's all existed long before PCP came along.

Of course this could happen in all of those scenarios. The point I was making that PCP isn't just being handed out to people. The lad working minimum wage wanting to ditch his 2006 Golf for a 172 A3 S-Line isn't going to get it unless he has more than enough money to pay for it and has proof of savings.

Anyone could suddenly fall behind on payments. That doesn't mean they aren't perfectly suitable for being approved at the time of signing a deal.

MidMan25

DaveyDave wrote: »

maidhc wrote: »

Sone of the finance deals are actually ok. Opel have a very decent 0% hp one where the car is fully paid for over 36 months. The monthly payments are still high though, because, guess what, cars are EXPENSIVE! We have our second car (astra) on hp with Opel because it was genuinely cheaper than paying out the cash.

My concern with the pcp is it is almost designed to encourage people to buy cars they really cannot afford. It is grand to advertise an executive car at €300 pm, but that is a fraudulent figure when all is said and done. The true cost of such s car is three four times that figure.

I have a strict rule of just buying a car from my own reserves. I'm 35, and bought the newest car I have ever had last week, a 2016 avensis and only because my 2001 c class was getting a little costly to keep going. I could have comfortably afforded a new 530d or more, but when you are paying yourself the true costs come into sharp relief!

It's not really a fraudulent figure though, it's usually "FROM €300 p/m" and if you know a little about PCP you know that's with 30%. Sure you can have a €46,000 Golf R for only €453 a month but with 10% that shoots up to €733 a month, fair difference there.

I understand a lot of people would think they could afford it at first but they'd quickly realize they can't once the monthly payments shoot up. It's no different than the Carphone Warehouse saying you can get the Galaxy S8 or iPhone 7 Plus for free then you realize the monthly contract is a ridiculous €80 a month or whatever when I'm currently happy paying €25 a month.

They wouldn't get their foot in the door if they couldn't afford it. People are only being approved for PCP because they have the deposit in hand and can prove they can pay the monthly payments they've agreed to. This obviously doesn't take into account if someone lost their job a year later and couldn't afford it anymore. Of course this also means there is a lot of people who can't afford it looking into PCP because they see the low numbers and don't know the full details of it.

It's not like I'm walking in to put a 10% deposit on the R with the idea of paying €453 then needing to back out when I realize I'm actually supposed to be paying €733. It needs to be sent off for approval from a bank, I don't see them saying "feck it, go on" to make a sale on someone who is at risk. When I went in for PCP I had to prove I could pay more than the agreed amount, presumably to make sure I'm not scraping pennies to pay for it because if something came up I wouldn't be able to make a payment.

Out of curiosity, how did you prove you could pay more than the agreed amount? I've been using PCP myself for the last 3.5 years but probably as I had a track record with them, when I upgraded 2 years into my first PCP VW Bank didn't look for any documentation off me despite my repayments increasing by 50%.

maidhc

DaveyDave wrote: »

Of course this could happen in all of those scenarios. The point I was making that PCP isn't just being handed out to people. The lad working minimum wage wanting to ditch his 2006 Golf for a 172 A3 S-Line isn't going to get it unless he has more than enough money to pay for it and has proof of savings.

Anyone could suddenly fall behind on payments. That doesn't mean they aren't perfectly suitable for being approved at the time of signing a deal.

No, he will get the car because the pcp payments will always be ahead of the depreciated value of the car. The car is held by the finance house as security so they are in a no loose position. All it will mean is that if he looses his job he will have neither an 06 Golf or 172 Audi with a month or two.

Pcps are being given out far too freely. Also don't forget an average car loan will diminish your borrowing for a mortgage by close on 150k. Considerable if you plan on buying/moving during the currency of the agreement.

maidhc

MidMan25 wrote: »

Out of curiosity, how did you prove you could pay more than the agreed amount? I've been using PCP myself for the last 3.5 years but probably as I had a track record with them, when I upgraded 2 years into my first PCP VW Bank didn't look for any documentation off me despite my repayments increasing by 50%.

They don't. I have a client who was approved to buy a very fancy car she couldn't afford. She would be at the pin of her collar to manage a fiesta and she was getting pcp on a prestige German car. Bananas.

DaveyDave

MidMan25 wrote: »

Out of curiosity, how did you prove you could pay more than the agreed amount? I've been using PCP myself for the last 3.5 years but probably as I had a track record with them, when I upgraded 2 years into my first PCP VW Bank didn't look for any documentation off me despite my repayments increasing by 50%.

I just provided payslips and an additional bank statement for my savings account. The savings account had most of my salary going in weekly so they could see I was had saved X more than the monthly payment. I think it was also important for them to see that I was putting money in regularly too as they wanted to see the savings for the year.

The salesperson told me because I didn't have credit history or previous loans they'd like to see I could afford to put away 25% more than the monthly payments. I'm sure it's different for each individual.

Sean de

Just wondering if someone could do the basic maths for me. 160 pages later and I'm still confused.
My Senario.
New Car cost 31000
Trade in value 11000
Gmfv of New Car 14000
On what amount am I paying back over 3 years

At the end of the 3 years I go back with my car with the 14000 gmfv and want to upgrade to another car worth 31000.
Where that car is then given a gmfv of 14000. What am I paying back on the second term.
Please keep it as basic as possible. ðŸ˜Thanking you

Lantus

Sean de wrote:

Just wondering if someone could do the basic maths for me. 160 pages later and I'm still confused. My Senario. New Car cost 31000 Trade in value 11000 Gmfv of New Car 14000 On what amount am I paying back over 3 years

Well your trade in 30% which is the max ( in fact it's slightly higher but I'll disregard that)

Assuming 0% Apr you will pay 6000 over 3 years which is less than 180 a month.

However in your next term your equity will be 3 to 4.5k so your monthlys will be based on nearer 12k which is going to double your monthly. Bear that in mind....

Robertr

Sean de wrote: »

Just wondering if someone could do the basic maths for me. 160 pages later and I'm still confused.
My Senario.
New Car cost 31000
Trade in value 11000
Gmfv of New Car 14000
On what amount am I paying back over 3 years

At the end of the 3 years I go back with my car with the 14000 gmfv and want to upgrade to another car worth 31000.
Where that car is then given a gmfv of 14000. What am I paying back on the second term.
Please keep it as basic as possible. ðŸ˜Thanking you

You'll pay back the price of the car less deposit and GMFV. But thats just the capital amount.

The amount of interest added to your payment is based on the price of the car less the deposit. You still have to pay interest on the GMFV as they are still lending you this money even though you don't it back during the term of the loan.

bazz26

My understanding is that on the first deal you will be paying back 20k plus interest over the 3 years. The GFV at the end of year 3 only comes into play if you want to buy the car outright.

To go for a second deal, then you trade the car in again but you need to get a trade-in value greater than the GFV figure on the first deal. That is your deposit (equity) towards the second new car.

One thing you need to remember is if you put a large deposit into the first deal ie valuable trade-in, and you want to keep similar monthly payments in the second deal, you need to come up with a similar large deposit again either via a higher trade-in value and/or a lump sum.

artheb

Sean de wrote: »

Just wondering if someone could do the basic maths for me. 160 pages later and I'm still confused.
My Senario.
New Car cost 31000
Trade in value 11000
Gmfv of New Car 14000
On what amount am I paying back over 3 years

At the end of the 3 years I go back with my car with the 14000 gmfv and want to upgrade to another car worth 31000.
Where that car is then given a gmfv of 14000. What am I paying back on the second term.
Please keep it as basic as possible. ðŸ˜Thanking you

The finance amount is calculated as follows:

31000-11000(trade in)-14000(GFMV)=6000 to be financed

However it may not be possible in your case since the deposit cannot be more than 30% which would be 9300 from 31000. I would say that in your case taking HP over 5 years would make a sense.

ps: If above was possible on PCP you would pay 6000 over 36 months but APR would be calculated off 20000 as that what is left after taking off trading value.

maidhc

Sean de wrote: »

Just wondering if someone could do the basic maths for me. 160 pages later and I'm still confused.
My Senario.
New Car cost 31000
Trade in value 11000
Gmfv of New Car 14000
On what amount am I paying back over 3 years

At the end of the 3 years I go back with my car with the 14000 gmfv and want to upgrade to another car worth 31000.
Where that car is then given a gmfv of 14000. What am I paying back on the second term.
Please keep it as basic as possible. ðŸ˜Thanking you

At the of three years you will most likely have lost the value of your current car and the monthly payments for the new one.

You will be going to the market with nothing to trade basically.

Lantus

artheb wrote:

However it may not be possible in your case since the deposit cannot be more than 30% which would be 9300 from 31000. I would say that in your case taking HP over 5 years would make a sense.

The dealer often does a cash refund for the difference over 30pc. But yes if you have a high value car which is a third of the value of the new car then an hp or traditional loan to buy outright would seem to make more sense.

If the PCP offers very low or no interest then use it with a view to purchase. Save an extra amount each month so you can pay off the gmfv after 3 years without any additional loan. I'd be inclined to keep the car for another 3 to 4 years before trading in again.