Car finance - pcp

Fountain man

hi all,
i'm thinking of changing my car and was talking to Volkswagen dealership about a pcp on a new Passat. I've no experience of pcp but the dealer is selling it as a way to get a new car every three years. However if you don't want a new car after three years there is a big payment to make or you hand the car back even after making three years worth of repayments!
can anybody advise of the hidden pitfalls or benefits?

thanks

166man

PCP is something that can be very easy to get sucked into given the lower monthly rates compared to other methods of financing. All I would say is that make sure you do your research into what the payments are, the breakdown of the interest, what happens if you need to hand the car back for example.

naughtysmurf

IMO it's a financial product designed as much as possible to lock the purchaser into one particular brand whether it be VW, Nissan etc etc for as long as possible, may suit some, may not suit others

Paddy@CIRL

naughtysmurf wrote: »

IMO it's a financial product designed as much as possible to lock the purchaser into one particular brand whether it be VW, Nissan etc etc for as long as possible, may suit some, may not suit others

That's a common misconception, as you're free to continue the PCP with another manufacturer / dealer at the end of your term.

mickdw

Pcp is ok but you need to check some stuff out.
The repayment can appear very low on first entering a pcp deal because you more than likely have a fully owned car to trade in as a deposit.
In 3 years time, you will only have the value of the car over and above the final payment figure as a deposit and this could be quite a small amount meaning for your next car, your monthly payment could increase.
I think its wise as a start point to run the figures based on providing a minimum deposit and see if you can afford that monthly payment. If you can, pcp will suit you. If on the other hand You can only afford the car now because you have max deposit due to trade in, well it might not be a sustainable idea into the future. The interest rate is generally excellent on pcp deals

In terms of how the payment is reduced, it's similar to taking out a 5 year loan to buy a car and then trading the car in at 3 years hoping it's worth alittle more than you still owe. If you did that you would have cheaper repayments than taking a 3 year loan but instead of owning the car at year 3, you still owe a pile of money on it

Kenny Logins

It's just a financial product that allows dealers to shift more cars, by breaking the purchase down into more manageable chunks. Makes a lot of sense to me, but whatever car/brand you decide on check the current s/h market for a rough idea of where you'll be when you hit the 3 year mark.

BTW Octavia is available on 0% now and other cars have servicing included.

ei9go

Firstly, you need a 0% PCP deal.

There are two figures, the guaranteed future value and how much you will be allowed as a trade in on the next car.

The theory is that the difference between these two values is your deposit for the next car.

The big question is will there be enough equity in your car for the deposit in 3 years time?

If not, you will have paid for three years and also lose your initial deposit.

Choose carefully, very carefully.