PCP mileage question.

BoatMad

I'm just about to sign for a 30 kW 6kw charge SV with cold pack

Currently given Nissan ridiculously high pcp rates , I'm considering going for the 10k annual option costings , even though the likely mileage is closer to 30 k

I don't see the point in financing the depreciation difference at 8% , especially since the penalty over mileage charge is effectively never applied as the car will simply be worth whatever The commercial value will be , which is a haggle with the dealer.

I have the option of everything from cash purchase to no deposit pcp, as I availing of the scrapage. I don't like the fact I have to give Nissan 2400 euros in interest though

Anyone with alternative views

Rafal

If cash is an option for you, without much inconvenience, then it is the best overall option in Ireland, at the moment, unless you buy for business purposes, in my opinion. I have analysed the available PCP deals and they all end up costing significantly more, with you also taking the risk due to the very low guaranteed minimum values offered in Ireland. It is cheaper, in my opinion, to buy with cash. U.K. PCP is, on the other hand, a much better option than cash, especially if you intend to keep the car for a shorter period of time.

However, if the GFMV were much higher, meaning Nissan dealer/finance company would be taking the risk, it might make sense to go for a PCP.

I should make it clear that I firmly do not believe in the concept of "building equity" because a car is a wasting asset with significant risks attached. I respect that others may believe in this concept, but numeric simulation seems not to support it, according to my calculations, suggesting a savings account would be a better option for building a cash reserve for a future purchase, and with a much lower risk, than an Irish PCP.

All of this changes completely if you don't have the cash and you are considering a form of a loan, or if you already have a prior PCP, in which case it is still sometimes better to end it and buy with cash, unless incentivised to counteract the higher cost.

BoatMad

Thanks

The main issue with using cash , is investing in a wasting asset, whereas the cash can be used more productively.

my main question was the tradeoff of using a low annual mileage PCP to lower the total interest paid , over not doing so and remaining within the GMFV

Im not sure about your comments in regards GMFV, mine is 10K plus, doesnt seem low in comparison to the UK

I absolutely agree about " building equity" at 7.9% its absolute nonsense

BoatMad

Thanks

The main issue with using cash , is investing in a wasting asset, whereas the cash can be used more productively.

my main question was the tradeoff of using a low annual mileage PCP to lower the total interest paid , over not doing so and remaining within the GMFV

Im not sure about your comments in regards GMFV, mine is 10K plus, doesnt seem low in comparison to the UK

I absolutely agree about " building equity" at 7.9% its absolute nonsense

Padraig Mor

I have a 15k PCP but am currently looking at about 23k per year. It's worth noting that if you exercise the option to just hand the car back (a possibility, given that Nissan now seem to be giving lower GFVs than when I signed - i.e. they now think they'll be worth less), I'm not sure how well they can enforce charging you the excess mileage. My PCP contract only makes a mention of 'additional charges' if handing back - I've never been given a figure for excess mileage (€0.15 per km I've heard others say) or, to my knowledge, signed anything to say that I will pay anything, or what that charge would be.

BoatMad

Padraig Mor wrote: »

I have a 15k PCP but am currently looking at about 23k per year. It's worth noting that if you exercise the option to just hand the car back (a possibility, given that Nissan now seem to be giving lower GFVs than when I signed - i.e. they now think they'll be worth less), I'm not sure how well they can enforce charging you the excess mileage. My PCP contract only makes a mention of 'additional charges' if handing back - I've never been given a figure for excess mileage (€0.15 per km I've heard others say) or, to my knowledge, signed anything to say that I will pay anything, or what that charge would be.

its 10 cents per Km and its in the PCP.

At the end of the day , the GMFV is irrelevant unless the bottom was to drop out of the market. Your car will be worth the trade in market value and thats what you will seek to obtain.

My dealer expained that the main reason for lowering the PCP, was not that the commercial value has changed. but that people had the wrong expectation if PCPs, in that they expected to walk in at the end of three years with enough equity in the car as a deposit. When they released they didn't , they felt conned. so nissan lowered the GFMV to ensure this was the case. at the end of the day a PCP is a balloon lease and no-one should have expectations as to what the next car purchase will bring

Rafal

BoatMad wrote: »

Thanks

The main issue with using cash , is investing in a wasting asset, whereas the cash can be used more productively.

my main question was the tradeoff of using a low annual mileage PCP to lower the total interest paid , over not doing so and remaining within the GMFV

Im not sure about your comments in regards GMFV, mine is 10K plus, doesnt seem low in comparison to the UK

I absolutely agree about " building equity" at 7.9% its absolute nonsense

I don't think a car is an investment, because it does not pay back any kind of dividends or interests, unless you strongly expect to generate a profit when you sell it. I would always think of "spending cash on a car purchase" rather than "investing cash in a wasting asset", but I realise people feel better when instead of saying "spend" they say "invest" even if it does not mean that. Car is a cost, unless you buy rare and historical models and trade them like art.

I should have been clearer about my comment about GFMV in UK. While the figure seems similar to Irish, as a proportion of the actual price paid they are much higher in UK, because the UK PCP deals are cheaper, owing to significant dealer+Nissan contributions towards lowering the price. Sometimes this is referred to as a deposit contribution, so as to never be seen as saying "discount" but effectively UK PCP are sold with significant discounts, making the GFMV a much bigger portion of the price you don't have to pay.

To compare PCPs I'd take the deposit you must pay + total of instalments incl interest + any over-mileage penalties, and ignore all the talk of GFMV, discounts, contributions, rebates and other marketing talk. The total you have just calculated is the hard number you will pay and the only one to use when comparing deals. Whatever happens to the car when PCP expires does not impact what you had to spend on it. When buying with cash, take the best stab at the resale value, subtract from what you have to spend on it, and compare.

BoatMad

To compare PCPs I'd take the deposit you must pay + total of instalments incl interest + any over-mileage penalties, and ignore all the talk of GFMV, discounts, contributions, rebates and other marketing talk. The total you have just calculated is the hard number you will pay and the only one to use when comparing deals. Whatever happens to the car when PCP expires does not impact what you had to spend on it. When buying with cash, take the best stab at the resale value, subtract from what you have to spend on it, and compare

hmmm

This isn't a inter car PCP comparison, its specific to the Leaf and Nissans current PCP offering

The "over-mileage penalties" in my view are meaningless, as they merely represent a " nominal " reduction in GFMV. The real final price is the commercial value of the car, that the dealer offers. I notice that several PCP offerings have done away with different mileage PCPs, ( VW for one)

My question was on peoples opinion of plumping for a low mileage PCP or one closer to the expected PCP mileage

" investing " or spending is just a semantic debate, many " investments " result in a loss of value , ( see 2008 property !!)

Mileage is of no concern unless handing the car back, then you can be sure they'll charge you all the 8 C per Km over, I read 10 C per KM above so this must have been raised since last year.

My GFMV was lowered since last year also on the 30 Kwh but this is as mentioned to guarantee you have something going forward or at least guarantee a good chance.

As for the value of the car, well it's no worse than all but the premium brand cars as expected and a little bit more from what I've seen. The Irish market isn't comparable to the U.K market due to the flood of PCP leaf sales there.

As the battery proves a lot more reliable from 2013+ July built leafs they will make cracking good 2nd hand ultra cheap cars, the question is whether people will realise this or not .

Mileage is of no concern unless handing the car back, then you can be sure they'll charge you all the 8 C per Km over, I read 10 C per KM above so this must have been raised since last year.

My GFMV was lowered since last year also on the 30 Kwh but this is as mentioned to guarantee you have something going forward or at least guarantee a good chance.

As for the value of the car, well it's no worse than all but the premium brand cars as expected and a little bit more from what I've seen. The Irish market isn't comparable to the U.K market due to the flood of PCP leaf sales there.

As the battery proves a lot more reliable from 2013+ July built leafs they will make cracking good 2nd hand ultra cheap cars, the question is whether people will realise this or not .

BoatMad

Mileage is of no concern unless handing the car back, then you can be sure they'll charge you all the 8 C per Km over, I read 10 C per KM above so this must have been raised since last year.

even then my dealer explained, that if you were handing it back, you would expect the dealer to give you the commercial value of the car, not the GFNV less penalty . He said " sure if I didn't give it to you , another dealer would , so I'll have to give it to you "

BoatMad

Mileage is of no concern unless handing the car back, then you can be sure they'll charge you all the 8 C per Km over, I read 10 C per KM above so this must have been raised since last year.

even then my dealer explained, that if you were handing it back, you would expect the dealer to give you the commercial value of the car, not the GFNV less penalty . He said " sure if I didn't give it to you , another dealer would , so I'll have to give it to you "

Well yeah, it makes no sense to loose a sale over 10-20 K extra kms !

BoatMad

OK , given all that ,why does anyone go for the higher mileage PCP, it seems daft

BoatMad

BoatMad wrote: »

OK , given all that ,why does anyone go for the higher mileage PCP, it seems daft

I suppose just in case something happens and you do decide to hand the car back, you could have a few K to pay in excess mileage. Or in case you go mad over, say beyond 50 K, better to be safe than sorry ?

I'm sure there's a point where the dealers will say , "ah here now , you're taking the Pi**.

Padraig Mor

BoatMad wrote: »

its 10 cents per Km and its in the PCP.

It's not in mine!

At the end of the day , the GMFV is irrelevant unless the bottom was to drop out of the market. Your car will be worth the trade in market value and thats what you will seek to obtain.

It's most relevant if the Leaf depreciates at a high rate, in which case Nissan could be left out of pocket if people just hand back the keys of Leafs worth €8k (or whatever) on which Nissan gave GFVs of €10k (or whatever).

My dealer expained that the main reason for lowering the PCP, was not that the commercial value has changed. but that people had the wrong expectation if PCPs, in that they expected to walk in at the end of three years with enough equity in the car as a deposit. When they released they didn't , they felt conned. so nissan lowered the GFMV to ensure this was the case. at the end of the day a PCP is a balloon lease and no-one should have expectations as to what the next car purchase will bring

Commercially, the whole point of a PCP is (or should be) exactly the above - punter buys car with deposit X (generally, ~15% is regarded as best) and makes monthly payments of Y for three years; at which point the car is worth roughly GFV + X, allowing the punter to step into a new car for the same monthly payments, without stumping up a deposit. Essentially, it's a move to get people thinking of cars like mobile phones - pay a certain amount every month for the service, and get a new phone / car every few years. This benefits the dealers as punter A is buying a new car every three years, and punters B/C/D are buying the quality used cars A trades in. The main problem that can arise is that the car is worth less than GFV + Y at the end of the term, leaving punter A to fork out a couple of grand to get his new car leaving a poor taste in his mouth - or he may just buy it outright, depriving the dealer of two commissions that he may have expected. That Nissan have lowered the GFVs suggests the opposite of what the dealer said - namely they were lowered because Nissan now think they'll be worth less in the future than they used to think.

KCross

BoatMad wrote: »

Thanks

The main issue with using cash , is investing in a wasting asset, whereas the cash can be used more productively.

my main question was the tradeoff of using a low annual mileage PCP to lower the total interest paid , over not doing so and remaining within the GMFV

Im not sure about your comments in regards GMFV, mine is 10K plus, doesnt seem low in comparison to the UK

I absolutely agree about " building equity" at 7.9% its absolute nonsense

The cash may be used more productively but for you to break even you have to first make that cash grow by €2400 (your quoted interest amount) and only then is it more productive for you!

If you have known "easy" and legal, of course, ways to grow your money by more than that amount you should tell us all!

I'd agree with Rafal, if you have the cash to spare you should use it and forget PCP. The 8% PCP is just adding more hurt to the high depreciation which you are going to have to take on a new car anyway.

I agree also that dumping a lot of cash on a car isn't wise, better to have it if you need it for more important things.

If you loose your job for instance, though while you may hand the car back say after 2 years they'll still come after you for the years payment but it's better than getting stung for the whole amount which you don't pay on PCP.

I agree also that dumping a lot of cash on a car isn't wise, better to have it if you need it for more important things.

If you loose your job for instance, though while you may hand the car back say after 2 years they'll still come after you for the years payment but it's better than getting stung for the whole amount which you don't pay on PCP.

BoatMad

I was offered a different ' PCP' today by the dealer

reduce the interest from 7.9 to 7.5% , but accept a lower GMFV from 13,000 to 11,000, and monthlies go up from 339 to 386, total financed value is 21240

but i cant exercise the option to just walk away , I have to either trade or pay the GMFV?

I cant get my head around it , there is a reduction in the total costs of credit of 378 euros ? . why offer this

I also only realised now - doh, that you pay interest on the GMFV value not just the balance

I think they have generally reduced the GFMV to give more of a chance for deposit for the next contract, it could be the case where they will just increase the 2nd hand price of the old car to cover any loss ?

BoatMad

Deleted User wrote: »

I think they have generally reduced the GFMV to give more of a chance for deposit for the next contract, it could be the case where they will just increase the 2nd hand price of the old car to cover any loss ?

Yes I agree, I think Nissan are struggling to strike a balance , where the car is simply overpriced, so they need a higher GFMV to get the punters monthlies right, yet they dont want to p1ss them off at the end when the trade value is lower then the GMFV or just the GMFV, leaving the purchaser to fork out money to go forward.

Marcusm

BoatMad wrote: »

I'm just about to sign for a 30 kW 6kw charge SV with cold pack

Currently given Nissan ridiculously high pcp rates , I'm considering going for the 10k annual option costings , even though the likely mileage is closer to 30 k

I don't see the point in financing the depreciation difference at 8% , especially since the penalty over mileage charge is effectively never applied as the car will simply be worth whatever The commercial value will be , which is a haggle with the dealer.

I have the option of everything from cash purchase to no deposit pcp, as I availing of the scrapage. I don't like the fact I have to give Nissan 2400 euros in interest though

Anyone with alternative views

IS there any point at which the excess mileage renders the GMFV unenforceable?

General pricing is for the GMFV to be set well below the expected value meaning that it is not a valuable option. That holds true for ICE vehicle but for EV, there is a potential for technological developments to mean that having a fixed price put option over the car is a good idea. In the event that an impact occurs, you car with much greater mileage would be substantially more unattractive also.

BoatMad

Marcusm wrote: »

IS there any point at which the excess mileage renders the GMFV unenforceable?

General pricing is for the GMFV to be set well below the expected value meaning that it is not a valuable option. That holds true for ICE vehicle but for EV, there is a potential for technological developments to mean that having a fixed price put option over the car is a good idea. In the event that an impact occurs, you car with much greater mileage would be substantially more unattractive also.

Yes , but if you go in an finance the car at the expected mileage , you end up giving that difference to the PCP finance provider at nearly 8%, That a very expensive way to finance devaluation

one way or the other the GMFV gets lowered

Yes, the big risk is " unexpected " devaluation , but at 4000 euro cost of finance , or closer to 6000 cost of finance for higher mileage PCPs, you have already in effect valued the car at close to zero in terms of cash handed over !!!

Rafal

BoatMad wrote: »

Yes I agree, I think Nissan are struggling to strike a balance , where the car is simply overpriced, so they need a higher GFMV to get the punters monthlies right, yet they dont want to p1ss them off at the end when the trade value is lower then the GMFV or just the GMFV, leaving the purchaser to fork out money to go forward.

If the trade-in value is significantly lower than GMFV then you have won, because you have enjoyed the car for far less money, and now you just hand it back and smile. An extra small amount that you could put into a savings account each month could be your new deposit contribution, with far less risk, and more ways to use it if your circumstances changed. And the dealer would give you a bigger discount if there were no trade-ins to deal with.

There are no scenarios were it works out better to pay more in the monthly installments for that riskier, and quite false "equity" created by accepting a low GFMV. The best PCP comes with no deposit for you to pay, enormously high GFMV, 0% APR and a low starting price—such PCPs get offered in UK 2-3 times a year, but I have never seen one in Ireland. Its optimum strategy is to hand the car back at the end, never intending to keep it.