Will PCP go POP?

John_Rambo

John_Rambo wrote: »

I work in advertising. It's all below and above the line, digital and traditional.

Two of the advertisers I work with are the most popular motoring brands in Ireland. The push for PCP is very focused, they're targeting young social climbing men that are brand and year-reg obsessed diesel drivers whom are gearing for a new car to show off to contemporaries and family. And it's working very very well.

Making normally unaffordable purchases all of a sudden affordable along with the typical Irish hankering for the newest 162/171 latest reg to impress the neighbours is the new black.

..... You're not. It's absurd to think that you're getting a deal.

Reminds me of someone

goz83

GerryDerpy wrote: »

Does the houses value drop to 1,000 after 10 years?

RayCun wrote: »

5000 deposit and 2500 a year is a high price to pay for a warranty.

Looking at an always on EML, or being paranoid of every sound coming the car is a serious annoyance. I'd quite happily pay 2.5k per year to avoid that. With older cars, you just never know when the next repair bill is going to cost you over a grand and have you off the road for a week, or two.

GerryDerpy wrote: »

Do you really believe that your chosen method represents value over buying a €7k used car outright? No offence but it is a Seat for used S-Class money.

The reality is that your judgement is likely clouded by that episode of being stranded on the side of the road.

There's a lot to be said for the quality of an older, luxury car, so you'll have no argument on that. My 13 year old e200 has more comfort and spec than many brand new plates driving around and it cost me about 2k circa 2 years ago. BUT....the maintenance and repairs cost Mercedes prices.

Also not everyone cares about luxury brands. It's a cost per month game with as little hassle as possible for many. The pros and cons are put side by side and a decision is made (hopefully). Some though...yes, it's just about a new plate.

The_Honeybadger

goz83 wrote: »

Looking at an always on EML, or being paranoid of every sound coming the car is a serious annoyance. I'd quite happily pay 2.5k per year to avoid that. With older cars, you just never know when the next repair bill is going to cost you over a grand and have you off the road for a week, or two.



There's a lot to be said for the quality of an older, luxury car, so you'll have no argument on that. My 13 year old e200 has more comfort and spec than many brand new plates driving around and it cost me about 2k circa 2 years ago. BUT....the maintenance and repairs cost Mercedes prices.

Also not everyone cares about luxury brands. It's a cost per month game with as little hassle as possible for many. The pros and cons are put side by side and a decision is made (hopefully). Some though...yes, it's just about a new plate.

I'd agree with you here. Pcp doesn't suit me because of my mileage. My current car I bought for cash 5 years old with clutch and dmf just done. I intend to keep it for 3-4 years and go again. The engine management light is now coming on intermittently due to an egr fault so it's booked on Monday to look at this which is a total pain as it involves a morning off work and a couple of hundred quid probably.

The upside of this method of ownership is no monthly payments, but I am saving for my next car already anyway.

I do roughly 30k kilometres a year but if I was doing half of that I'd be tempted by pcp. The repayments are easily affordable for me and it should mean minimal maintenance and time off the road with silly stuff like the above. I'm fairly thrifty and would have to do the sums but I can see the initial appeal. €2.5k a year for that kind of peace of mind is nothing IMO, and it's also really nice to have a new car that nobody else has abused. If the second hand values crash as some expect then it wouldn't be the end of the world paying the balloon payment at the end.

Pcp has its place I think, but its definitely not for everybody.

mickdw

Did anyone see the adverts from mercedes saying they have cut prices by 10 percent across the range for 2017? What is that about?
Seems like a mistake in terms of sales approach.
If they offered zero percent interest against the higher retail price, it would look very attractive, would allow them to retain Original gfv figure and perhaps prevent used prices dropping to reflect cheaper new price.
A different approach would have made considerable difference to the monthly rates and in my opinion mercedes need to move alittle here to compete with audi and bmw. They don't seem to want to push mercedes to the ordinary man though and no doubt the mercedes deal is likely a more realistic deal in terms of deposit going forward compared to deals from bmw but still they could push more for sales.

goz83

mickeyk wrote: »

I do roughly 30k kilometres a year but if I was doing half of that I'd be tempted by pcp. .

Yeah I only do about 10k a year, so pcp is what I am thinking. Will hang onto the merc for now and see what deal are out in 2017. I would also plan to buy at the end of the 3 years. No intention of forever finance.

mickdw wrote: »

Did anyone see the adverts from mercedes saying they have cut prices by 10 percent across the range for 2017? What is that about?
Seems like a mistake in terms of sales approach.
If they offered zero percent interest against the higher retail price, it would look very attractive, would allow them to retain Original gfv figure and perhaps prevent used prices dropping to reflect cheaper new price.
A different approach would have made considerable difference to the monthly rates and in my opinion mercedes need to move alittle here to compete with audi and bmw. They don't seem to want to push mercedes to the ordinary man though and no doubt the mercedes deal is likely a more realistic deal in terms of deposit going forward compared to deals from bmw but still they could push more for sales.

I think offering lower finance deals would have just been lost with the rest of them. Cutting 10% off prices has got peoples attention, so a bold move. Still too expensive though for a new merc.

mickdw

goz83 wrote: »

Yeah I only do about 10k a year, so pcp is what I am thinking. Will hang onto the merc for now and see what deal are out in 2017. I would also plan to buy at the end of the 3 years. No intention of forever finance.



I think offering lower finance deals would have just been lost with the rest of them. Cutting 10% off prices has got peoples attention, so a bold move. Still too expensive though for a new merc.

I don't know. Nothing worse than seeing 4k interest built into the figures adding over 100 per month to repayment. Would immediately steer people to other manufacturer imo.
I know its all just playing with numbers but common sense would suggest that it's not a good tactic considering you are going to be hitting residuals abit as well by discounting.

bazz26

The cynic in me wonders is that 10% reduction clawed back in the straight deal discount or trade-in value.

mickdw

bazz26 wrote: »

The cynic in me wonders is that 10% reduction clawed back in the straight deal discount or trade-in value.

Some no doubt.

mickdw

mickdw wrote: »

Did anyone see the adverts from mercedes saying they have cut prices by 10 percent across the range for 2017? What is that about? ......

Weird one alright, cost of PCP on a €37K c class is €3,328.61.
0% PCP would be a bigger draw you'd think but maybe their existing customer base is deemed to be more likely to be impressed with a bigger chunk off the RRP. Or are they trying to tempt new customers.

I saw something on facebook from Annesley Williams .

Ordinarily what could one expect to haggle off an new Merc do you think?

rubbadubdub

Augeo wrote: »

Ordinarily what could one expect to haggle off an new Merc do you think?

I doubt people haggle as much with PCP as they getting the supposed deal of the century - surely how could you not buy this your making money ( that's honestly how I felt when walking out of dealer with new car)

We did knock the monthly payment down from 235 to 200 so we happy but I wonder how many people do!?

ShadowHearth

mickeyk wrote: »

I'd agree with you here. Pcp doesn't suit me because of my mileage. My current car I bought for cash 5 years old with clutch and dmf just done. I intend to keep it for 3-4 years and go again. The engine management light is now coming on intermittently due to an egr fault so it's booked on Monday to look at this which is a total pain as it involves a morning off work and a couple of hundred quid probably.

The upside of this method of ownership is no monthly payments, but I am saving for my next car already anyway.

I do roughly 30k kilometres a year but if I was doing half of that I'd be tempted by pcp. The repayments are easily affordable for me and it should mean minimal maintenance and time off the road with silly stuff like the above. I'm fairly thrifty and would have to do the sums but I can see the initial appeal. €2.5k a year for that kind of peace of mind is nothing IMO, and it's also really nice to have a new car that nobody else has abused. If the second hand values crash as some expect then it wouldn't be the end of the world paying the balloon payment at the end.

Pcp has its place I think, but its definitely not for everybody.

I am kind of in the same boar as you with 25-30k km per year. Though the way messed market is now, I think pcp still would suit me or you better, then 1-3 year old car.
Pcp is great way to get that car with zero or very small apr in total.
When you buy 1-3 year old car, you will be landed with 5-10% Apr making it pretty much same amount of money as same car, but brand new on pcp with 0% + balloon payment payed off or half of it refinanced.
Paying off 25K with 5.5% Apr is more money, then paying off 20K at 0% Apr and the rest 5K at 5.5%, but you will own new car and own it after 3 years.

That's my plan for next car. Brand new car on pcp, but keeping at 3 years. So I will actually use its as o own car, not rent and hope for the best in 3 years with extra 35K kms on it.

Eric Cartman

GerryDerpy wrote: »

Do you really believe that your chosen method represents value over buying a €7k used car outright? No offence but it is a Seat for used S-Class money.

The reality is that your judgement is likely clouded by that episode of being stranded on the side of the road.

+1 , I think id rather get stranded roadside once or twice for an hour and not have any payments owed on a luxobarge than fly around in a new econobox with a higher number on a plastic plate

If you have the 30+ k to buy a new car outright or dont mind a traditional loan then fair play.

If you have 7-10k saved theres a lot of good cars to be had that will 99 times out of 100 get you from a to b without issue

newacc2015

rustynutz wrote: »

I paid 5000 deposit, monthly repayments of 216 with final payment of 7000. At the end of the 3 years I have been offered 12000 trade in value for the car, this means I have a deposit of 5000 in order to buy a new car again so my monthly repayments should be the same as I'm paying now, or I can pay the 7k with a credit union or other loan and own the car. I will probably change as I want to keep a car within warranty, maybe a kia or something with a longer warranty next time so I have the option of keeping it longer.

I accept it doesn't suit everyone but to me PCP was a no brained and was by far the cheapest route to hassle free motoring.

The thing I have noticed with PCP is that friends and family who would have brought a new car every 5/6 years are now replacing them every 3 years with PCP. PCP locks you into a cycle of replacing your car every 3 years, which is amazing for car makers. But most people are obvious to the fact they are replacing their car twice as much and losing a ton with massive depreciation at the start of every new car.

The fact is car makers in the UK are beginning to **** themselves. PCP is working far too well. The UK should be selling around 2.3m cars a year. It is currently selling 2.6m as around 75% of cars sold are sold on finance with PCP making up a lot of that. There is a good chance that the arse will fall out of the used car market in a few years when all this glut of used cars hits the markets.

https://www.bloomberg.com/gadfly/articles/2016-01-07/the-bubble-in-car-sales-is-reaching-bursting-point

The car market is in a bubble. When it bursts, the used car market will feel the blunt of it. There is the risk the company who you signed the PCP agreement with could go bankrupt and the agreed selling price is not longer being honoured. That 12k you were promised to get after 3 years could end up being €8k as the car market is so depressed with the excess of used cars.

When interest rates begin to rise again. Will people really be happy with financing their car at 8% every 3 years? Most consumers will absolutely not

goz83

Eric Cartman wrote: »

+1 , I think id rather get stranded roadside once or twice for an hour and not have any payments owed on a luxobarge than fly around in a new econobox with a higher number on a plastic plate

If you have the 30+ k to buy a new car outright or dont mind a traditional loan then fair play.

If you have 7-10k saved theres a lot of good cars to be had that will 99 times out of 100 get you from a to b without issue

Even if you have the capital to buy it outright, does it not make more sense to get some car on 0% APR and have the balloon money aside is a short term investment to make a few euro from the capital held back?

Spark Plug

Another side effect of PCP is that it has allowed manufacturers to steadily increase the price of cars. People don't really focus on the purchase price it's the cost per month is all that matters. Whereas with traditional HP or a cash buyer it matters much more

rustynutz

GerryDerpy wrote: »

Do you really believe that your chosen method represents value over buying a €7k used car outright? No offence but it is a Seat for used S-Class money.

The reality is that your judgement is likely clouded by that episode of being stranded on the side of the road.

So I buy a 7k car outright, if I want to replace this in 3 or 4 years time then I will need to be save at least 2k a year in that time.

Then there is the yearly nct, high tax, insurance and servicing costs of the 7k car and if you are looking at an s class or similar any problem is not going to be cheap. The only money I've spent on the seat is 2 tyres in the 3 years as servicing was free.

The main attraction to PCP for me is certainty, I know that the car is going to cost me 216 a month or roughly 50 a week, no nasty surprises or phone calls from the missus to say she is stranded somewhere when I am working in the other side of the country.

On the new seat versus used Merc comment I'm not going to kid myself that I can afford a Merc when i cant by driving around in a 10 year old one!

If I want to walk away from PCP after the 3 years of ownership I simply sell the car privately, lets assume ill get at least the 12k I was offered on trade in, pay back the final payment of 7k so I have my 5k deposit back meaning my motor cost me 2.5k a year for the 3 years, I can live with that

RayCun

If you buy a 7k car, it doesn't turn into a pumpkin after three years. You can keep it for another three years, or you can sell it, it will have resale value.

Lantus

rustynutz wrote: »

So I buy a 7k car outright, if I want to replace this in 3 or 4 years time then I will need to be save at least 2k a year in that time.

Then there is the yearly nct, high tax, insurance and servicing costs of the 7k car and if you are looking at an s class or similar any problem is not going to be cheap. The only money I've spent on the seat is 2 tyres in the 3 years as servicing was free.

The main attraction to PCP for me is certainty, I know that the car is going to cost me 216 a month or roughly 50 a week, no nasty surprises or phone calls from the missus to say she is stranded somewhere when I am working in the other side of the country.

On the new seat versus used Merc comment I'm not going to kid myself that I can afford a Merc when i cant by driving around in a 10 year old one!

If I want to walk away from PCP after the 3 years of ownership I simply sell the car privately, lets assume ill get at least the 12k I was offered on trade in, pay back the final payment of 7k so I have my 5k deposit back meaning my motor cost me 2.5k a year for the 3 years, I can live with that

You won't get a 5k deposit back as equity!

You would get something but that's not realistic.

Lantus

Lantus wrote: »

You won't get a 5k deposit back as equity!

You would get something but that's not realistic.

The poster has already said a dealer has offered him 12k to trade in which gives him his 5k deposit back.

Lantus

Paisley Rapid Newscast wrote: »

The poster has already said a dealer has offered him 12k to trade in which gives him his 5k deposit back.

Looks like there has been a future estimation made which is fine but not actual evidence of a deal. I was offered 4k equity on a leaf day 1 which I didn't buy. Those cars have near zero equity today. You might achieve a better deal for super low mileage and perfect condition.

It's just too good to be true though. Customers doing that well? Assumes no increase in future car values and zero risk to customer.

Lantus

Lantus wrote: »

Looks like there has been a future estimation made which is fine but not actual evidence of a deal. I was offered 4k equity on a leaf day 1 which I didn't buy. Those cars have near zero equity today. You might achieve a better deal for super low mileage and perfect condition.

It's just too good to be true though. Customers doing that well? Assumes no increase in future car values and zero risk to customer.

I'm reading it that his 3 years is almost up and he has got a trade in price of 12k from a dealer but maybe I'm wrong.

Not directing this at the poster I'm quoting more a general comment but I get the impression from some posters that they don't want pcp to work out as planned for people. A hit of begrudgery maybe at those buying new cars.

jimmy blevins

Honestly I'd love to see PCP go bang and more besides, the "motor industry" here is an absolute shower of gangsters. I currently drive a car that's near twenty years old which despite having to pass yearly nct's is near uninsurable never mend the ridiculous taxation system
I feel like drivers are being railroaded into unnecessarily buying newer and newer cars.

Lantus

Paisley Rapid Newscast wrote: »

I'm reading it that his 3 years is almost up and he has got a trade in price of 12k from a dealer but maybe I'm wrong.

Not directing this at the poster I'm quoting more a general comment but I get the impression from some posters that they don't want pcp to work out as planned for people. A hit of begrudgery maybe at those buying new cars.

I have two cars on pcp so quite keen to see it work out!

Pcp for me was cheaper when I looked at the total cost of car ownership over 3 years, by a considerable margin.

Selling privately may yield a better return and the poster may see their full deposit returned. However, you then have the private car market to deal with and a period with no car?

rustynutz

Lantus wrote: »

You won't get a 5k deposit back as equity!

You would get something but that's not realistic.

Its simple mathematics - final balloon payment = 7000. Value of car = 12000 (I've already been offers this amount in trade in off another dealer) 12000 - 7000 owed = 5000 for me to do as I please.

I have bought everything from 12 year old cars to 3 year old cars, and everything inbetween in my 20 years of motoring and I can promise you PCP hasn't been the dearest option.

It was different 10 years ago, if you owned a ten year old car chances were you would have relatively trouble free motoring for many years if you chose the car carefully. This is not the case now, as cars have gotten more advanced reliability has gone way down, particularly as cars age, everything has a sensor attached to it, some a couple of hundred euro each, then you have turbos, injectors, particulate filters, dual mass flywheels to name a few, each can have 1000 euro plus price tags and each considered a service item by car manufacturers. Then throw in yearly nct and astronomical tax if its pre 2008, along with insurance companies not wanting to insure older cars, and charging a premium if they will, The bills start adding up.

oscar2

jimmy blevins wrote: »

Honestly I'd love to see PCP go bang and more besides, the "motor industry" here is an absolute shower of gangsters. I currently drive a car that's near twenty years old which despite having to pass yearly nct's is near uninsurable never mend the ridiculous taxation system
I feel like drivers are being railroaded into unnecessarily buying newer and newer cars.

Trouble is if it goes bang it will be the Motorist with cars bought on PCP who suffers.

Reason PCP has taken off here is that we have a car market constrained by the perfect storm of a credit squeeze,falling incomes job insecurity etc from 2008 onwards. and as a result now have a distorted market.

Added to that it is impossible to get a secondhand petrol family saloon/hatch because of the distortion in car tax bands. So do you buy a second diesel that will give you expensive repairs because of sub 10000km driving or get the car that suits on PCP?

People have 8-10 year old cars that are nearing end of their life and need an affordable way of upgrading. The secondhand market in 3 to 5 year cars is poor at best.Public transport is poor and cars are necessary just to get to work. People are buying new because it makes sense not because of vanity.

Lantus

rustynutz wrote: »

Its simple mathematics - final balloon payment = 7000. Value of car = 12000 (I've already been offers this amount in trade in off another dealer) 12000 - 7000 owed = 5000 for me to do as I please.

I have bought everything from 12 year old cars to 3 year old cars, and everything inbetween in my 20 years of motoring and I can promise you PCP hasn't been the dearest option.

It was different 10 years ago, if you owned a ten year old car chances were you would have relatively trouble free motoring for many years if you chose the car carefully. This is not the case now, as cars have gotten more advanced reliability has gone way down, particularly as cars age, everything has a sensor attached to it, some a couple of hundred euro each, then you have turbos, injectors, particulate filters, dual mass flywheels to name a few, each can have 1000 euro plus price tags and each considered a service item by car manufacturers. Then throw in yearly nct and astronomical tax if its pre 2008, along with insurance companies not wanting to insure older cars, and charging a premium if they will, The bills start adding up.

It's a slight contraction to say do as you please. I would say your getting a good price by the dealer to jump brands or dealership. Fair play if it all works out. The deposit goes into another car though, not your pocket.

Hope I'll be in as good position!

frozenfrozen

I think the issue gets confused when it's not looked at from very far back. If you picture the entire pool of vehicles in ireland, massive damage is being done.

It's not that new car buyers should be doing anything for the subsequent owners, but it is in their interest to pass on good cars.

But because car ownership is artificially expensive in Ireland a lot of money is just being leeched out of the pool of cars. Eg. why maintain an old car when after a simple service and a small repair you would have been 'better off' putting that money into a deposit on a brand new car.

All of a sudden the only option is to get a new car, and what happens then, less choice, cheap tax disappears, fuel prices go up, and you end up paying for depreciation and all of the costs you moved to a new car to avoid. And then you want to keep your cheap PCP car? Ok but good luck with that small displacement turbo diesel long term.

Second hand cars shouldn't be scary things with no provenance, but because of years of this strange mentality here, basically anything under 10 grand is bought and driven into the ground and scrapped. PCP is only exacerbating the situation by making even really good second hand cars hard to keep on the road.

If the PCP bubble pops, hopefully it's while we still have free trade with the UK because otherwise it'll all be coming from Japan at great expense. We will end up spending a lot of money bringing in suitable cars, rather than buying cars domestically. This will lead to even more depreciation for the owners of the PCP cars..

Just rambling here. And by PCP cars I basically just mean cheap and cheerful small displacement turbo diesels with a very low life expectancy. If you're getting something really nice on PCP then that's good for you and I have no issue with that.

I just think the money being put into PCP for cheap cars would be much better spent maintaining the status quo of 'somebody buys expensive car, then sells it on for a good value, who then sells it for good value, who then gets a great car for 3000 euro for going in and out to the shops'

That sounds a lot better than everyone paying massive depreciation and everyone's cars are worthless.


But IMO it's all down to the fact that new PCP car ownership is only considered by a lot of people because second hand car ownership is artificially expensive and plagued by badly maintained vehicles, because putting anything other than fuel into a vehicle is seen as money down the drain here by many

So will PCP go POP? Who knows knowing the influence of the motor industry in ireland, we will just get a Singapore style certificate of entitlement system that sees cars destroyed after 10 years.

frozenfrozen

frozenfrozen wrote: »

If the PCP bubble pops, hopefully it's while we still have free trade with the UK because otherwise it'll all be coming from Japan at great expense. We will end up spending a lot of money bringing in suitable cars, rather than buying cars domestically. This will lead to even more depreciation for the owners of the PCP cars..

Just rambling here. And by PCP cars I basically just mean cheap and cheerful small displacement turbo diesels with a very low life expectancy. If you're getting something really nice on PCP then that's good for you and I have no issue with that.

I just think the money being put into PCP for cheap cars would be much better spent maintaining the status quo of 'somebody buys expensive car, then sells it on for a good value, who then sells it for good value, who then gets a great car for 3000 euro for going in and out to the shops'

That sounds a lot better than everyone paying massive depreciation and everyone's cars are worthless.

A lack of free trade with the uk would actually help pcp imo and make second hand cars more expensive here thus reducing depreciation. A lack of influx of cars from the uk can only strengthen used car values here.

I think you are way over exaggerating the unreliability of new cars also

rustynutz

Lantus wrote: »

It's a slight contraction to say do as you please. I would say your getting a good price by the dealer to jump brands or dealership. Fair play if it all works out. The deposit goes into another car though, not your pocket.

Hope I'll be in as good position!

Its not a contradiction, just because you buy a car on PCP doesn't mean you 'have' to go new again in 3 years. You can sell and own a used car again if it doesn't work out, or pay off the final payment and keep the car. Or of course hand the car back and walk away which would be extremely stupid Imo.

What I don't understand is when someone buys brand new and finances most of it by traditional means with 5-10% interest rate when they could buy through PCP with 0% interest and after 3 years finance the balloon payment with a traditional loan. This way they are only paying interest on 1/3 of the cars value rather than most of it. They could even save the balloon payment inside the 3 years as the repayments with PCP are considerably lower that if repaying a car loan. This way they could cover as much mileage as they liked as their intention is to keep the car.

Like a lot posting here I was sceptical about PCP but gave it a go after sitting down with a calculator for a while. I still had it in my he's that until it came time to trade it in I couldn't truly gauge if it was a success or not. Now that time has come and I've been offered a decent trade in value all I can say its been a success for me.

I accept its not for everyone and the car chosen will likely effect residual values but I am giving an honest account of my experience for anyone considering the same option.

mickdw

People are over complicating the future scenario.
If used values tank, pcp or no pcp, people will see the value in the used models and new sales will slow down. It will all balance out naturally.
If someone is coming out of a pcp and the deal is giving them zero equity, they may wish to hold the car again slowing new car sales.
Again talking a new passat highline 35k. Gfv currently 13k. If values have tanked, that 3 year old passat will be available on the open market for around 13k. That would steer alot of people away from a pcp where that same 13k might only form the initial deposit on the new one which would also need 36 monthly payments and you still wouldn't own it.