Will PCP go POP?

frozenfrozen

Paisley Rapid Newscast wrote: »

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

you're right no UK would raise the value of all cars in Ireland.. don't really know where I was going with that idea

I suppose a lack of free trade with the UK being a bad thing relies on the assumption of unreliability of new cars. Totally ignorant guess on my part.

I think I'm still sort of making sense with the value of the pool of cars in Ireland being reduced when so much money is going to depreciation now rather than maintaining the fleet so to speak.

But just talking bollox anyway

carsfan2

If sterling stays low in value over the next few years, and no tariffs are introduced in that time period then used car values here will continue to go down. Car owners will be in the same boat regardless of whether they bought on pcp or not. The reverse is true obviously if trade is restricted from the uk and a supply of used cars dwindles then values here hold up. How you bought your car is irrelevant to these scenarios.
The car industry would probably introduce pcp products on uk imports if that made cars more affordable for buyers who had less equity than expected from previous pcp.
The last time sterling stayed low Bmw introduced " premium selection " where they imported from the uk themselves and slapped a BMW warranty on them to keep sales going.

mickdw

carsfan2 wrote: »

If sterling stays low in value over the next few years, and no tariffs are introduced in that time period then used car values here will continue to go down. Car owners will be in the same boat regardless of whether they bought on pcp or not. The reverse is true obviously if trade is restricted from the uk and a supply of used cars dwindles then values here hold up. How you bought your car is irrelevant to these scenarios.
The car industry would probably introduce pcp products on uk imports if that made cars more affordable for buyers who had less equity than expected from previous pcp.
The last time sterling stayed low Bmw introduced " premium selection " where they imported from the uk themselves and slapped a BMW warranty on them to keep sales going.

Was it not the 'sterling collection'
They had some balls doing that when bad mouthing inferior imported cars the week before they started bringing them in and claiming the uk car would alway have poorer resale value etc.
Once they brought them in, there was suddenly no issue with a uk import

carsfan2

You have a better memory than me Mick!
That's what it was alright.
I would think dealers/ importers will come up with even more"innovative " ways to help people trade up when the time comes as it is in their interests as much as the consumer to ensure there is no price crash.

Eric Cartman

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.

these figures work when 3000 of the same year, same model car aren't com ing back to a forecourt near you , your figures may hold up now, but when it comes to the new model of that coming out , you may find balloon payment - 7k , value of car - 6.5k

ShadowHearth

Problem with Irish market at the moment:

New car - good value due to pcp and 0% Apr.
1 to 3 year old - completely horrible value due to increased artificial value of cars by dealers to make pcp look great. With added 3.9-10% Apr you better of buying brand new at 0%, paying of half of balloon payment and refinancing the little tail left over.
3 to 5 year old cars - kind of okay value. Can still finance it if you pay a chunk of your own. Even at high apr, it's manageable. Wouldn't call it a golden spot, but it's not bad.
5 to 9 year old cars - high prices due to lack of actual cars. Bad sales in those years ment less second hand cars.
9+++ older cars - market price just fallen to the bottom, sounds good, but there is a reason why it did. According to insurance companies those are now death traps and of you want the luxury of driving one, you pay stupid amount. Add high tax on it and it becomes perfect situation where poor pays more, because he can't afford new.
At least old cars where great starter for young first time drivers. There was a market there. Now insurance companies won't even insure anyone on 10 year old car to someone who is starting off driving.

At the moment it's a mess and pcp is looking like a good deal if you can afford and and have more financial planing then loving from wages to wages. Problem is that 1-3 year old market is lagging a lot and can the weak link for the whole thing to collapse.
10+ year old cars being completely useless won't help things too.

rustynutz

Eric Cartman wrote: »

these figures work when 3000 of the same year, same model car aren't com ing back to a forecourt near you , your figures may hold up now, but when it comes to the new model of that coming out , you may find balloon payment - 7k , value of car - 6.5k

Are you telling me that a car will be worth less than a third of its new value after 3 years? Honestly?

Either way I'm not trying to predict the future just sharing my experience right here and now.

In the event of the doomsday scenario you predict above coming to pass, it wont just be the PCP buyers effected, it will be everyone who owns a car. In that situation I would simply pay my balloon payment and drive off into the sunset in my car!!

Eric Cartman

rustynutz wrote: »

Are you telling me that a car will be worth less than a third of its new value after 3 years? Honestly?

Either way I'm not trying to predict the future just sharing my experience right here and now.

In the event of the doomsday scenario you predict above coming to pass, it wont just be the PCP buyers effected, it will be everyone who owns a car. In that situation I would simply pay my balloon payment and drive off into the sunset in my car!!

I didn't think your value was a real life one. Ive never seen a balloon payment thats as low as 7k, unless its on a dacia or something, in which case it is incredibly possible that it loses 2/3 of value in 3 years.

mickdw

carsfan2 wrote: »

You have a better memory than me Mick!
That's what it was alright.
I would think dealers/ importers will come up with even more"innovative " ways to help people trade up when the time comes as it is in their interests as much as the consumer to ensure there is no price crash.

I think if sales started to suffer, we will see a zero deposit financial product for car purchases for the masses.
This would enable people starting out to buy new and would also enable people burned with pcp and zero equity.
It would be a pure depreciation based payment with no attempt to have equity at the end - more of a rental type scenario.
In this case the banks/ manufacturers would have to run with a 3 year old valuation rather near the true value to make the payments acceptable, the manufacturers would be taking on some of the risk there re resale.
So possibly pay 5 to 6k per year to drive a passat and leave it back at the end. No start deposit and no retained value at end of term.

rustynutz

Eric Cartman wrote: »

I didn't think your value was a real life one. Ive never seen a balloon payment thats as low as 7k, unless its on a dacia or something, in which case it is incredibly possible that it loses 2/3 of value in 3 years.

Which value isn't real? I have to admit I don't see where you're coming from. I bought a 19.5k car, paid 5k deposit, 36 x 216 monthly payments and I owe 7k to bank of Volkswagen when I return the car. I have been offered 12k as a trade in value against a new Kia on PCP, this is there first offer, without any haggling or negotiation. I also checked the various car selling sites and the cheapest car I can find with same spec, mileage etc as my car is 13k.

Explain what part of this isn't real life?

Lantus

rustynutz wrote: »

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.

I agree and I've been saying as much for a long time. PS, I meant a verbal contraction. Not a contradiction. Which it isn't.

mickdw

mickdw wrote: »

........
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...........

Indeed, the person taking out PCP has to realise that the GFV might be all they are offered by the dealer come trade in time.

The dealers are well covered with current PCP, the risk is all with the customer, all this talk of potential equity in 3 years time smells like property developer speel.

If diesel and motor tax rates for diesels is increased over the next while there could be a significant effect on used car values.

PCP itself coupled with low interest rates and an improving economy could mean more and more people go the PCP route so when existing PCP consumers come to their 3 year turn there could be less demand for the 2nd hand cars.

PCP is great for those who want a new car and are not relying on any equity in their current one to finance their next car imo

twin_beacon

rustynutz wrote: »

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.

Fully agree. Of course, no salesman will ever mention that, as they want to get you into a brand new car at the end of the pcp deal.

Shedite27

rustynutz wrote: »

I also checked the various car selling sites and the cheapest car I can find with same spec, mileage etc as my car is 13k.

Explain what part of this isn't real life?

The only argument I've heard against that logic is that people think there'll be a load of 3 year old cars coming to the end of their PCP life so the supply of them will reduce the price. I don't buy it.

Shedite27

My own circumstance, I currently plan on keeping a Seat Leon Select after 3 years. I've a €3.5k trade in and €3.5k cash as deposit. Leaves €16,500 to be financed
My options are:

Bank Loan
(5 years with AIB): €338/month - total repayments €20,295

PCP
3 years PCP: €225/month + can save the excess of €110/month
Final Payment: €8,941 less Savings of €3960 = €4981
2 year loan: €225/month

So Bank Loan = 5 years of €338/month
PCP = 3 years of €335/month + 2 years of €225/month

Shedite27

Shedite27 wrote: »

My own circumstance, I currently plan on keeping a Seat Leon Select after 3 years...............

0% PCP is perfect for you.

ShadowHearth

Shedite27 wrote: »

My own circumstance, I currently plan on keeping a Seat Leon Select after 3 years. I've a €3.5k trade in and €3.5k cash as deposit. Leaves €16,500 to be financed
My options are:

Bank Loan
(5 years with AIB): €338/month - total repayments €20,295

PCP
3 years PCP: €225/month + can save the excess of €110/month
Final Payment: €8,941 less Savings of €3960 = €4981
2 year loan: €225/month

So Bank Loan = 5 years of €338/month
PCP = 3 years of €335/month + 2 years of €225/month

Thats exactly what I was talking about about with pcp. in the end its just costing you so much more with hp or bank loan and best thing is, you will own car after 3 years.

Henry Ford III

I reckon PCP in many instances is just kicking a debt problem down the road a few years, by which time it'll be a bigger problem.

It's also important to remember that even with 0% PCP the finance house isn't in business for charitable/philanthropic purposes.

rustynutz

Henry Ford III wrote: »

I reckon PCP in many instances is just kicking a debt problem down the road a few years, by which time it'll be a bigger problem.

It's also important to remember that even with 0% PCP the finance house isn't in business for charitable/philanthropic purposes.

Can you explain what you mean by that? Here's my take on it: In my case I have bought a Seat, Seat being part of the Volkswagon group finance the car through the volkswagon bank. They can afford to do this with 0% finance as they receive a share of the profit for all new cars sold. I could be wrong though

ShadowHearth

Henry Ford III wrote: »

I reckon PCP in many instances is just kicking a debt problem down the road a few years, by which time it'll be a bigger problem.

It's also important to remember that even with 0% PCP the finance house isn't in business for charitable/philanthropic purposes.

I see PCP as flexibility and cheaper option. Its easier to pay 3k deposit on the spot and another 3k deposit after 3 years. Then put down hard earned 6k on the spot.
Then again, I would be a person who would pay 3k, but have already extra 3k "resting in my account".
If person can only afford on the spot 3k max and then he is living from wages to wages, then he should not be looking at brand new car in the dirst place. Anyone who has at least basic financial planing and stability should not be afraid of pcp as it is the cheapest way to own brand new car. I am not talking about whole 3 year cycle thing, which I personally would not be keen on it.

Lantus

Henry Ford III wrote: »

I reckon PCP in many instances is just kicking a debt problem down the road a few years, by which time it'll be a bigger problem.

It's also important to remember that even with 0% PCP the finance house isn't in business for charitable/philanthropic purposes.

Vw group are unique in offering zero interest. Of course it's not free and the cost is often realised in the car cost whether you realise it not. It does make it attractive though. Where vw win is sheer volume of sales across the EU.

The new Octavia will come with their 3.9% interest. This is instead of a price increase on the car I'm told. Same thing to the customer!

Thanks for shedite27 quote on costs. Really just shows how working those numbers can pay dividends.

ofcork

ShadowHearth wrote: »

Thats exactly what I was talking about about with pcp. in the end its just costing you so much more with hp or bank loan and best thing is, you will own car after 3 years.

But surely you won't own the car after 3 years as there will be still money owing on it,with the bank loan you would own the car straight away.

bazz26

That depends on the type of loan. A car loan from a bank may require the car as security on the loan whereas personal loans are unsecured but carry a higher interest rate.

Henry Ford III

Lantus wrote: »

Vw group are unique in offering zero interest...

No they aren't.

Shedite27

ofcork wrote: »

But surely you won't own the car after 3 years as there will be still money owing on it,with the bank loan you would own the car straight away.

I've heard this argument a few times. What can I do when they officially own a car as opposed to when still under PCP?

cerastes

Atlantic Dawn wrote: »

The big question is where the market will be for the PCP stuff handed back at the end of the 3 years, they will be coming on to an already flooded market of UK imports. The banks who lent for PCP will be needing a fire sale.

Not in position to buy now but might consider replacing partners car with a 3 year old in the future which I thought might be a possibility with PCP after there were enough over 3 years old cars around, reading this it seems the situation might not be as I'd expected regarding older cars re PCP and the prices being greater than hoped for! Gfv?
I wouldn't even consider getting a new car on PCP right now, although i can see the appeal and if it suited someone's finances I think it can serve a purpose, if mine were I'd definitely keep a 3 year old car and look after the finance options then, given I'm driving a 15 year old car, a 3 year old would seem practically new, hence the view of planning to pick up a 3 year old which is probably more likely to be a 5 year old at this point.

Previous to this I'd always considered Irish cars overpriced compared to UK cars and have gone the route of importing an older lower mileage car with some features, not perfect and usual maintenance stuff plus some unexpected, it's cost me less than paying out monthly, still does great mileage so I plan to hold onto it for a few more years until something too expensive to replace occurs or ive the money to replace. No concerns of residual value as its probably very little now anyway.

Augeo wrote: »

Worst case scenario people stop paying and the car is taken back from them or they get offered the actual GFMV at the end of the term and give the car back.
So there's a glut of 3 year old cars in dealers.
Might be a burst bubble but the overall impact is minimal.

A glut was what I was hoping for, reading this makes me think 3 year old cars might be kept priced artificially high by dealers, seems we might still be going the route of importing from the UK of an older year unless brexit! Limits that somehow by making it less viable.

Shedite27 wrote: »

The only argument I've heard against that logic is that people think there'll be a load of 3 year old cars coming to the end of their PCP life so the supply of them will reduce the price. I don't buy it.

Is there included servicing on PCP? Just wondering if people can just make the payments, I'm hazarding a guess that main dealer maintenance is included in this, if people are refinancing after 3 years by other means will they keep up the maintenance if there is no requirement especially if they can't afford to get back into a new PCP deal, maybe they plan to refinance and sell at 5 years to keep residual value as high as possible while owning the vehicle outright, but Minimising their losses and costs by not carrying out even basic maintenance, meaning 5 year old cars will be a worse prospect than they should be, but helping keep a premium on 3 year old cars?

Looks like I could be going the UK route when it happens which I'd hoped to avoid as id prefer a petrol and an automatic as my partner can only drive auto.

ShadowHearth

ofcork wrote: »

But surely you won't own the car after 3 years as there will be still money owing on it,with the bank loan you would own the car straight away.

If the value of car is about 20K, there is no way they will take that as a hostage for 4K loan.
As mentioned already, most likely you will go with personal loan with apr of 8% and then you definitely own a car with a little 4K loan, that is easy enough to repay. It will be flexible too, so if you pay it off early, you will pay less Apr.
Pay 8% Apr on 4-5k and own car in 3 years is a big saving, compared to hp 6.9% on 25K over 5 years amd own car in 5.

ShadowHearth

ShadowHearth wrote: »

...............
Pay 8% Apr on 4-5k and own car in 3 years is a big saving, compared to hp 6.9% on 25K over 5 years amd own car in 5.

What €25k car has a GFV of €4/5k ?

rubbadubdub

So I was curious as to what my option is now to upgrade to new car from my PCP Deal. Spoke to dealer and was advised that in order for me to go again with a new car I have to give them a €3.2k top up to keep my repayments at current level for same model of new car.

I paid 7k as original deposit for the pleasure of new car..... A lot of people will be expecting to hand keys back and get another one with no more deposit, I imagine our position will be just get a loan for the GFMV of the car but is too expensive IMO to justify the pleasure of an upgrade of 2 year old car!

Casati

rubbadubdub wrote: »

So I was curious as to what my option is now to upgrade to new car from my PCP Deal. Spoke to dealer and was advised that in order for me to go again with a new car I have to give them a €3.2k top up to keep my repayments at current level for same model of new car.

I paid 7k as original deposit for the pleasure of new car..... A lot of people will be expecting to hand keys back and get another one with no more deposit, I imagine our position will be just get a loan for the GFMV of the car but is too expensive IMO to justify the pleasure of an upgrade of 2 year old car!

Yeah, unless you are on 0% Apr it's generally impossible to upgrade after two years as the way interest is front loaded. With 0% it might be possible though if trading a car with low depreciation e.g Octavia 1.6 tdi