New car, PCP, €500 per month max..

Logicost31

Wondering what others would go for in this situation.
Assuming we'll get around 3 or 4k for our old car, that's the chunk of our deposit, we'd add a few k to it for the right car, but would want to keep the deposit in the 10-15% range so the amount it's worth over the gmfv should roughly cover the deposit for a similar spec machine in 3 years.

Average around 15k km's per year, with lots of short journeys, so no diesels.
Highest possible spec and lots of toys ideally!
Manual, petrol.
Likely to be 172 or 181 realistically, so upcoming models can be factored in.
low apr pcp preferred, i'd rather be paying for a nicer car than paying off interest!

Seat Ateca / Highline Golf / Mazda3 / New 3008 / Insignia Grand Sport come to mind

Soarer

Think Skoda and Opel are doing 0% finance. With what you're saving on interest, you should be able to spec it up a bit.

.G.

Logicost31 wrote: »

Wondering what others would go for in this situation.
Assuming we'll get around 3 or 4k for our old car, that's the chunk of our deposit, we'd add a few k to it for the right car, but would want to keep the deposit in the 10-15% range so the amount it's worth over the gmfv should roughly cover the deposit for a similar spec machine in 3 years.

Average around 15k km's per year, with lots of short journeys, so no diesels.
Highest possible spec and lots of toys ideally!
Manual, petrol.
Likely to be 172 or 181 realistically, so upcoming models can be factored in.
low apr pcp preferred, i'd rather be paying for a nicer car than paying off interest!

Seat Ateca / Highline Golf / Mazda3 / New 3008 / Insignia Grand Sport come to mind

Anyone explain how the bit in bold works? I'm obviously being a bit simple but I've read this a few times regarding PCP but still fail to get my head around it! Any calculations I've seen the GMFV of the car stays the same regardless of size of deposit or monthly repayments. So I presumed the only thing that affects the size of the future deposit is the value of the car in 3 years time compared to the GMFV.

Sam Russell

superg wrote: »

Anyone explain how the bit in bold works? I'm obviously being a bit simple but I've read this a few times regarding PCP but still fail to get my head around it! Any calculations I've seen the GMFV of the car stays the same regardless of size of deposit or monthly repayments. So I presumed the only thing that affects the size of the future deposit is the value of the car in 3 years time compared to the GMFV.

Simply put, you turn up with €8k to buy a car for €30 k. You are quoted a GMV of €12k, and a monthly cost of €300 per month. [Figures are not real, only to illustrate].

After 3 years, you owe €12k on the car.

Your choices are:

1. If you have the car in good condition with correct mileage, they will take your car and you walk away - if that is what you want.
2. You pay them €12k and the car is yours to keep.
3. They value the car at, say, €17k and give you €5k towards your new PCP. If they value the car at €21k, you get €9k towards your next car. You can go to any dealer - you just must pay off the €12k to clear the GMV.

You need to have an idea of how much the three year old car will be worth. It is you who takes the risk of that value, unless the value collapses totally.

The GMV is the new name for the old 'balloon' payment in the HP. You do not own the car till you pay off the GMV of €12 k.

Hope that helps.

You can lose out if you do not get your figures right, or if your circumstances change in the three years, or if the market in three year old cars collapses.

Penalty

superg wrote: »

So I presumed the only thing that affects the size of the future deposit is the value of the car in 3 years time compared to the GMFV.

This is correct.

The GMFV is the only fixed number in the process. That is set and stone.
The client decides on the deposit and then the monthly payments are calculated to get back to this GMFV.

In general a bigger than 10-15% deposit means that the future monthly payments on the second PCP will increase as the equity =deposit will be lower than the initial deposit

Sam Russell

Just to simplify further my explanation above.

Deposit - the lower this is, the higher the monthly payment will be, and obviously the higher the deposit the lower the monthly repayments. If interest is low, then low deposit.

Interest rate - this is crucial in assessing the value of a deal. It needs to be zero or nearly so.

GMV - this is the key figure and it is the amount owing at the end of the contract. If this is low, then there will be more equity in the car at the end of the contract, but it will be harder to walk away with nothing if that is what you intend to do.

It would be sensible to save during the contract so you have the GMV to at least allow the option of paying it and keeping the car. You could always get a car loan to pay it off, I suppose.

PCP looks attractive in a zero interest deal, but not attractive if the interest is not low.

Hope that clarifies it a bit better.

.G.

Yeah but this is just an explanation of how PCP works, I get all that. Also get the risks involved regarding the GMFV, car might have high mileage or poor condition or even be crashed and therefore not worth what it should be but all things being well in the world, the car will usually be worth more than is owed on it.

I still don't get how my initial deposit will affect the value of my future equity as intimated by the OP. The only thing that affects that is the GMFV compared to what the car is worth in 3 years. All things being good the car will be worth more than I'd owe on it regardless of which route I follow - high deposit+low repayments or low deposit+high repayments. How much future equity I have in the car depends on the state of it compared to what it should be and also the value of those cars in general at the time.

As for interest there's very few out there offering zero or close to it, Kia say they do but only on HP when you have 40% deposit. For most it seems to be 3.9, 5.9 and upwards. I don't think I'll be doing PCP either way and if I did it'd be keeping the car after 3 years rather than needing any equity but I just wanted to understand what the OP meant. I'll most likely do a high deposit and HP for the rest, depending on interest etc.

Sam Russell

superg wrote: »

Yeah but this is just an explanation of how PCP works, I get all that. Also get the risks involved regarding the GMFV, car might have high mileage or poor condition or even be crashed and therefore not worth what it should be but all things being well in the world, the car will usually be worth more than is owed on it.

I still don't get how my initial deposit will affect the value of my future equity as intimated by the OP. The only thing that affects that is the GMFV compared to what the car is worth in 3 years. All things being good the car will be worth more than I'd owe on it regardless of which route I follow - high deposit+low repayments or low deposit+high repayments. How much future equity I have in the car depends on the state of it compared to what it should be and also the value of those cars in general at the time.

As for interest there's very few out there offering zero or close to it, Kia say they do but only on HP when you have 40% deposit. For most it seems to be 3.9, 5.9 and upwards. I don't think I'll be doing PCP either way and if I did it'd be keeping the car after 3 years rather than needing any equity but I just wanted to understand what the OP meant. I'll most likely do a high deposit and HP for the rest, depending on interest etc.

It does not. Deposit level vs monthly payments. More deposit equals lower monthly payments. Interest rate would also affect this.

Interest rate affects cost of finance, nothing else. High interest would indicate high deposit would be wise.

High GMV would indicate low equity at the end and therefore more risk for future deposit if you intend to go again.