PCP query

Heisenburg81

In relation to Guaranteed Minimum Future Value, what determines the actual Market Value after three years. If the car is worth more than the GMFV how do you argue this and prove same to the finance company?

JoeA3

Heisenburg81 wrote: »

In relation to Guaranteed Minimum Future Value, what determines the actual Market Value after three years. If the car is worth more than the GMFV how do you argue this and prove same to the finance company?

Actual market value is determined by what dealers are prepared to offer you for it on a trade in... whatever customers are typically paying for cars similar to yours. A quick browse on carzone/DD will give you an idea what 3 year old examples of your car are typically going for.

Why would you even be arguing with the finance company?

bazz26

The GMFV is determined at the beginning of the PCP contract and is what is owed by you at the end of the PCP term. It is a fixed valuation set by the manufacturer of what they think the car will be worth at the end of the 3 year PCP contract. There is no adjusting of the GMFV as it has nothing to do with actual market value of the car. At the end of the PCP term you own the GMFV figure irrespective of what the car is actually worth at that time, unless you decide to go for a PCP deal on another new car.

mickdw

Heisenburg81 wrote: »

In relation to Guaranteed Minimum Future Value, what determines the actual Market Value after three years. If the car is worth more than the GMFV how do you argue this and prove same to the finance company?

You appear to be referring to the situation where you return at end of term and want to trade in for a new car. It is up to you to get best price on your returning car similar to how you would trading in any car. The key is that you can go to any dealer of any make and get a trade in offer. All you need to make this very straight forward is the settlement figure relating to the car you are hoping to trade. So say you have a 3 year old passat going back in at end of term, you might owe 13k and it might be worth 16k. If you thought the vw sales guy wasnt giving a fair price, you can go to toyota or bmw or wherever or even another vw dealer and see what they offer. Any dealer of any brand will settle finance outstanding and set you up on new deal for your new car. So any salesman has to be reasonable if he wishes to do business.
If they were to tell you the car is just covering the gfv, you go down the road and try to improve.
Obviously, the more you can get over and above gfv, the more money that goes into your next deposit.

Heisenburg81

mickdw wrote: »

You appear to be referring to the situation where you return at end of term and want to trade in for a new car. It is up to you to get best price on your returning car similar to how you would trading in any car. The key is that you can go to any dealer of any make and get a trade in offer. All you need to make this very straight forward is the settlement figure relating to the car you are hoping to trade. So say you have a 3 year old passat going back in at end of term, you might owe 13k and it might be worth 16k. If you thought the vw sales guy wasnt giving a fair price, you can go to toyota or bmw or wherever or even another vw dealer and see what they offer. Any dealer of any brand will settle finance outstanding and set you up on new deal for your new car. So any salesman has to be reasonable if he wishes to do business.
If they were to tell you the car is just covering the gfv, you go down the road and try to improve.
Obviously, the more you can get over and above gfv, the more money that goes into your next deposit.

Thanks very much.
That answers everything for me.

kurant

Heisenburg81 wrote: »

In relation to Guaranteed Minimum Future Value, what determines the actual Market Value after three years. If the car is worth more than the GMFV how do you argue this and prove same to the finance company?

I have the same situation right now in the end of PCP. Went down to a dealer where I bought car and trade in offer was too low. Was upset about it . When I signed contract 3 years ago was told the car will hold a good value in the end of contract,and definitely value not dropped more then half of the starting price in 3 years. Dealer offer for my car about 6-7 thousand less then similar car on DoneDeal. I think it's not right and should be argued.

Slippin Jimmy

kurant wrote: »

I have the same situation right now in the end of PCP. Went down to a dealer where I bought car and trade in offer was too low. Was upset about it . When I signed contract 3 years ago was told the car will hold a good value in the end of contract,and definitely value not dropped more then half of the starting price in 3 years. Dealer offer for my car about 6-7 thousand less then similar car on DoneDeal. I think it's not right and should be argued.

What type of car do you have, mileage, and price offered?

colm_mcm

kurant wrote: »

I have the same situation right now in the end of PCP. Went down to a dealer where I bought car and trade in offer was too low. Was upset about it . When I signed contract 3 years ago was told the car will hold a good value in the end of contract,and definitely value not dropped more then half of the starting price in 3 years. Dealer offer for my car about 6-7 thousand less then similar car on DoneDeal. I think it's not right and should be argued.

You need to shop around.

carsfan2

kurant wrote: »

I have the same situation right now in the end of PCP. Went down to a dealer where I bought car and trade in offer was too low. Was upset about it . When I signed contract 3 years ago was told the car will hold a good value in the end of contract,and definitely value not dropped more then half of the starting price in 3 years. Dealer offer for my car about 6-7 thousand less then similar car on DoneDeal. I think it's not right and should be argued.

Argue with who?
Second hand values have collapsed here thanks to low sterling so your car is probably not worth what the dealer thought it would be when you got it.
However shop around but values are not as good as they were.

George Dalton

kurant wrote: »

I have the same situation right now in the end of PCP. Went down to a dealer where I bought car and trade in offer was too low. Was upset about it . When I signed contract 3 years ago was told the car will hold a good value in the end of contract,and definitely value not dropped more then half of the starting price in 3 years.

A lot of people are going to be in your situation this year where they don't have the equity they expected to have in the car at the end of the PCP term. It seems to me that when doing their figures at the start of the term in 2015 people were predicting a market value for their car at the end of the term based on market values of 2012 cars at the time, but that was extremely flawed logic. There will be a huge supply of 3 year old cars this year with the amount of PCP deals ending plus there's the additional factor of the volume of UK imports due to the favourable sterling exchange rate (which couldn't have been predicted 3 years ago to be fair). At the same time the demand for these cars is lower than it was a few years ago because of the various attractive options available for financing new cars. You don't have to be a genius to work out that the inevitable result is that secondhand values are lower now than they were back in 2015.

kurant wrote: »

Dealer offer for my car about 6-7 thousand less then similar car on DoneDeal. I think it's not right and should be argued.

Are you planning to go for another PCP deal?

George Dalton

carsfan2 wrote: »

Argue with who?
Second hand values have collapsed here thanks to low sterling so your car is probably not worth what the dealer thought it would be when you got it.
However shop around but values are not as good as they were.

The sterling issue is a big factor and is one that nobody could have predicted but it was always inevitable that secondhand values would suffer when the first batch of PCP deals ended.

mickdw

George Dalton wrote: »

A lot of people are going to be in your situation this year where they don't have the equity they expected to have in the car at the end of the PCP term. It seems to me that when doing their figures at the start of the term in 2015 people were predicting a market value for their car at the end of the term based on market values of 2012 cars at the time, but that was extremely flawed logic. There will be a huge supply of 3 year old cars this year with the amount of PCP deals ending plus there's the additional factor of the volume of UK imports due to the favourable sterling exchange rate (which couldn't have been predicted 3 years ago to be fair). At the same time the demand for these cars is lower than it was a few years ago because of the various attractive options available for financing new cars. You don't have to be a genius to work out that the inevitable result is that secondhand values are lower now than they were back in 2015.



Are you planning to go for another PCP deal?

No doubt supply and demand etc is at play however there will always have to be a balance. If everyone is going back with pcp cars and have suddenly no deposit, new car sales are going to none dive and the used car will be in favour again.
I see alot of room in the new car market for further incentives from manufacturers to help new sales. I know pricing is significantly different here to uk but they have deals with very small deposit where you just hand the car back at the end, no promise of built up equity - they manage to offer reasonably monthly figures too. This is made possible by large discounts and large dealer contributions. If used values are as you say, we will surely see more of that type of deal to prop up new sales.
I believe they are better deals. No false promises of built up equity, just a clear cost to use the car for 2, 3 or 4 years.

George Dalton

mickdw wrote: »

No doubt supply and demand etc is at play however there will always have to be a balance. If everyone is going back with pcp cars and have suddenly no deposit, new car sales are going to none dive and the used car will be in favour again.

I wouldn't be so sure, for a lot of people the only realistic option (or at least the easier if shortsighted option) will be to go for another PCP deal with a lower deposit and higher monthly payments. Either that or finance the GFMV and buy the car outright. Neither situation will increase used car sales.

To be fair from the little information given in this case the dealer is giving a very poor trade in value and the poster can surely do better by shopping around but the equity they end up with will almost certainly be less than they were led to believe 3 years ago.

mickdw

George Dalton wrote: »

I wouldn't be so sure, for a lot of people the only realistic option (or at least the easier if shortsighted option) will be to go for another PCP deal with a lower deposit and higher monthly payments. Either that or finance the GFMV and buy the car outright. Neither situation will increase used car sales.

To be fair from the little information given in this case the dealer is giving a very poor trade in value and the poster can surely do better by shopping around but the equity they end up with will almost certainly be less than they were led to believe 3 years ago.

The new car with greatly increased monthly wont be an option for many. They will likely just refinance gfv as you say. This wont help the new car sales trade so if this was happening across the board, the trade will have to come up with a more inventive finance product. Will be interesting to see how it goes. We already saw 5k being thrown into deposit by bmw last year and 9 percent discount this year. Ive no doubt the 5k deposit contribution was to counteract the high numbers of customers coming in with zero equity and being rather upset and unable to buy again.

kurant

I am trying to find right car to go for pcp again, it should be new or nearly new comfortable spacious car in the region of 25k to keep low monthly payments. But as far as I dig I think to refinance GFMV or pay out and sell car. Still not sure what car to have a look for if new .Driving Passat Estate 1.6tdi CL 142 ,50 k km. Still looks as new... Like the looks of Tiguan, Kodiaq, Karoc, 5008 , wife fancy Merc B class. Love to have Tesla but you know... not for my budget.. Trying to get Merc C class from vw dealer but was told I can't go for pcp for that car as it not a vw.....?

jimmycrackcorm

kurant wrote:

.. Trying to get Merc C class from vw dealer but was told I can't go for pcp for that car as it not a vw.....?

It's not in the VW dealers interest to try to sell you a Mercedes. Why would you go there instead of an actual Mercedes dealer who would do a pcp and take your passat as a trade in?

Lantus

Just remember that the dealer treats a pcp like any other trade in where he needs to clean, service and turn around and make a profit. Looking at a selection of cars on done deal and the difference between that value and your gmfv is not your equity. The dealers cut is taken out of that.

That said the contractural nature of such deals makes a slightly bigger cut more of a possibility with resale values being blamed as consumers are asked to reinvest more deposit for the next car or pay a slightly higher monthly.

It's a much more captive market than just taking in a car you own. Yes you can go anywhere else but the reality is a lot of consumers will feel like they need to stay with the dealer.

Casati

George Dalton wrote: »

A lot of people are going to be in your situation this year where they don't have the equity they expected to have in the car at the end of the PCP term. It seems to me that when doing their figures at the start of the term in 2015 people were predicting a market value for their car at the end of the term based on market values of 2012 cars at the time, but that was extremely flawed logic. There will be a huge supply of 3 year old cars this year with the amount of PCP deals ending plus there's the additional factor of the volume of UK imports due to the favourable sterling exchange rate (which couldn't have been predicted 3 years ago to be fair). At the same time the demand for these cars is lower than it was a few years ago because of the various attractive options available for financing new cars.


I don’t agree with this statement, the demand for second cars is extremely strong as clearly seen by the massive numbers of imports coming in from the U.K.

Second hand cars here are worth less due to the very low sterling fx rate and slow economy in U.K depressing their secondhand values, both of which are resulting from Brexit, which in fairness was not expected.

Heisenburg81

Currently say Im doing 30000km per annum but this may change down to 24000 due to opportunity to work from home for a day each week.
Was at a dealers today for a car I like retailing at €26,950. I have €5,000 scrappage and can pay €4,000 cash.
If I conservatively opt for a Pcp with 30k km per annum, after 36 months the GMFV is €6,973.
If I go with 25k km the GMFV is €7,898.
The dealer said I would be better off just opting for 15k km and that if I did over just accept the GMFV would be less when it came to end of agreement. He said doing this avoids "paying twice" - for higher payments and less GMFV.
Is this good advice?
I can afford the higher payments for 30k and surely if I do less km the equity will be higher than GMFV at end of term, assuming market and demand similar?
Or just get a car loan for full amount?!

Casati

Heisenburg81 wrote: »

Currently say Im doing 30000km per annum but this may change down to 24000 due to opportunity to work from home for a day each week.
Was at a dealers today for a car I like retailing at €26,950. I have €5,000 scrappage and can pay €4,000 cash.
If I conservatively opt for a Pcp with 30k km per annum, after 36 months the GMFV is €6,973.
If I go with 25k km the GMFV is €7,898.
The dealer said I would be better off just opting for 15k km and that if I did over just accept the GMFV would be less when it came to end of agreement. He said doing this avoids "paying twice" - for higher payments and less GMFV.
Is this good advice?
I can afford the higher payments for 30k and surely if I do less km the equity will be higher than GMFV at end of term, assuming market and demand similar?
Or just get a car loan for full amount?!

What’s th interest rate? If it’s less than you’ll get in th bank/ credit union then the pcp might work out better. To help
avoid nasty shocks go for the higher mileage

aerofoiled

Heisenburg81 wrote: »

Currently say Im doing 30000km per annum but this may change down to 24000 due to opportunity to work from home for a day each week.
Was at a dealers today for a car I like retailing at €26,950. I have €5,000 scrappage and can pay €4,000 cash.
If I conservatively opt for a Pcp with 30k km per annum, after 36 months the GMFV is €6,973.
If I go with 25k km the GMFV is €7,898.
The dealer said I would be better off just opting for 15k km and that if I did over just accept the GMFV would be less when it came to end of agreement. He said doing this avoids "paying twice" - for higher payments and less GMFV.
Is this
I can afford the higher payments for 30k and surely if I do less km the equity will be higher than GMFV at end of term, assuming market and demand similar?
Or just get a car loan for full amount?!

Go for the mileage level that's realistic. In your case, I'd go for 24k.
Even if you end up doing 30k per year, assuming an excess mileage of 6c per km, you'd pay €1080 were you to just hand the car back. Basically the difference between the two GMFV figures you've been quoted. And you'll still have lower monthly payments.

Heisenburg81

aerofoiled wrote: »

Go for the mileage level that's realistic. In your case, I'd go for 24k.
Even if you end up doing 30k per year, assuming an excess mileage of 6c per km, you'd pay €1080 were you to just hand the car back. Basically the difference between the two GMFV figures you've been quoted. And you'll still have lower monthly payments.

Worst case scenario, and a persoms job goes etc and cant finance paymemts.
What happens with a PCP in this case?
Eg After 2 years you cant pay, but have made full payments for 2 years..
Just want to kmow all possible outcomes - obviously this shouldnt happen but important to know.
Cheers for replies

mickdw

Heisenburg81 wrote: »

Worst case scenario, and a persoms job goes etc and cant finance paymemts.
What happens with a PCP in this case?
Eg After 2 years you cant pay, but have made full payments for 2 years..
Just want to kmow all possible outcomes - obviously this shouldnt happen but important to know.
Cheers for replies

I would suggest not taking out a pcp if you are anyway unsure of being able to pay or unsure of being able to refinance baloon at end even after losing job. Anyone with pcp needs the get out option of being able to refinance and sell, otherwise you will lose out whether it be by handing back car at end or whatever

bazz26

Heisenburg81 wrote: »

Worst case scenario, and a persoms job goes etc and cant finance paymemts.
What happens with a PCP in this case?
Eg After 2 years you cant pay, but have made full payments for 2 years..
Just want to kmow all possible outcomes - obviously this shouldnt happen but important to know.
Cheers for replies

Your basically renting the car for the first 3 years so if your thinking that you may get some of your monthly payments back after 2 years then you won't. Best case is the possibility you hand the car back and walk away with nothing. PCP is a convenient way of paying for a car but you still have to pay for it or give it back.

Also worth reading some of this recent thread:
https://www.boards.ie/vbulletin/showthread.php?t=2057827245

Casati

bazz26 wrote: »

Your renting the car for the first 3 years so if your thinking that you may get some money back after 2 years then you won't.

Also worth reading some of this recent thread:
https://www.boards.ie/vbulletin/showthread.php?t=2057827245

It really depends on the car, if you have an a high depreciation car like a Leaf or indeed certain BMW’s, then you won’t get anything back but lower depreciation cars you may see your full deposit back.

After two years I checked prices to trade in a Skoda Superb and equity in it had increase from the original 6500 deposit put in to about 9000. A year later and the market softer, my equity had fallen to 8000.

Despite what you might read (especially in the ev forum) not all cars drop by the same % annually, though with low sterling all cars have fallen in value by more than expected. I’m going PCP again in 2018

Lantus

Casati wrote:

After two years I checked prices to trade in a Skoda Superb and equity in it had increase from the original 6500 deposit put in to about 9000. A year later and the market softer, my equity had fallen to 8000.

Equity is independent of deposit and not related. Superbs are around 35ish? So equity is market value after x years minus the gmfv minus the dealers cut and profit. Not likley to be 8 or 9k.

So if you owe say 15k after 3 years and a 3 year car is worth 20k then you may get 3k equity after the dealers profit. Just an example. You are better off asking the dealer for a quote for the same car. If he tells you that you only need to add X amount to keep monthlys the same you can work from there.

Casati

Lantus wrote: »

Equity is independent of deposit and not related. Superbs are around 35ish? So equity is market value after x years minus the gmfv minus the dealers cut and profit. Not likley to be 8 or 9k.

So if you owe say 15k after 3 years and a 3 year car is worth 20k then you may get 3k equity after the dealers profit. Just an example. You are better off asking the dealer for a quote for the same car. If he tells you that you only need to add X amount to keep monthlys the same you can work from there.

The deposit you put in should be compared to the equity you take out, that’s hows I’ve looked at it.

3 years ago I gave the dealer a 6500 deposit and the car was 33000. The dealer is telling me that the equity in my car (value - gfmv) is now 8000 and as such this 8000 goes to making up my new deposit in full.

I’m going 40k car this time so payments are slightly higher, but if I had stuck with another 33k Skoda my payments would have dropped dramatically as I have a 1500 extra deposit going in and the interest has dropped to 0% from 3.9% three years ago.

The dealer was telling me he is calling lads two years into PCP’s telling them they can have a 181 of the same car as their 161 for the same payments and no extra deposit required, but this is down to their specific cars holding value better than the market average

Casati

Casati wrote: »

The deposit you put in should be compared to the equity you take out, that’s hows I’ve looked at it.

3 years ago I gave the dealer a 6500 deposit and the car was 33000. The dealer is telling me that the equity in my car (value - gfmv) is now 8000 and as such this 8000 goes to making up my new deposit in full.

I’m going 40k car this time so payments are slightly higher, but if I had stuck with another 33k Skoda my payments would have dropped dramatically as I have a 1500 extra deposit going in and the interest has dropped to 0% from 3.9% three years ago.

The dealer was telling me he is calling lads two years into PCP’s telling them they can have a 181 of the same car as their 161 for the same payments and no extra deposit required, but this is down to their specific cars holding value better than the market average

I would add also that Skoda have a very realistic GFMV of between 38% and 40% of rrp where as some makes like BMW have a GFMV of 50% of rrp. As such with BMW unless the car holds 60%+ of the rrp after three years you won’t have any equity at the end

Whatever why you look at it buying a new car every three years is an expensive game, driving old cars is generally going to result in cheaper motoring

DaveyDave

On a somewhat related note, how much does a dealer typically take? My Golf GFMV is €11k, there's a new model coming out in a few years so time will tell on the values but the 3 year old MK7s still weren't cheap a while after the MK7.5 came out, around €20k. I'm sure they'll give a bit of a discount to whoever's buying one and take a nice cut for themselves but from €11k to €20k there must be something decent in it for everyone?

Casati

DaveyDave wrote: »

On a somewhat related note, how much does a dealer typically take? My Golf GFMV is €11k, there's a new model coming out in a few years so time will tell on the values but the 3 year old MK7s still weren't cheap a while after the MK7.5 came out, around €20k. I'm sure they'll give a bit of a discount to whoever's buying one and take a nice cut for themselves but from €11k to €20k there must be something decent in it for everyone?

Very hard to know, depends on the exact model and what kind of money they are making.

Lantus

Casati wrote:

I would add also that Skoda have a very realistic GFMV of between 38% and 40% of rrp where as some makes like BMW have a GFMV of 50% of rrp. As such with BMW unless the car holds 60%+ of the rrp after three years you won’t have any equity at the end

Agreed and I have validated this on Skoda PCP calculator. In fact they have dropped slightly compared to last year as have other brands and specific models. A sign of slightly worsening 2nd hand values and sales slow down.

My own enquires last year for a 24 month exchange on PCP showed a poor position despite a vehicle ranked as holding the most value in its class and the least deposit possible when bought. This is pushing me towards purchase outright rather than upgrade this time. Hold on, pay off and maybe go electric!

Casati

My own enquires last year for a 24 month exchange on PCP showed a poor position despite a vehicle ranked as holding the most value in its class and the least deposit possible when bought. This is pushing me towards purchase outright rather than upgrade this time. Hold on, pay off and maybe go electric![/quote]

If you like the car and have the cash it’s generally a good idea to keep it if even another year.