PCP - What are current recommendations?

Shefwedfan

I am possible looking at new car. No real requirement apart from I like a change.

I am not trading in. Last time I looked at PCP the recommendation was to keep the deposit small and repayments high(I think). I never took car out so I didnt check into it proper. At the moment offer is
Car Price: €37,950
Deposit: €4,000
Financed: €33,950
Repayments: €703.42
Final payment: €11,240

I have no idea if this is decent for PCP, interest is 3.9% APR.

Thanks for advice

CIP4

Seems like a high monthly repayment for PCP but then it’s a relatively expensive car with low deposit. Based on that you will pay about 2.6k in interest assuming you clear the balloon payment. Not sure where the idea of having a lower deposit being better is coming from. Putting down a 30% deposit for example will mean lower repayments but also less interest paid.

To me the final payment seems low compared to the new car price also which isn’t nevessarily a good thing.

Nonoperational

To be honest it depends what you can afford. I pay a particular amount per month, it's an amount that is almost inconsequential to me, I don't notice it coming from the account, and I think that's quite important for PCP. Also the end payment, you need to be able to pay that in 3 years if you have/want to. €703 would sound quite high to me per month. Getting the interest rate as low as possible is key for me.

PCP essentially makes new cars a lot more affordable, but you have to understand it. At the end you either roll over or buy it. For me it's a great way of getting a new car every 2.5-3 years.

Shefwedfan

Correct me if wrong, the final payment. If I don't pay and want to go to another new car, which is the plan

If the value of the car is €18,000 and the final payment is listed as €11,240 I have a deposit of €6,760?

These are just ball park figures.....

Mickiemcfist

Shefwedfan wrote: »

Correct me if wrong, the final payment. If I don't pay and want to go to another new car, which is the plan

If the value of the car is €18,000 and the final payment is listed as €11,240 I have a deposit of €6,760?

These are just ball park figures.....

Yes that's correct (as long as dealer says "value" is 18k not just the market)

Shefwedfan

Mickiemcfist wrote: »

Yes that's correct (as long as dealer says "value" is 18k not just the market)

In this situation am I not better they have marked the value down?

Mickiemcfist

Shefwedfan wrote: »

In this situation am I not better they have marked the value down?

Ok there's two steps to it. Their initial guaranteed future value which is c.12k at the outset of the contract, then the actual valuation at the end of the contract which in your example is 18k. If the dealer offer 18k trade in value for it, you've got 6k to put towards your new car.

mickdw

Yes but it's not free. You are paying extra monthly due to the exceptionally low Gfv.
Are you looking at a 28k car with 9k in extras or something because the Gfv would typically be a lot higher on a 37k car.

I wouldn't touch that deal.

Mickiemcfist

mickdw wrote: »

Yes but it's not free. You are paying extra monthly due to the exceptionally low Gfv.
Are you looking at a 28k car with 9k in extras or something because the Gfv would typically be a lot higher on a 37k car.

I wouldn't touch that deal.

What's the difference, sure you have to pay it at some stage anyway, If repayments are lower he'll have less equity at the end & have to finance more next time?

mickdw

Ya but in worst case scenario if you had to return car at the end, you would be throwing even larger balls of cash away having payed down such a large portion of the car and then having to walk away from it.

Mickiemcfist

mickdw wrote: »

Ya but in worst case scenario if you had to return car at the end, you would be throwing even larger balls of cash away having payed down such a large portion of the car and then having to walk away from it.

Ahh yes good point

Lantus

So most PCP is based on paying off 55 to 60% of the principle in the first few years. That deal pays off 68% which is a bit higher. It could be due to mileage or the model which we don't know. Either way a lower gmfv should ensure a better chance of equity moving forwards.

You are correct that if your intention is to roll over into a new deal a low deposit ensures your monthly payments stay very similar throughout.

It's worth noting that generally PCP deals are under pressure from UK cars and the 2nd hand market. In 3 years you 'may' need more deposit to keep payments the same.

In relation to equity. Say your gmfv is 10k and the value is 18k. Remember that the dealer needs to allow for some discount, money to repair, clean and service and critically profit. So the full 8k in this example is not all yours.

I don't know what they allow and I'd assume it's fairly fixed but clearly good negotiation here can make a huge difference. In another post an assumption of 1500 to 2k was allowed for dealer profit. Others may have a better idea.

Shefwedfan

Thanks for all the info

The car is eGolf. In 3 years time VW will have replaced with ID range so I guess that is why they have such a low value at the end of the contract.

Casati

Shefwedfan wrote: »

I am possible looking at new car. No real requirement apart from I like a change.

I am not trading in. Last time I looked at PCP the recommendation was to keep the deposit small and repayments high(I think). I never took car out so I didnt check into it proper. At the moment offer is
Car Price: €37,950
Deposit: €4,000
Financed: €33,950
Repayments: €703.42
Final payment: €11,240

I have no idea if this is decent for PCP, interest is 3.9% APR.

Thanks for advice

Presuming that’s an eGolf? Sounds like VW don’t have faith in the projected resale value and are protecting themselves with the v low GFV, but if the value holds up better than expected you could end up with a lot of equity, but it makes for high monthly’s for you in the meantime.

By going in with a low deposit the basic assumption is that you can afford to get a new car in three years with similar payments as you should be able to get your low deposit back in the form of equity when you trade in

I notice VW offer 0% on diesel Highlines, 1.9% on petrols and 3.9% on ev’s so are obviously still trying to get more people into diesels!

Shefwedfan

Casati wrote: »

Presuming that’s an eGolf? Sounds like VW don’t have faith in the projected resale value and are protecting themselves with the v low GFV, but if the value holds up better than expected you could end up with a lot of equity, but it makes for high monthly’s for you in the meantime.

By going in with a low deposit the basic assumption is that you can afford to get a new car in three years with similar payments as you should be able to get your low deposit back in the form of equity when you trade in

I notice VW offer 0% on diesel Highlines, 1.9% on petrols and 3.9% on ev’s so are obviously still trying to get more people into diesels!

Yes eGolf. They are not offering much on my current car so I guess they are using that as a guideline. Their excuse is not great seeing as they are holding value in second hand market compared to Leaf etc

I guess they are trying to get rid of all those dirty diesel/petrol engine before they can't sell anymore:P

hooch-85

Casati wrote: »

Presuming that’s an eGolf? Sounds like VW don’t have faith in the projected resale value and are protecting themselves with the v low GFV, but if the value holds up better than expected you could end up with a lot of equity, but it makes for high monthly’s for you in the meantime.

By going in with a low deposit the basic assumption is that you can afford to get a new car in three years with similar payments as you should be able to get your low deposit back in the form of equity when you trade in

I notice VW offer 0% on diesel Highlines, 1.9% on petrols and 3.9% on ev’s so are obviously still trying to get more people into diesels!

SEAT are doing the same, we ordered a new Ibiza FR 1.0 TSi last week and got 1.9% rate, herself's Dad also ordered a new Arona diesel and got it on 0%. There is a massive shortage of petrol engines across the VAG range currently so they are trying to push the diesel sales.

Lantus

Shefwedfan wrote: »

Thanks for all the info

The car is eGolf. In 3 years time VW will have replaced with ID range so I guess that is why they have such a low value at the end of the contract.

Yeah. A dedicated ev platform renders the egolf obsolete as a model. I would operate on zero equity to be on the safe side. Do you need an egolf or will a second hand ev like a leaf suffice for around 15k? You can have it paid off in 2 years and of saved almost 10k towards an id range in 2020???

Shefwedfan

Lantus wrote: »

Yeah. A dedicated ev platform renders the egolf obsolete as a model. I would operate on zero equity to be on the safe side. Do you need an egolf or will a second hand ev like a leaf suffice for around 15k? You can have it paid off in 2 years and of saved almost 10k towards an id range in 2020???

I have an eGolf :-) Was looking to swap for newer model.

The option is keep current eGolf and then swap direct for ID range which will hopefully be available on 2019/2020. Or change now, get new eGolf and swap in 2021 when full ID range will be available. I like the ID Crozz.

mickdw

700 per month for an e golf together with 4000 deposit sounds like utter lunacy.

kerten

I started to feel like PCP scheme makes only sense if you buy a desirable models/spec(for market not for a petrolhead) with low interest rate.

Shefwedfan

Shefwedfan wrote: »

...............At the moment offer is
Car Price: €37,950
.................
Final payment: €11,240

I have no idea if this is decent for PCP.............

Well, there's €4k interest but as mentioned by Mick the watchout is the 30% GFMV ............ it seems perhaps you are buying something that folks don't tend to consider in demand when 3 years old.

raxy

Pcp has nothing to do with the type of car you buy. It's simply a loan method to allow car dealers advertise new cars that appear to be very good value. No matter how you finance a less desirable car it will be difficult to sell off at the end.
At the end of the day it's a loan & you will either have to pay back 100% of the cost or upgrade after the term.
If the pcp plan is 0% interest than you can pay the minimum deposit. Then you pay the balance over the three year term followed by the final payment.
If you are being charged interest on the pcp portion you want yo pay the max deposit so you are paying the least amount of interest on the loan.
If you can & do buy the egolf pay the max deposit at the start.

kerten

raxy wrote: »

Pcp has nothing to do with the type of car you buy. It's simply a loan method to allow car dealers advertise new cars that appear to be very good value. No matter how you finance a less desirable car it will be difficult to sell off at the end.
At the end of the day it's a loan & you will either have to pay back 100% of the cost or upgrade after the term.
If the pcp plan is 0% interest than you can pay the minimum deposit. Then you pay the balance over the three year term followed by the final payment.
If you are being charged interest on the pcp portion you want yo pay the max deposit so you are paying the least amount of interest on the loan.
If you can & do buy the egolf pay the max deposit at the start.

I get what you mean. I probably should have said

"I started to feel like PCP scheme makes only sense if you buy a desirable models/spec(for market not for a petrolhead) with low interest rate if you see it as a system to change your car every 3 years without additional financial hit "

If you are paying the gmfv at the end it is just a different loan.

Marcusm

mickdw wrote: »

700 per month for an e golf together with 4000 deposit sounds like utter lunacy.

Especially as it’s a like for like change.

raxy

My point is it doesn't matter if you plan to keep or trade up. If you pay the minimum deposit you will spend an extra ~700 in interest on the pcp portion.
Pay a higher deposit & save the extra to put towards a final payment.

Lantus

Shefwedfan wrote: »

I have an eGolf :-) Was looking to swap for newer model.

The option is keep current eGolf and then swap direct for ID range which will hopefully be available on 2019/2020. Or change now, get new eGolf and swap in 2021 when full ID range will be available. I like the ID Crozz.

Well if course a new car is nice. But as you say it's a rapidly obsolete model in the making. If this is cash you won't miss then fine but id keep the current egolf, pay it off if not already and save 500 a month for a few years or more and use that as deposit on an id model. They look great.

Buying an egolf makes no economic sense for a few years but the urge for new is a big pull. Try and resist????