Audi PCP Experience...

FUTY2211

So my brother went to take a look at a few used Audis up in the Sandyford centre and came away liking a few cars.

On a 2016 Audi A4, they offered him the following PCP they offered him over 36 months:

€32,349 - Total cost of the car
€7,000 - Deposit

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€25,349 - Amount financed
€3,669 - Interest Charge
€17,800 - Final Payment
€314 - Monthly Payment

Is it just me or is that not absolutely ludicrous?

They're looking to charge him an interest rate of 14.48% (3,669/25,349) and the final payment seems extremely steep/will leave him with a very little amount of equity if he looked to trade it in for something else in 3 years time.

Has anyone else experienced this when looking at buying used cars on PCP? Obviously the interest rates etc. will be a bit higher than on buying new cars but that seems totally excessive to me.

amcalester

APR on that is about 9% which I think is pretty standard on second hand pcp deals.

Interest is calculated on the total balance outstanding not just the portion being repaid over 36 months.

Mooooo

Unless interest rates are much lower you are better off with a regular car loan as at least capital is being paid off as well

FUTY2211

amcalester wrote: »

APR on that is about 9% which I think is pretty standard on second hand pcp deals.

Interest is calculated on the total balance outstanding not just the portion being repaid over 36 months.

Well if he's paying a deposit of €7k, then the total outstanding balance is €25,349 including the monthly payments and the final payment....or do you mean that they charge you interest on the deposit amount as well? Because that's frankly ridiculous to be charged interest on something paid up front.

amcalester

FUTY2211 wrote: »

Well if he's paying a deposit of €7k, then the total outstanding balance is €25,349 including the monthly payments and the final payment....or do you mean that they charge you interest on the deposit amount as well? Because that's frankly ridiculous to be charged interest on something paid up front.

9% on the €25k.

FUTY2211

amcalester wrote: »

9% on the €25k.

9% on €25,349 would be €2,281 rather than the €3,670 they're quoting. It's 14.48% no?

amcalester

FUTY2211 wrote: »

9% on €25,349 would be €2,281 rather than the €3,670 they're quoting. It's 14.48% no?

No.

It’s not as simple as dividing interest by capital.

Read up on APR to understand how much he is being charged for the finance.

It’s more expensive than a credit union loan but is more affordable due to the balloon payment which reduces the monthly payment (by kicking the can down the road)

My CU APR was 6% but no balloon payment so the monthly repayment was higher than a pcp deal.

digiman

Looks like it’s around 5.5% interest rate on the PCP deal

amcalester

digiman wrote: »

Looks like it’s around 5.5% interest rate on the PCP deal

Yeah, you’re right.

Too many beers, forgot to carry the one.

carsfan2

I thought that Audi were advertising 2.9% apr on used pcp?
Maybe that is only on newer cars than the 2016 in question.
Still 5.5 is better than the likes of Bmw or Mercedes charge on new cars.

Nonoperational

carsfan2 wrote: »

I thought that Audi were advertising 2.9% apr on used pcp?
Maybe that is only on newer cars than the 2016 in question.
Still 5.5 is better than the likes of Bmw or Mercedes charge on new cars.

Nah that 2.9% is a complete red herring. Bought a 172 A6 recently and it's 5.9%.

Still a great way to buy for me. My second PCP and its brilliant. Barely notice the monthly payment and don't have to dip too far into the savings initially.

The only think I don't like about this is he APR. They seem to catch you on used cars.

FUTY2211

digiman wrote: »

Looks like it’s around 5.5% interest rate on the PCP deal

Complete novice here....can you show me how to calculate that please?

carsfan2

Nonoperational wrote: »

Nah that 2.9% is a complete red herring. Bought a 172 A6 recently and it's 5.9%.

Still a great way to buy for me. My second PCP and its brilliant. Barely notice the monthly payment and don't have to dip too far into the savings initially.

The only think I don't like about this is he APR. They seem to catch you on used cars.

Maybe they only offer the 2.9 on ex demo or pre reg or something but I definitely saw it on their website.
5.9 seems high on an A6 when they offer 1.9 on a new one

dubrov

FUTY2211 wrote: »

Complete novice here....can you show me how to calculate that please?

For a rough approximation, you could use the following

Rate = Total Interest / (Average amount being financed) / Duration of loan in years

Rate = 3669 / [(25349 + 17800)/2] / 3
Rate = 5.67%

The actual rate will be slightly higher as the average is just an approximation of the loan being serviced over the 3 years,

Nonoperational

carsfan2 wrote: »

Maybe they only offer the 2.9 on ex demo or pre reg or something but I definitely saw it on their website.
5.9 seems high on an A6 when they offer 1.9 on a new one

They said the 2.9% was on very limited models. The 5.9 is high, but they gave me a substantial discount. The 172 was over €10k cheaper than the new equivalent so you get the saving there.

bazz26

PCP rates are always going to be higher on a 2 year old car as the incentive is really to get you into a brand new one.

MarkN

PCP on a 2 year old car is madness. Do it HP or some other traditional form of finance or don’t buy it.

CIP4

Recently bought a 161 A4 myself through an Audi dealer paid a fair chunk of the cost and then got 2 year HP with Audi/VW bank rate works out at just under 4.9%. Which in my case I thought was ok as over the shorter term I am not paying a whole lot of interest.

Interest aside 18k is a fair size of a final repayment on an A4 at 5 years old to the point where I don’t see my own being worth that at that age anyway.

Lantus

FUTY2211 wrote:

€32,349 - Total cost of the car €7,000 - Deposit

FUTY2211 wrote:

€25,349 - Amount financed €3,669 - Interest Charge €17,800 - Final Payment €314 - Monthly Payment

So 314 a month over 3 years is 3700 a year give or take. To pay the final payment at that level would take just under 5 years. That's 8 years to pay off a car which would be 10 years old once you'd finished.

If you can save 200 to 300 a month in addition to help pay off the gmfv or soften it then fine. If 314 is near the limit of affordability I'd be saying this is overstretching and unaffordable.

FUTY2211

Thanks a million for all the help guys, I think he's going to shop around a bit more and explore car loans directly from banks etc before pulling the trigger!