Am I crazy to go PCP?

GusGus

So returning to Ireland and I am on the hunt for a new car . I haven’t settled in whst I’ll get yet but I know given my past history I’ll probably want to change after a year . I’m just wondering am I crazy to consider PCP for this purchase ?

I have about 10k as a deposit and no trade in. I was looking at a golf ( New) coming in at 37k. They advised me to lower my deposit as they had 0% apr . This seemed to make sense .

I am just wondering how much I will owe in 12 months time ?
Am I right to say the following : I’ll owe 24 x monthly payments plus the agreed GFMV?

Example : GFMV is 14.5 k and 24 x 450 =10800

So will I owe : 25.3 k in a years time?

Is this the right way to try and understand pcp if I was to change in a year ?

bazz26

There is a huge PCP thread on here already that I suggest you read through to get an understanding of how it works:

https://www.boards.ie/vbulletin/showthread.php?t=2057120240

nim1bdeh38l2cw

No

wassie

GusGus wrote: »

They advised me to lower my deposit as they had 0% apr . This seemed to make sense .

Makes perfect sense for them - the more you borrow the more commission they make. Theres not a lot of profit margin on new cars for dealers and they make most of their profits on selling extras, including finance.

Sure effectively your getting a free loan, but at the end of the day debt is debt and must be repaid at some point. Keep your deposit the same and enjoy the stress of lower repayments and residual at the end.

TCM

Simply answer is YES.

Fann Linn

Wouldn't be new but you'd buy a decent car for your €10k.

Lantus

30% deposit only makes sense when your looking to buy car and keep long term.

Run the numbers on 12pc deposit. If its still affordable that's the car for you.

Trading a 1 Yr old car is nearly always a loss maker due to depreciation in Yr 1. You won't see your 10k again.....

A good dealer would advise smaller deposit...

weary1

Its probably too late if you have already moved, but you can import your car without any VRT tax if you lived abroad and owned it for over 6 months.

ravendude

Lantus wrote: »

30% deposit only makes sense when your looking to buy car and keep long term.

Run the numbers on 12pc deposit. If its still affordable that's the car for you.

Trading a 1 Yr old car is nearly always a loss maker due to depreciation in Yr 1. You won't see your 10k again.....

A good dealer would advise smaller deposit...

Presumably this (advice to pay the minimum deposit) only applies for 0% Apr pcp as there is no cost of credit as such? Or does it apply generally, ( just wondering if I'm missing something somehow )

Lantus

ravendude wrote: »

Presumably this (advice to pay the minimum deposit) only applies for 0% Apr pcp as there is no cost of credit as such? Or does it apply generally, ( just wondering if I'm missing something somehow )

Your pcp affordability test should be run on the lowest deposit. Yes you will save money on interest at the high deposit but its a very small amount.

If you roll into 2nd pcp your monthly will be as if you had made a 12% deposit give or take regardless of your first deposit. So if its unaffordable then your potentially in trouble. Your using a once off asset to reduce the monthly to its lowest level.

If you can afford to save the difference between the 12 and 30pc monthly into a savings account then do that. If you can't afford it I would question your overall affordability of this car.

Mad_maxx

Pcp is a relatively low risk endeavour, always amuses me how so many view borrowing as inherently bad.

Credit is cheap, better to not use up all your cash on an unreliable second hand, I could afford to buy a new car with cash for 40 k in the morning yet I'd still use finance where the rates are under 4.5%

grogi

Janessa Victorious Canon wrote: »

No

Actually it is YES.

grogi

Lantus wrote: »

30% deposit only makes sense when your looking to buy car and keep long term.

The size of the deposit does not make virtually any difference. In the end it is the full price of the car that you need to pay. You can pay it with higher deposit and smaller instalments plus GMFV or smaller deposit and higher instalments plus GMFV. The sum will be the +/- same...

The only difference is the total interest you'd pay in the end, as bigger deposit lowers the average dept over the whole period of the deal. If the interest rate is low, it makes perfect sense to sit on cash.

Lantus

grogi wrote: »

The size of the deposit does not make virtually any difference. In the end it is the full price of the car that you need to pay. You can pay it with higher deposit and smaller instalments plus GMFV or smaller deposit and higher instalments plus GMFV. The sum will be the +/- same...

The only difference is the total interest you'd pay in the end, as bigger deposit lowers the average dept over the whole period of the deal. If the interest rate is low, it makes perfect sense to sit on cash.

It's makes a big difference to affordability. A skoda octavia is 240 a month with 30pc deposit and 400 on 10pc. If your affordability is predicated on the lower monthly then paying off the gmfv or rolling into a new deal can come as a shock if the consumer doesn't fully understand what will happen. I. E the monthly will increase dramatically after 3 years.

bcklschaps

Firstly to the OP, welcome back.

A few points to note.


1). You are a straight sale buyer (no trade in). The type, every dealer wants to see coming. Use that to your advantage.

2). 37k is a lot to pay for a VW Golf. The basic 1.6 TDI 5dr is only about 23k...its a fine car, anything else is overkill and money wasted.

3). Car Industry in Ireland is on its knees. Main dealers have to hit stringent unit targets and will let stuff go even at a loss just to get the sale. Just try to time it properly. December is about the worst month you could be buying new.... as they are busy with New registrations for next year. Wait til Jan/Feb and you'll get a far more sympathetic hearing.

4). Not sure if its still true or not, but the old rule of buying a car in Ireland was ...organize the finance yourself and demand a straight cash discount or free extras etc. That way you can easily compare the deal each dealer is giving you....and play them off against each other.

bcklschaps

bcklschaps wrote: »

2). 37k is a lot to pay for a VW Golf. The basic 1.6 TDI 5dr is only about 23k...its a fine car, anything else is overkill and money wasted.

This is most certainly not the case, not everyone is happy with a basic bog standard model and it’s certainly not waste getting the model you want.

You can easily go above 40k for the nicer and more powerful golfs with good spec they aren’t comparable with an entry level model.

nim1bdeh38l2cw

grogi wrote: »

Actually it is YES.

Of course it is, the OP had 2 exact same threads. I answered yes to one and no to this one. The other one got deleted.

Squatman

Mad_maxx wrote: »

Pcp is a relatively low risk endeavour, always amuses me how so many view borrowing as inherently bad.

Credit is cheap, better to not use up all your cash on an unreliable second hand, I could afford to buy a new car with cash for 40 k in the morning yet I'd still use finance where the rates are under 4.5%

whys that?

Mad_maxx

Squatman wrote: »

whys that?

Because I'd prefer have the cash for other things

BnB

GusGus wrote: »

So returning to Ireland and I am on the hunt for a new car . I haven’t settled in whst I’ll get yet but I know given my past history I’ll probably want to change after a year . I’m just wondering am I crazy to consider PCP for this purchase ?

I have about 10k as a deposit and no trade in. I was looking at a golf ( New) coming in at 37k. They advised me to lower my deposit as they had 0% apr . This seemed to make sense .

I am just wondering how much I will owe in 12 months time ?
Am I right to say the following : I’ll owe 24 x monthly payments plus the agreed GFMV?

Example : GFMV is 14.5 k and 24 x 450 =10800

So will I owe : 25.3 k in a years time?

Is this the right way to try and understand pcp if I was to change in a year ?

I would say your calculations are right. You would just have to confirm this with the finance person in VW. There might be some penalties involved that are written into the contract.

My wife did it this year with VW in that she broke out of a 3 year deal, 18 months in because she really missed having a 7 seater and it was no problem. However, in her case, she was going to a new VW deal again, so they were obviously delighted to be selling another new car.

knifey_spoonie

bcklschaps wrote: »

Firstly to the OP, welcome back.

A few points to note.


1). You are a straight sale buyer (no trade in). The type, every dealer wants to see coming. Use that to your advantage.

2). 37k is a lot to pay for a VW Golf. The basic 1.6 TDI 5dr is only about 23k...its a fine car, anything else is overkill and money wasted.

3). Car Industry in Ireland is on its knees. Main dealers have to hit stringent unit targets and will let stuff go even at a loss just to get the sale. Just try to time it properly. December is about the worst month you could be buying new.... as they are busy with New registrations for next year. Wait til Jan/Feb and you'll get a far more sympathetic hearing.

4). Not sure if its still true or not, but the old rule of buying a car in Ireland was ...organize the finance yourself and demand a straight cash discount or free extras etc. That way you can easily compare the deal each dealer is giving you....and play them off against each other.

Im normally not one to "bite" at such post as these but this is soo unbelievably wrong in going for it this time.

1) A straight sale buyer is not an ideal customer. They tend to offer less opportunities of profit. Used cars are generally where the majority of profit in the sales department comes from and used cars are generated by people trading in vehicles.

2) If it's the car the OP wants then the OP should go and buy it, just because you wouldn't do it doesn't mean they shouldn't.

3)Most garages that have remained open over the last 10 years are not on their knees.They have survived a very harsh trading period and are more than likely the better for it. While yes they may have targets to hit you are not going to walk in and buy a €37k Golf cheaper than it costs the dealer. I would imagine if its a 37k Golf it's not going to be a stock vehicle so the earlier its ordered the sooner the OP will take delivery.

4) Again completely wrong, the OP has said they are getting 0% APR, currently AIB motor loans sit at 8.95% APR thats €6500 in interest over a 5 year loan. If the OP was to take the dealer option of a 3 year PCP and at the end of the term takes a 3 year HP of the 14.5k GMFV they would still save €4000 in interest.

If you want to get the best deal call in person to 3 or 4 dealers, tell them the car you want the position your in and ask them how much they will sell you the car. Don't be a dick and you will fare out okay.

Anyway on to the original question.

PCP is just a hire purchase with a different structure.

1) Deposit, Your initial payment/deposit is taken off the capital cost just as in any HP agreement

2) Your monthly payments

3) GMFV(Guaranteed Minimum Future Value), This is the figure that you would have to pay if you wanted to purchase the car at the end of the agreement. It is also what the value that VW guarantee the car to be worth once it is kept in good condition and below the agreed mileage cap. You have no obligation to purchase the car, you are not liable for the GMFV at the end.

Because your in 0% agreement after a year you will just owe your principal amount borrowed less any payments made.

The reason to keep your deposit as low as possible is to ensure that do not end up in a case where you put in a massive original deposit and when it comes to the end of the agreement your equity does not cover your initial deposit and the car ends up costing your monthly payment plus the loss of your original deposit.

It also facilities an easier change at the end of the agreement as if you put in a small deposit your equity at then end has a better chance to be similar to your initial deposit. What that means that in 3 years time if you choose to change your car you will be financing a similar amount again and your payments stay the similar.

The above 2 don't apply if you think you are going to change after a year.

Lastly i would recommend you don't change after a year, An educated guess on cost to change(like for like)would be Year 1 €7000 Year 2 €11,500 Year 3 €15,000. That said if that's what you want you won't be get any better value than a 0% loan to do it with.