PCP...am I getting this right?

lalababa

PCP explained by me.......

On a 0% deal....I rent a new car for 3 years paying a deposit of 10% of sale price and roughly 40 % of sale price over3 years in monthly payments. At the end of 3 years I have the option to buy the 3 year old car for roughly 50% of sale price or walk away or enter into a new PCP on a new car.

So example: Cost price 25,000, pay deposit of 2,500 and 36 monthly payments of 278.
So after 3 years pay a total of 12,500 which is 87 euros per week. I have to maintain and service the car as well.
And I have no car.

Mike9832

Correct

PaulKK

Or you could look at it this way.

You want to buy a new car, and instead of paying for it all up front, you pay in installments with no interest for 3 years, effectively enabling you to put your own money to work earning interest.

After three years, you pay the balance that's left and pay no interest on the purchase at all without the initial outlay for the full purchase cost. Or, if preferred, you finance an amount that is substantially less than the car is actually worth.

Xodar

Don't forget all of the restrictions of the agreement (mileage, servicing intervals, servicing provider etc, etc....)

digiman

PaulKK wrote: »

Or you could look at it this way.

You want to buy a new car, and instead of paying for it all up front, you pay in installments with no interest for 3 years, effectively enabling you to put your own money to work earning interest.

After three years, you pay the balance that's left and pay no interest on the purchase at all without the initial outlay for the full purchase cost. Or, if preferred, you finance an amount that is substantially less than the car is actually worth.

This is exactly how I look at it when it comes to 0% pcp deals.

Del2005

lalababa wrote: »

PCP explained by me.......

On a 0% deal....I rent a new car for 3 years paying a deposit of 10% of sale price and roughly 40 % of sale price over3 years in monthly payments. At the end of 3 years I have the option to buy the 3 year old car for roughly 50% of sale price or walk away or enter into a new PCP on a new car.

So example: Cost price 25,000, pay deposit of 2,500 and 36 monthly payments of 278.
So after 3 years pay a total of 12,500 which is 87 euros per week. I have to maintain and service the car as well.
And I have no car.

You can continue to a new PCP contract and have another new car. If we had any sense no one would own a massively deprecating asset. The USA and UK have been doing PCP for years, in the US they don't even give the price for the vehicle in ads they just give the monthly payments.

theoneeyedman

Del2005 wrote: »

You can continue to a new PCP contract and have another new car. If we had any sense no one would own a massively deprecating asset. The USA and UK have been doing PCP for years, in the US they don't even give the price for the vehicle in ads they just give the monthly payments.

But.....

Are you not paying the biggest chunk of the depreciation in those first 3 years?

The depreciation slows down the older the car. If you're happy to be hit for the depreciation, and the numbers add up (eg 0% finance) then go for it. But it's not a no brainer, you're paying for it either way.

colm_mcm

And the more you change, the more year 1 and 2 depreciation you have to pay.

I think people are more clued in about PCP than a few years ago, but it’s not a magic scheme to get around cost of ownership. It’s kicking the can down the road - which works for a lot of people.

Marcus Rashford

For people with reasonably predictable cashflows (e.g. share options), PCP can make a lot of sense as a means to acquire the car.

Jeju

Or save 87 euro per week for 3 years and drive away in a car that was going to cost you double that and be paying no loan. Save the same amount for a further 3 years and upgrade to someone else's dedicated car.

ml100

These 0% PCP deals are not much good to you if you saved the price of a new car as they are pushing up the new car prices to cover the "0%" apr and they wont discount if you not doing PCP.

digiman

ml100 wrote: »

These 0% PCP deals are not much good to you if you saved the price of a new car as they are pushing up the new car prices to cover the "0%" apr and they wont discount if you not doing PCP.

It's not a good idea to go saving for a new car and then handover 30k for a car if you can get finance at 0%. It's much better to have the 30k working for you that you can have access to in the future should you need it. Even if it is costing me a little more at the time I'd sleazy take the option of having the 30k sitting there in my bank account.

ml100

There are lots of reasons why people don't want car loans, for example it can have a big effect on the amount of a mortgage you can get, etc PCP can work for some people, but they're taken over so much that new car pricing is tailored for PCP now, by the way if you think you are paying 0% on PCP you are not, it's priced into the selling price of the car.

digiman

ml100 wrote: »

There are lots of reasons why people don't want car loans, for example it can have a big effect on the amount of a mortgage you can get, etc PCP can work for some people, but they're taken over so much that new car pricing is tailored for PCP now, by the way if you think you are paying 0% on PCP you are not, it's priced into the selling price of the car.

It might be but you won't get the car any cheaper if you paid in cash so it doesn't actually matter.

bazz26

Just be careful too of some of these headline grabbing low APR PCP deals. They can be misleading, yes they can give you a very low interest rate but that interest rate could be off the full retail price of the car rather than discounted price. So while your paying little or no interest your actually buying the car at full retail price - swings and roundabouts. Just make sure to calculate how much the car is costing you in total over the term of the deal rather than just monthly repayments or the interest rate up front.

Marcus Rashford

But there is no discounted new price...it’s not like someone with cashola gets a better deal.

bazz26

You can get a discount on a new car for buying straight - ie no trade in. That has nothing to do with paying by cash or going PCP.

Marcus Rashford

bazz26 wrote: »

You can get a discount for buying straight - ie no trade in. That has nothing to do with paying by cash or PCP.

So it’s irrelevant.

The point is that PCP or cash makes no odds...in fact, the garage prefers PCP.

bazz26

Marcus Rashford wrote: »

So it’s irrelevant.

The point is that PCP or cash makes no odds...in fact, the garage prefers PCP.

You seem to be missing my point though. Some very low or zero interest PCP rates can be conditional that you pay the full retail/list price. So instead of including interest every month they are charging you the full retail/list price upfront instead - ie they are still taking money off you, just not calling it interest.

Marcus Rashford

bazz26 wrote: »

Marcus Rashford wrote: »

So it’s irrelevant.

The point is that PCP or cash makes no odds...in fact, the garage prefers PCP.

You seem to be missing my point though. Some very low or zero interest PCP rates can be conditional that you pay the full retail/list price. So instead of including interest every month they are charging you the full retail/list price upfront instead - ie they are still taking money off you, just not calling it interest.

You seem to be missing the main point...EVERYONE pays the full price!

Xodar

Marcus Rashford wrote: »

You seem to be missing the main point...EVERYONE pays the full price!

Cash buyers don't

colm_mcm

Marcus Rashford wrote: »

You seem to be missing the main point...EVERYONE pays the full price!

No they don’t. Hardly anyone pays the full retail price.

Xodar wrote: »

Cash buyers don't

Cash deal meaning straight deal as opposed to paying in cash I assume.

Marcus Rashford

You’re living in the past. Cash buyers get little if anything off new cars these days.

Lantus

Xodar wrote: »

Don't forget all of the restrictions of the agreement (mileage, servicing intervals, servicing provider etc, etc....)

Servicing any car is critical to its continued operation. An expensive new car even more so. Mileage is sometimes limited but generally not. I don't see these as restrictions.

MIKEKC

PaulKK wrote: »

Or you could look at it this way.

You want to buy a new car, and instead of paying for it all up front, you pay in installments with no interest for 3 years, effectively enabling you to put your own money to work earning interest.

After three years, you pay the balance that's left and pay no interest on the purchase at all without the initial outlay for the full purchase cost. Or, if preferred, you finance an amount that is substantially less than the car is actually worth.

Put your money to work earning interest ? Joke

bazz26

Marcus Rashford wrote: »

You seem to be missing the main point...EVERYONE pays the full price!

No they certainly don't. If you can buy a brand new car with no old car to trade in then you can get a discount off the car. If you can also get 0% PCP on top of that's even better. To say everyone pays the full price is false. If you think there is no discount and everyone pays full price then your doing something wrong.

Marcus Rashford wrote: »

You’re living in the past. Cash buyers get little if anything off new cars these days.

You seem to confuse cash buyer in motoring context with someone who pays in cash. In the motoring context a cash buyer is someone who is buying and has no old car to trade-in or part exchange against the new car. This has nothing to do with the method of how they pay for the car.

Marcus Rashford

I’m not confusing it at all.

People are saying that a cash buyer (i.e. no trade in and no finance requirement) can get a better deal.

I don’t believe they can.

For the avoidance of doubt, I am not talking about people with trade-ins who clearly end up paying more.

AndrewJRenko

ml100 wrote: »

These 0% PCP deals are not much good to you if you saved the price of a new car as they are pushing up the new car prices to cover the "0%" apr and they wont discount if you not doing PCP.

This. There's no such thing as free money.

Ben Done

AndrewJRenko wrote: »

This. There's no such thing as free money.

So what is the standard discount one should expect off list price, for 'cash'?

colm_mcm

Ben Done wrote: »

So what is the standard discount one should expect off list price, for 'cash'?

Up to 8% would be doable on a lot of cars. Some unpopular cars will have much bigger discounts available. On newly launched models big discounts aren’t usually possible.


‘Cash’ meaning straight deal discount - or a discount used to artificially inflate the trade price of a car to a near retail price level.

PaulKK

MIKEKC wrote: »

Put your money to work earning interest ? Joke

Joke? How so?

If you are paying 0% then anything you get on the savings even if the interest is crap is better than spending it all up front.

You also aren't landing out all your savings and have something to fall back on if needs be.

mgbgt1978

Marcus Rashford wrote: »

I’m not confusing it at all.

People are saying that a cash buyer (i.e. no trade in and no finance requirement) can get a better deal.

I don’t believe they can.

For the avoidance of doubt, I am not talking about people with trade-ins who clearly end up paying more.

WHAT ? In just one post you have stated that that you don't believe that somebody with no trade-in can get a better deal on a new car.
...and then say that people with trade-ins clearly pay more .

AndrewJRenko

Ben Done wrote: »

So what is the standard discount one should expect off list price, for 'cash'?

I'll let you know right after you drop into your bank for a zero interest loan and see what they say.

Xodar

Lantus wrote: »

Servicing any car is critical to its continued operation. An expensive new car even more so. Mileage is sometimes limited but generally not. I don't see these as restrictions.

Some of the PCP offerings I have looked at are specifying the annual mileage, the service center that can be used and condition of vehicle at the end of period. There are probably more that I did not become aware of as I did not look too hard as I am not interested and will never use the offering.

Normally I will service my own car(s) and bike which breaks the conditions of the PCP with the providers I looked at. Further I would like to be able to drive "my" car for however many miles per year I like without worrying about a pre-determined limit (I used to drive 150 mile round trip daily) and finally the "condition" is (in my opinion - subjective ) a very subjective evaluation of a vehicle - obviously there can be predetermined acceptable levels but if you are unlucky to get a príck it may cause undue stress.

This is just my opinion and I do not believe PCP is the way to go (I don't believe a new car is the way to go but in Ireland there is a visceral fear of not "keeping up with the Jones's" ) and appears to be a level of snobbery that I find hard to comprehend.

What ever happened to living within ones means or failing that saving enough to get a loan from the Credit Union to cover the cost of the car (at sometimes the low rate of 6.5% (on the depreciating value - not the principle)) and 'owning' the car from the very start.

PCP is something that will be making headlines for all the wrong reasons in the next 3 - 5 years (in my opinion)

Del2005

theoneeyedman wrote: »

But.....

Are you not paying the biggest chunk of the depreciation in those first 3 years?

The depreciation slows down the older the car. If you're happy to be hit for the depreciation, and the numbers add up (eg 0% finance) then go for it. But it's not a no brainer, you're paying for it either way.

With PCP you are only paying for the depreciation. That's the reason why they tell you how much it will be worth at the end of the contract. You can then choose to pay the depreciation on another new car or buy your depreciated car and continue to see depreciation until you sell it or scrap it.

Even if you buy a car straight and you plan to sell it in 3 years you will need to keep it in good condition, maintain it with a dealer and not do big mileage. Because no one is going to pay good money for a rough high mileage 3 year old car with no service history.

So not much difference at the end of 3 years if you got a car on PCP or straight if you want to change.

Marcus Rashford

mgbgt1978 wrote: »

Marcus Rashford wrote: »

I’m not confusing it at all.

People are saying that a cash buyer (i.e. no trade in and no finance requirement) can get a better deal.

I don’t believe they can.

For the avoidance of doubt, I am not talking about people with trade-ins who clearly end up paying more.

WHAT ? In just one post you have stated that that you don't believe that somebody with no trade-in can get a better deal on a new car.
...and then say that people with trade-ins clearly pay more .

Okay, I will explain it to you again.

Cash buyer pays X
PCP buyer pays X
Trade-in pays X plus

People’s point is that cash buyers are no better off than PCP buyers.

Do you know how little the margin is on most new cars?

Del2005

Marcus Rashford wrote: »

Okay, I will explain it to you again.

Cash buyer pays X
PCP buyer pays X
Trade-in pays X plus

People’s point is that cash buyers are no better off than PCP buyers.

Do you know how little the margin is on most new cars?

Sometimes dealers can give better deals if you take their finance as they get a cut. But when buying a car you need to look at the total cost of ownership not the sticker prices because you can get better value by having your own money earning interest if you can get zero rate finance or get a better deal taking the dealer finance than sorting your own. But you need to research each option because what's good for me might not be suitable for you.

Tikki Wang Wang

Ben Done wrote: »

So what is the standard discount one should expect off list price, for 'cash'?

10%. Maybe more if you bargain hard or in increments.

Phileas Frog

Xodar wrote: »

PCP is something that will be making headlines for all the wrong reasons in the next 3 - 5 years (in my opinion)

People have been saying that for the last 3-5 years too...

BarryD2

Marcus Rashford wrote: »

So it’s irrelevant.

The point is that PCP or cash makes no odds...in fact, the garage prefers PCP.

If the garage prefers PCP finance to money up front as in a straight cheque or bank transfer, then there HAS to be a reason. There must be some extra benefit to the garage. Anybody in business given a choice between giving credit in some form and a one off payment will always prefer the latter in general terms.

uck51js9zml2yt

BarryD2 wrote: »

If the garage prefers PCP finance to money up front as in a straight cheque or bank transfer, then there HAS to be a reason. There must be some extra benefit to the garage. Anybody in business given a choice between giving credit in some form and a one off payment will always prefer the latter in general terms.

The garage isn't giving the creit. They are acting as brokers for a finance house who provide the money to the garage and the buyer repays it.

They also get commission for the sale.

awec

BarryD2 wrote: »

If the garage prefers PCP finance to money up front as in a straight cheque or bank transfer, then there HAS to be a reason. There must be some extra benefit to the garage. Anybody in business given a choice between giving credit in some form and a one off payment will always prefer the latter in general terms.

I don't think garages care, you just see them promote PCP more often because PCP is easy to market to customers. They can manipulate the numbers by kicking the can down the road which makes it look like you can own nice cars for relatively low payments.

"Drive away in this brand new car for as little as x per month".

The garage is getting paid one way or the other when you drive off the forecourt.

PCP can quickly turn into a problem if you are not financially competent enough to save the extra money each month above the monthly payment in order to fund the balloon or your next deposit. Easy to get sucked into an endless circle of debt, and at the end of it not even own a car.

Widdensushi

Ben Done wrote: »

So what is the standard discount one should expect off list price, for 'cash'?

13 percent is what I got off the list the end of last year for a 191.The motorist is paying for the interest free loans one way or another.

MIKEKC

PaulKK wrote: »

Joke? How so?

If you are paying 0% then anything you get on the savings even if the interest is crap is better than spending it all up front.

You also aren't landing out all your savings and have something to fall back on if needs be.

Everything has to be paid for .If there was no zero% finance the cars could be sold cheaper. Always heard cash is king

PaulKK

MIKEKC wrote: »

Everything has to be paid for .If there was no zero% finance the cars could be sold cheaper. Always heard cash is king

Not necessarily. With PCP you can be sure they are boosting the number of new cars they sell overall.

People who would never buy new before are buying new and lots of people are going new again after 3 years because they like having the new car.

This is where the money is in it for the manufacturer, they are giving 0% and getting increased volume. They are also getting 3 year old good quality low mileage stock in regularly for those on here that seem to have it in for PCP.

rn

There's an overwhelming fascination at actually owning a car. The most important thing for most people is access to a car when you need it.

Pcp can work for many people, especially if they can predict in 3 years time where they'll be financially in life. If you rely on the equity in the car to renew pcp, you can't afford it.

On finance v cash, I've experienced both and I agree with Marcus, the only thing that effects the deal is straight or trade in. The finance is a separate sale in many dealers.

Unfortunately very difficult to get impartial advice as to what's best value on case by case, so salesmen exploit that.

awec

rn wrote: »

There's an overwhelming fascination at actually owning a car. The most important thing for most people is access to a car when you need it.

Pcp can work for many people, especially if they can predict in 3 years time where they'll be financially in life. If you rely on the equity in the car to renew pcp, you can't afford it.

On finance v cash, I've experienced both and I agree with Marcus, the only thing that effects the deal is straight or trade in. The finance is a separate sale in many dealers.

Unfortunately very difficult to get impartial advice as to what's best value on case by case, so salesmen exploit that.

I don't think thats it.

I think many people don't want to be paying car payments all the time. PCP suits better for people who want to change car regularly, and who don't mind pretty much always having a car payment to make each month.

BarryD2

Naomi Yummy Tenseness wrote: »

The garage isn't giving the creit. They are acting as brokers for a finance house who provide the money to the garage and the buyer repays it.

They also get commission for the sale.

Then the finance house is taking the risk and must build some of that into their deal with the garage. Money up front, cash flow - that's what all businesses involved in retail prefer. Finance houses are middlemen, feeding off the transaction and adding costs.

ShadowHearth

awec wrote: »

I don't think thats it.

I think many people don't want to be paying car payments all the time. PCP suits better for people who want to change car regularly, and who don't mind pretty much always having a car payment to make each month.

I always drove old cars. In price range 400eu to max 8k. 2 years ago I felt financially stable and needed reliable car due to 120km drive to work. So I did what I wanted to all my life: own at least once a brand new car. Finally there was something I could afford and I liked.
PCP, 0% apr and got 3k scrappage for car that costed 500eu max. Plan was take it, pay monthlies and put away 70eu each week to separate account to buy out the car in 3 years.
Almost 2 years in and instead of buying it out I want to get other car. In August I will have 7.5k in that account, which now I can use for next cars deposit and do same thing again.

PCP is a great product for people who know how to manage their money. It's even better for people who want to change cars now and then. It gives flexibility.
VW bank has Irish market by the balls with low apr rates and now even second hand car PCP with low apr 1.9-2.9%.
I really like Huyinday i30N and 31k can get you 181 one, but they don't do PCP on it and HP is 5.9%.
On the other hand we have Leon Cupra 290hp 172 for 30k. They do 2.9% apr and PCP on it. So I can pay low monthlies and keep putting away extra to cover balloon or change again. Most important thing that money I still have on account and gives me flexibility. In 3 years time I can use only half of saved and refinance rest.
So as you can see, Leon is just way more attractive proposition.

I went from owning old car and having it's own issues, to having new car and just paying monthlies. After trying both methods, I prefer just pay monthlies and have reliability, flexibility, warranty. It's not cheaper, but you have to ask yourself, how much value you put on peace of mind and car not back stabing you. If my car breaks, I can't get to work, no way to get a lift or public transport. 2 days per month me not being able to make to work will cost more then my monthly payment. When my car needed wheel bearing done, it was in dealership for 3 days. I got replacement car and did not missed a day of work.
PCP is not evil, like some people trying to make it look. It's a product that suits some and does not others. Just because someone does not understand how it works, what benefits of it is, does not mean it's ****.

FaganJr

PaulKK wrote:

effectively enabling you to put your own money to work earning interest.

Ha ha, really, where can you earn interest these days???

PaulKK

FaganJr wrote: »

Ha ha, really, where can you earn interest these days???

State savings for example give 5% on a five year bond tax free. Just an example, when you borrow at 0% any return on your own money is better than buying outright.