Are there many benefits to PCP?

bazz26

Very little incentives at present across the board as demand is higher than supply due to the chip shortage and logistical delays. Manufacturers don't have to try to shift cars they cannot even build or deliver at present.

Cyrus

https://www.boards.ie/discussion/comment/118063399#Comment_118063399

Their only hope of selling a few of them at that kinda rrp is to discount heavily or juice the gmfv imo.

DaveByDavid

https://www.boards.ie/discussion/comment/118064709#Comment_118064709

Yeah it's pretty crazy

Dealer said to me it was 30% of vehicle value which is more what other dealers should be doing.

Said they were protecting consumer. But at nearly 800 a month payments!

DaveByDavid

Another Ford dealer has the same to me in terms of low GMFV, this time for the RWD standard range mach-e.

• Car price - 55k~
• Deposit = 17,500
• 36 months @ 633 euro
• GMFV - 18,407

The GMFV is again quite a bit lower than other cars I've looked at under PCP. According to Ford this is to "try and give equity in 3 years time".

What does this mean? That they'd hope the car is worth a good bit more than the GMFV?

Buddy Bubs

Low gfmv really means you'll have paid off a higher proportion of the car by the time the terms allow you to hand it back, and if that happens the dealer has equity.

If you roll over, you have equity. But it's all nonsense really when you get your head around it, it's just pay mpre now or pay more later, you still pay.

DaveByDavid

https://www.boards.ie/discussion/comment/118090839#Comment_118090839

Yeah fair point.

So low GFMV might be good as you say if I want to roll over, but not if there's a chance I'll keep.

It's all so complicated for a first timer :)

Cyrus

https://www.boards.ie/discussion/comment/118090160#Comment_118090160

ford dont have faith in the residuals so they are safeguarding against getting back a load of cars that are worth less than the GMFV

Buddy Bubs

https://www.boards.ie/discussion/comment/118090875#Comment_118090875

No, if you want to keep it's a good thing at the time, you've less to pay. Although it means you paid a lot between the deposit and the monthlies. See, it's nothing to do with the cost of the car, it's only method and timing of your payments.

I admit it can be daunting and confusing for someone looking for the first time.

carsfan2

https://www.boards.ie/discussion/comment/118090910#Comment_118090910

This is it in a nutshell.

buyer is taking the risk here. Ford are protecting themselves.

Sam Russell

As I understand it, the GMFV is the final payment of a HP contract. The difference is that a normal HP would be 5 years while the PCP is 3 years. It has nothing to do with the value of the car in the future - or at least the seller hopes not as that could be disastrous.

The PCP is just a new name for HP, and just to confuse, PCP does not have the same protections of the HP contract It can give the impression that a car that is unaffordable for them to some is suddenly possible - which is OK on a good day, but any headwind and can be disaster. For the Motor Trade, the hope, it ties the customer to ever chasing a new car every three years. We see the same marketing used with mobile phones.

It might suit some, particularly with zero interest, and for those that see owning a new car as important - but not for me.

DaveByDavid

Will try in here before I start a new thread as a discussion in the electric car forum got me thinking about finance.

I'm buying a new car in January and will be putting half the money up front and financing the rest. I think I've decided against PCP because it costs more over the course of the finance years and I'm not sure I'm suddenly going to turn into a new car every 3 years kind of person.

So it's hire purchase I was going to opt for but some people in the other forum got me thinking about a bank loan. I'd originally said no to that idea was APR was higher than the 5.9% offered by car company, but I saw that AnPost are offering the same 5.9%.

So if I went with AnPost I'd have to pay back at the same monthly rate, over the same time scale but I'd own the car outright.

Is there any reason I'd opt to go with the dealer than AnPost? It's the first time I've bought a brand new car so could well be missing something.

https://www.boards.ie/discussion/comment/118124804#Comment_118124804

In the past, a "cash" buyer (no trade in, no finance required from a dealer perspective) might have given you some edge in terms of negotiation on price or extras. However, demand appears to be outstripping supply right now so there appears to be less possibility of price reduction- and on new cars, margins are quite low anyway.

However, by owning the car outright, you have the option to sell it at any stage the day after you buy it- this may become a requirement for you in the coming years- it's probably one of the most significant benefits

DaveByDavid

https://www.boards.ie/discussion/comment/118129619#Comment_118129619

To be honest I think I've already played my hand in terms of discount, not sure I can get much more.

I don't expect discount for cash anyway, I assume it's worse for dealers.

More worried about what's best for me. I wil keep considering PCP in case I want to change car in 3 years.

But in terms of HP Vs bank loan I can't see much reason not to go the bank loan route for same APR.

bidiots

HP gives an option that bank loan doesn’t:

Can you cancel your HP before you finish your monthly repayments?

With a HP you can end your agreement at any time and give back the car. To do this you will need to pay half the price (if you haven’t done so already) – this is called the ‘half rule’.

The half rule is part of the Consumer Credit Act 1995 and gives you the right to end a HP agreement at any time. The half rule limits your liability (the amount you are responsible for) to half the HP price of the car. The agreement from the finance company must show you the figure for half the HP price of the car.

If you have paid less than half of the HP price of the car, you can end your agreement and give the car back, and you will only owe the difference between what you have paid and half of the HP price of the car. You don’t have to pay half the HP price to the finance company before you end the agreement under the half rule. However, you will have to pay the difference between what you have paid to date and half the HP price. You will also be responsible for the cost of any repairs that are necessary.

If you have paid more than half of the HP price of the car and have not missed any payments, you can end the agreement and hand back the car. You will be responsible for the cost of any repairs that are necessary. If you have paid more than half of the HP price, you will not be entitled to any refund.

DaveByDavid

https://www.boards.ie/discussion/comment/118153835#Comment_118153835

Interesting, thanks - I assumed I might have been missing something. That's good to know.

Still unsure which way to go. PCP still on the table despite no incentive of lower APR which means total credit is higher but have the flexibility to trade up in 3 years if I want.

Wheety

I've said it before and this thread proves it, some people don't really understand PCP. The dealers should have to call it Final Payment instead of Guaranteed Minimum Future Value.

It should also be clearer that the Final Payment is basically an interest only loan for the 3 years. You will still owe the full amount at the end of the 3 years despite paying interest on it all that time. Obviously I'm talking about non 0% deals.

It would also make it clearer what happens at the end of the 3 years. I think GMFV muddies the waters.

DaveByDavid

https://www.boards.ie/discussion/comment/118154044#Comment_118154044

It's certainly confused me but I think I got there in the end.

Fully understand I have to make that final payment but I guess it still gives some flexibility in trading up if you wanted to, even though it means the monthly payments continue.

If I have the cash now to pay for the car I can always keep the final payment back so I have options in 3 years.

That's if I decide to go PCP, I'm still considering AnPost loan.

Wheety

https://www.boards.ie/discussion/comment/118154823#Comment_118154823

Ah that wasn't aimed at you really. You were asking questions. Someone on the first page said you don't accrue interest on the deferred payment.

I remember a few years ago working out the interest on the main part of the loan and thinking it was wrong. It was only when I added in the balloon payment I realised you're also paying interest on that amount.

As someone else said it's like a bad HP deal. Deferring part of the payment to the end, paying interest on that part and don't have the protections of normal HP. PCP only makes sense to me if you get a really low APR, preferably 0%.

People talk about the option of changing car every 3 years. If you're on a normal HP you can sell your car to a dealer, clear the remaining finance and use what's left as a deposit. That's what happens with PCP only it's worded differently/more confusing.

DaveByDavid

https://www.boards.ie/discussion/comment/118155083#Comment_118155083

Yeah for sure, I guess you just usually pay more up front.

For HP I'd essentially be putting up a bigger deposit and monthly payments but on the flip side when I sell the car I'd get more of a deposit for next one as I'd have already paid off more of the car.

Swings and roundabouts I suppose to a certain extent.

Craig_David

Can anyone tell me do you need to provide proof of income in order to secure PCP financing?

In between jobs at the moment and been wanting to get a car for some time now..

As part of the loan arrangement, do they look for proof of employment/payslips?

DaveByDavid

https://www.boards.ie/discussion/comment/118307930#Comment_118307930

I haven't yet done the finance but I'd be extremely susprised if the answer is they don't check.

Would assume employment is part of standard checks.

Craig_David

https://www.boards.ie/discussion/comment/118308404#Comment_118308404

thanks, yeah I was kind of thinking the same.

It depends how much you value money vs the pleasure of having a new car. Economically PCP is not the best value for money, many people are locking themselves in to having to buy a new car every 3 years as they cannot fun the balloon payment. Furthermore, it is not really a car completely free for your use as in the traditional sense, you will get penalised for going over set miles per year for example, quite restrictive.

That said, if it wasn't for PCP there wouldn't be so many nice new motors on the road, and the second hand market would suffer even greater.

My advice is, if you want to be smart with your money, avoid. If you however gain considerable pleasure out of a new motor, consider.

All the best, if you go PCP, I hope to purchase your car in a couple of years at a knock down price when you hand it back for another new one! :) :) :)

DaveByDavid

-

DaveByDavid

https://www.boards.ie/discussion/comment/118308567#Comment_118308567

11:22AM

I'm probably going HP over 4 years I think.

I have the cash for the car and would have the money for the balloon payment as well but PCP just costs more overall.

HP doesnt stop me trading up in 3 years, I could still use any trade in to clear the credit and put rest towards a new deposit if I wanted.

Just means I don't have that guaranteed future value.

DaveByDavid

Got the final figures and picking up car over next few days. Because the APR is the same % on both HP and PCP it means PCP will cost more over the term, but of course it means less money now.

The fact I can still trade in on HP at any point over the 4 years and use part of the trade-in value to pay off the credit and use it for a new deposit (in the same way as you can with PCP) makes me tempted to just go for HP.

My savings aren't earning any interest anyway, so it just means losing more money now than in 3 years.

PCP

PCP (15,000km PA) 5.9% APR

Car - €54,675

PX - €500

Deposit - €15,000 ( Max Deposit)

Monthly’s - €655.51over 36mths

GMFV - €20,863.05 at the end of term

Total car cost if paid off = 59,461.41

HP

HP 5.9% APR ( Restructured Figures)

Car - €54,675

PX - €500.00

Deposit - €29,000

Financing - €25,175

Monthly’s - €585.65over 48mths

Total car cost if paid of = 57,111.2

Am I right in saying that whether I end up trading in or not, PCP is going to cost me 2,500 more either way?

Casati

https://www.boards.ie/discussion/comment/118414717#Comment_118414717

Yes- but only because you are financing €14k less with the HP option.

Cyrus

https://www.boards.ie/discussion/comment/118418541#Comment_118418541

exactly, it really comes down to the benefit to you of having that 14k available to invest or save or whatever.

DaveByDavid

https://www.boards.ie/discussion/comment/118420077#Comment_118420077

Yeah fair enough, and goes back to something else I was saying before that I'm not sure what I'll do in 3 years so maybe being flexible is better.

Cyrus

https://www.boards.ie/discussion/comment/118420115#Comment_118420115

Flexible in what way?