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Optimum PCP Deposit

  • 18-11-2023 6:58pm
    Registered Users Posts: 78 ✭✭

    A dealer told me today that I should put down as low a deposit as possible on a PCP on a new car. I have enough to cover a 30% deposit but he said this would be unwise as I wouldn't be getting the most out of the PCP deal. The rate is 3.9%. His advice would mean my monthly repayments would be quite high. I can afford them but that's not the point- I don't want to pay any more interest that I have to.

    Is it possible he is earning commission and trying to get me to borrow more than necessary? Or is there any sense in it?

    Is there an optimum deposit for PCP? I read that 20% may be the sweet spot?

    I would be grateful for advice as thus is my first time considering a PCP.


  • Registered Users Posts: 22,636 ✭✭✭✭mickdw

    The answer differs based on interest rate.

    Clearly when not zero percent deal, putting down max deposit is the way to pay least interest.

    There is more to consider though. If intending to keep the car for a long time, max deposit, then pay off at end. No issues.

    If trading in every 3 years, some would argue that putting in about 15 percent deposit is a sustainable situation as you may have a similar amount to roll forward the next time without putting any cash in therefore allowing you to keep similar monthlies. If you put in max deposit, you will get a very low monthly. Next car, you will likely the have to increase monthly or put in some more deposit money.

    It all depends on your situation.

    Personally I'd put in the max deposit as interest is crippling on pcp due to offsetting a big lump of borrowing till end of deal and id also put some money aside every month to give options at end of term.

  • Registered Users Posts: 17,224 ✭✭✭✭rob316

    3.9% is cheap money for a car loan, I'd be inclined to agree putting in 30% doesn't make sense.

  • Registered Users Posts: 4,001 ✭✭✭MarkN

    The danger with 30% is when you go again, you may have to put even more money in to get the same low repayments, or much higher repayments if you don’t want to put more deposit in.

  • Registered Users Posts: 22,636 ✭✭✭✭mickdw

    Whay I used to say to people (before prices went nuts and they suddenly started getting back large chunks of equity) was to do the figures with 10 percent deposit and be sure you can afford the monthly at that kind of deposit. If so go ahead with whatever deposit suits.

    The issues arise when someone can barely afford the monthly with max deposit, a deposit that may have come from a fully owned trade in. They are then fine for 3 years but up sh1t Street at trade in time.