Best way out of a PCP

Brian Scan

https://www.boards.ie/discussion/comment/123380171#Comment_123380171

Without new cars, there would be no used cars.

timmyntc

https://www.boards.ie/discussion/comment/123380281#Comment_123380281

I think the point he's trying to make is that PCP drives demands for new cars, which causes manufacturers to raise prices of new cars and enjoy a better margin.

If people stopped buying new cars, the prices would reduce until they started buying again. but that will never happen because people are happy to get into PCP cycles because all they see is monthly and not the endgame.

Henry Ford III

0% finance is a con.

You pay one way or another. There's no such thing as a free lunch.

DaveyDave

https://www.boards.ie/discussion/comment/123381710#Comment_123381710

Worked out well for me with my Golf. The finance on a cheaper equivalent i30 at 5.9% made it more expensive over the 3 years.

The €2k discount and 3 year service plan sweetened the deal.

circadian

https://www.boards.ie/discussion/comment/123377837#Comment_123377837

It depends on what else the savings are needed for. I recently bought a car for cash because I had been setting aside a few hundred a month towards running my old car/saving for a new one. I certainly wouldn't be looking to pay any kind of interest when I have the cash there. If 0% HP was on the table I would have considered it as it means I'd hold onto 50% or so of my savings and continue to put that few hundred towards the new car/costs in the same way, but that would have really come down to fees and costs of setting up a HP agreement.

Most of the time, you'd be mad to finance it when you can just stump up the cash in this scenario.

Mad_Lad

deleted

Busman Paddy Lasty

If I had cash in Buddy's scenario I still would have taken the 0% HP. Year on year his payments are losing value in today's money.

Much better to use cash for accelerated mortgage payments, investments (maybe after Trump shenanigans) or maxing out work pension AVCs.

Bass Reeves

https://www.boards.ie/discussion/comment/123387192#Comment_123387192

There is no such thing as zero% finance. If you buy without using your own money you can expect a discount off the list price. Mortgage money is the cheapest money you every borrow its always cheaper than even so called zero finance deals.

Leasing interest rates arranged by a car maker usually very competitive but they limit the amount they give in finance, and if anything goes wrong ( you get sick, you lose your job etc) you lose your car. There is never houses repossed in Ireland. If the only loan you are servicing is your mortgage then you're on a solid financial footing.

Car finance is expensive whether you use PCP, leasing or a personnel loan. Cars are much more dependabke than 40 years ago. Over the last 40 years lifespan of cars have increased from 8-12 years up to 15-20 and longer depending on the model and milage.

PCP is probably grand if you want to buy a new or nearly new car and finance it over 6+ years. You can do a 3 Year PCP and finance the balloon payment after the PCP.

If you are constantly refinancing through PCP you are spending a significant amount of your earning on your car. It's not as bad as as doing stage payments on your car insurance, buy with shop credit or financing using credit card but it next on the list after that.

Finance companies and car dealerships especially on PCP's look for a significant deposit and modest balloon payments on the car. The reason being in the case of a recession where are values drop sharply they want to cover the risk of hardback at the balloon payment stage. This is what caused the crash in car values in 2008 and bankrupted some car dealerships.

There is risk as well as finiancial cost with PCP's the risk is something happening that you need to sell or hand back. The 18 months hand back rule may seem a get out of jail clause but with equity/ repayments you have tied up in it ( significant deposit and accelerated repayments) it's an expensive get out of jail card.

PCP'S are loaded in favour of dealerships and financial institutions anyone that thinks different is naive

Busman Paddy Lasty

https://www.boards.ie/discussion/comment/123387351#Comment_123387351

While your post is informative and extremely long, I made reference to a single purchase by a Boardsie who I believe got a discount and 0%.

Maybe he could have got another grand off paying cash, maybe not. I also stated what I would do in his scenario. Not the ultimate homo economus decision.

Bass Reeves

https://www.boards.ie/discussion/comment/123387387#Comment_123387387

One swallow dose not make a summer. Not sure when that poster was referring to, 5+ years ago in the era of negative interest rates by the ECB, car manufacturers like the VW/Audi group negotiated very low finance rates and it was easier to hide them as zero% and they even in cases put itnin place for some of there second hand product

Over the last few years it's higly unlikly. Even then zero% might not be zero%. I was one getting a machine costing 4k abd you could zero% finance 75% of it for 2 years….. there was a 200 euro facility set up fee or about 3% per anum. If you paid up front the discount was about 200 euro.

While you might consider my previous post long there is no short way of explaining tge intricacies of car finance. It your second largest life time expense and can be your largest if you buy new all the time and use finiancial instruments to finance it.

JoeA3

There is no such thing as zero% finance. If you buy without using your own money you can expect a discount off the list price.

I'm sorry, but this comment and other ones along similar lines need to be called out. The usual boards hyperbole and resident WUMs in here are still alive and kicking.

I've bought several new cars in the last 15 odd years. Some through personal loans, some through my own funds and a couple through dealer finance. I've availed of 0% twice (that I can remember).

For any of the cars I've bought, I've negotiated a price with the salesman (including discount or trade-in price I'm happy to shake on) before the finance question even came into it. Whether I paid for it via their finance, my own money, the credit union or via magic beans, it didn't matter a jot in terms of the bottom line. Salesmen have never seemed particularly bothered in my experience either, very much a case of "up to yourself now" and directing me to their finance person IF I wanted to see whats available. On one recent occasion I told them I was doing my own thing, but then when the car arrived, there was a 0% HP offer which wasn't available when I ordered so on collection day I decided to avail of it.. seemed to make perfect sense to me to take a small amount on 0% rather than chewing up all my own savings.

Actually, now that I think of it, there was just one occasion I can remember where the dealer finance was a factor in a deal. It wasn't one of my cars on this occasion, I was helping my Dad out with his purchase. On that occasion there was a "dealer contribution" - basically a small extra discount off the list price IF you availed of their finance. My Dad being old school and a lot like some on this thread, he was wary of it, but once explained to him, he happily availed of it - and repaid it in full the following week!

Busman Paddy Lasty

https://www.boards.ie/discussion/comment/123387457#Comment_123387457

It was quite recent, within the last 2 months.

User1998

No such thing as cash discounts anymore. Dealers rather you take out finance.

Damien360

https://www.boards.ie/discussion/comment/123387599#Comment_123387599

I found exactly that when buying my car last year. They wanted me to take their finance and no discounts at all. I had nothing to trade in and was a cash buyer.

Given the debacle in the Uk over this with finance companies giving generous bumps to dealers to apply their finance (Close Brothers Finance), its a wonder this has not translated over here as our previous car was with Close Brothers so they operate in Ireland.