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PCP finance.

[Deleted User]

Ok so after a while of my brother and I trying to figure out the benefits of PCP we can't find any.

He's looking at getting a new Audi and we've been looking into pcp, he changes every 2 years or so and might have 15 k miles maximum on the clock so we thought pcp might suit him better.

You got to come up with a large deposit if you don't have a trade in and while your monthly payments appear low when you add in the fact you need a new deposit for the new pcp after 3 years your 300 a month pcp suddenly turns into 600+ pm.

So what's the benefit over hp or bank loan ?

The only hing with hp or loan is you pay the full interest where as pcp yup don't ?

Either way I see little benefit on a normal loan and trade in and re finance after 3 years or so. Only thing is VW bank has much lower interest than any other bank or finance.

For me doing 20-25 k miles a year pcp would leave me with not much on the gfv.

It seems to me that people could get caught out at the end because you can be damn sure you won't have much over the gfv to use as a deposit.

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26000 Elephants

opinionated3 wrote: »

I've being following this thread for a while now and it seems to me that pcp is not something that will suit the typical average paid irish worker. I think the big problem is not the initial 3 years ...it's the decision time when the 3 years is up. I can't see there enough equity in most cars to see a person continue on with a new car again and keep the same repayments. I realise that the option is there to refinance the current car and pay it off over a longer term but obviously that won't suit someone who got into pcp on the basis of upgrading every three years.

The problem is that PCP allows people to finance cars they otherwise might not afford. If you are realistic in your deposit and monthlies, then there is no reason why you wont be able to get back into a similar car in 3 years for similar money.

But if you look for small payments it ill be almost impossible to get another car without finding an extra few quid from somewhere.

MuddyDog

What happens if the GMFV is higher than the maximum 31% deposit of the new car you want to trade it in for after 3 years?

Lux23

It never would be, they would find some way to make sure it doesn't. In fact, you could end up owning them money.

MuddyDog

Lux23 wrote: »

It never would be, they would find some way to make sure it doesn't. In fact, you could end up owning them money.

Why would it never be? The dealer would not know what new car I'd want after 3 years. If my gmfv on my current pcp deal is 20k and after 3 years I want a 40k car then what happens?

Marcusm

Lux23 wrote: »

It never would be, they would find some way to make sure it doesn't. In fact, you could end up owning them money.

Huh? Do you understand PCP? The outstanding finance at the end of the 3 years is the GMFV; if the car is worth more than this it forms part of a deposit for a new vehicle. If the car is worth less than the GMFV/finance balance then that is a problem for the finance company.

Most PCP is provided by the captive finance subsidiaries of the motor manufacturers and they generally set the GMFV to be at a level below what the expected value will be to try and ensure that the customer will roll into a new PCP on a new vehicle at roughly the same monthly rate.

This is how PCP works, they need you to get hooked on a new car. Provided there is no shock and there is not a glut of secondhand PCP cars driving down residual values, it helps them establish a nice addictive 3 year cycle.

grogi

MuddyDog wrote: »

Why would it never be? The dealer would not know what new car I'd want after 3 years. If my gmfv on my current pcp deal is 20k and after 3 years I want a 40k car then what happens?

You clearly don't understand the scheme...

GMFV is how much you owe in three years, not how much you have...

Blazer

good calculator for pcp

http://www.icalculator.info/terminology/GMFV-final-payment.html

Heat_Wave

Hi guys,

Volkswagen have an APR of 3.9% for their PCP plan.

Can anyone tell me, does this apply to all Volkswagen garages in Ireland? Also, is there any movement/negotiation on this? It is very high.

carloscorreia

On the volkwagen.ie website I can see some models with 1.9% APR (Golf GTD/GTI,etc.) and other models at 5.9% like the new Tiguan.

Drummerboy08

How is 3.9% APR high?!

conzy

Heat_Wave wrote: »

Hi guys,

Volkswagen have an APR of 3.9% for their PCP plan.

Can anyone tell me, does this apply to all Volkswagen garages in Ireland? Also, is there any movement/negotiation on this? It is very high.

Not only is that lower than most other car dealers, its less than half the rate you will get from your credit union or bank. Which will be ~8% and ~10% respectively

mickdw

Drummerboy08 wrote: »

How is 3.9% APR high?!

Its very high compared to zero percent that they were offering. And they were offering that on newer models too not just run out stuff.

Heat_Wave

mickdw wrote: »

Its very high compared to zero percent that they were offering. And they were offering that on newer models too not just run out stuff.

Exactly.

conzy

They only seem to offer 0% on vehicles with a higher margin. Makes sense

jca

Skoda are still doing 0% on all models except the Superb

Drummerboy08

mickdw wrote: »

Its very high compared to zero percent that they were offering. And they were offering that on newer models too not just run out stuff.

Everything is high compared to 0% tho. Please remember that 0% finance will not be around forever, it's almost like a drug at the moment. Consumers will have to be weaned off it as time goes on.

3.9% APR is still a highly competitive rate, i certainly wouldn't call it high.

bazz26

conzy wrote: »

They only seem to offer 0% on vehicles with a higher margin. Makes sense

Or run out models that are soon to be facelifted or replaced e.g. the Golf.

grogi

Drummerboy08 wrote: »

Everything is high compared to 0% tho. Please remember that 0% finance will not be around forever, it's almost like a drug at the moment. Consumers will have to be weaned off it as time goes on.

3.9% APR is still a highly competitive rate, i certainly wouldn't call it high.

No, it will. It's just a marketing gimmick.

When you are offered 0% finance, the sale makes money somewhere else - thus there is a cash discount to be negotiated. Money costs - around 3% per year.

Thus if one finances 30k car with 10k deposit and GFMV in 3 years of 12k, the average finance balance over the period of PCP is €16,000. 3years * 16k * 3% ~= 1.5k. That's how much the 0% PCP costs the seller - and that's more-less what you could get on top of scrappage etc. when you pay cash.

Drummerboy08

I understand how it works.

Interest rates are low at the moment from the ECB but will rise in the near future. 0% is subsidised by the manufacturer, not the dealer, much like the scrappage offers that are currently out there.

It's also why you rarely see manufacturer backed scrappage AND 0% on new cars.

It's a simple fact that 0% will not be around forever, and the likes of VW Bank have already stated this to dealers an customers alike.

Just something to be aware of, especially if you are buying a run out model or older model as the 0% will more than likely not be there in 3 years time on the replacement car.

Heat_Wave

Would it be cheaper to order a car in the UK and go PCP on it, rather than here?

Can you even go the PCP route overseas?

conzy

Heat_Wave wrote: »

Would it be cheaper to order a car in the UK and go PCP on it, rather than here?

Can you even go the PCP route overseas?

Even if that was possible (I bet you need to be resident in the country you are taking out the PCP scheme in)

You would have to pay VRT as soon as you brought it to Ireland. So it would absolutely not be cheaper

tomaso11

Is PCP an option for someone who runs a taxi? was talking about it with a friend who owns one and was looking to change, he thinks is not an option if he wants to use it as a taxi

Fiskar

Heat_Wave wrote: »

Would it be cheaper to order a car in the UK and go PCP on it, rather than here?

Can you even go the PCP route overseas?

I looked into it last year, PCP is not available to non resident persons. I would imagine you need to have a UK social security number for credit checking. if you find a way please do let me know.

OmegaRed

tomaso11 wrote: »

Is PCP an option for someone who runs a taxi? was talking about it with a friend who owns one and was looking to change, he thinks is not an option if he wants to use it as a taxi

There are mileage restrictions on PCP financed cars if you intend on handing it back before or after 3 years. You'll have to pay more for each km you are over. The limit is like 10,000/15,000 km per year. Wouldn't make sense for a taxi unless you decided you'll have the car for more than 3 years, can afford the repayments and the balloon payment at the end....

OmegaRed

VW are now doing free insurance when you PCP finance a new VW Polo or UP Criteria apply:

http://ext.volkswagen.ie/en/162-polo-and-up.html

http://www.volkswagenbank.ie/content/sites/vwcorporate/volkswagenbank_ie/en/home/ourproducts/Drivers_Qualifying_Criteria.html

Drummerboy08

Fiskar wrote: »

I looked into it last year, PCP is not available to non resident persons. I would imagine you need to have a UK social security number for credit checking. if you find a way please do let me know.

The finance company won't allow you to permanently export the vehicle while it it is still on a PCP agreement, so no its not possible.

opinionated3

As regards the whole pcp phenomenon that's currently going on here in this country, I'm of the opinion that there may be serious problems down the line when the 3 year term comes to a conclusion and people have to make their choice. ...finance the balance, hand the keys back and walk away or upgrade to the newer model (which i imagine is what most buyers would like to do and what the dealers would also like them to do). However the problem i think that is going to rear it's ugly head is when the dealer tells the buyer there isn't enough sufficient equity in the trade in to clear the balance AND provide a suitable deposit for the new car that will keep the monthly repayment at a similar rate to what they have been paying all along.
For example the highest selling car at the moment is the hyundai tucson. I would reckon a significant amount were sold on hyundai pcp. In 3 years time dealers will be swamped with 161 tucsons on their forecourts. They will use this excuse to drive down the value of the trade in therefore resulting in a higher than expected deposit required to upgrade to the 191 reg.
I gave a lot of thought to buying a 162 (vw golf) but i could only realistically afford it via pcp. It's the thoughts of dealing with the deposit conundrum in 3 years time that has put me off.

FrontDoor

opinionated3 wrote: »

As regards the whole pcp phenomenon that's currently going on here in this country, I'm of the opinion that there may be serious problems down the line when the 3 year term comes to a conclusion and people have to make their choice. ...finance the balance, hand the keys back and walk away or upgrade to the newer model (which i imagine is what most buyers would like to do and what the dealers would also like them to do). However the problem i think that is going to rear it's ugly head is when the dealer tells the buyer there isn't enough sufficient equity in the trade in to clear the balance AND provide a suitable deposit for the new car that will keep the monthly repayment at a similar rate to what they have been paying all along.
For example the highest selling car at the moment is the hyundai tucson. I would reckon a significant amount were sold on hyundai pcp. In 3 years time dealers will be swamped with 161 tucsons on their forecourts. They will use this excuse to drive down the value of the trade in therefore resulting in a higher than expected deposit required to upgrade to the 191 reg.
I gave a lot of thought to buying a 162 (vw golf) but i could only realistically afford it via pcp. It's the thoughts of dealing with the deposit conundrum in 3 years time that has put me off.

There is no such thing as a free lunch.

A lot of what you describe will depend on broader economic factors. If employment keeps increasing and less graduates leave relative to the last 8 years, then there will be a strong market for these cars.

If something like Brexit causes a big issue, then demand will drop.

Drummerboy08

What you have to remember is that there is still massive shortage of used vehicles still.

It'll probably be 2018 before this starts returning to normal levels . New car sales will level off because certain people who are buying new cars at the moment we're originally in the used car market.

Heat_Wave

I would like to hear people's thoughts on the below, as I am torn and do not know what to do.

I am looking at a new Mini Cooper on PCP.

Price of the car - €30,500
Deposit - €8,500
Monthly repayments - €289

These are the only figures I have been given. I have not been given a GFV yet. Based on these figures, if I was to go on PCP again in 3 years time, what deposit might I be looking at?

I'm on a salary of €29,000 and I live at home. Is this doable?