nav[aria-label="Primary Navigation"] { padding: 0; & ul { list-style: none; width: 100%; display: flex; flex-direction: row; justify-content: start; align-items: start; gap: 30px; padding: 0; & li { margin: 0; } & ul li { list-style: none; } } }

Child Item

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.

Find more posts tagged with

Quick Links

Comments

Soarer

EndaHonesty wrote: »

I'll use simple figures.

Buy a car worth €35,000
Deposit €5,000
GMFV €15,000
Interest Rate: 3.0%
Term: 36 months
Cost of Credit: 1388.44
Monthly Amount: €455.23
Total amount financed: €30,000

Total amount of monthly payments: €16388.28
GMFV: €15,000
Deposit: €5,000
Total amount: €36,388.28

Actual Value after 36 months: €18,500

So at the end of 36 months you owe the finance company €15,000.
You can pay them that and own the car, hand it back or use the equity (€3,500) to start a new PCP.

If you give them €15,000 you will own a car worth €18,500. A car that you know since it was brand new.

It's the same as a hire purchase system with smaller monthly payments and a large final payment.

It suits some people and doesn't suit others. It is neither good or bad.

I have bought a car on PCP with 0% interest, so free money. I paid the smallest deposit possible to get the most free money.
I will buy the car at the end of the 36 months and decide then what to do.

I did not trade at the beginning of the deal so I got the straight deal discount, €2,250 and I got 3 free services too.

My distance allowance was 12,000kms per year and after almost 12 months I already have 36,000kms done,
but it's not an issue for me because I intend to buy the car at the end of the term.

I am very happy with my arrangement.

That example you gave is the perfect scenario, which almost always isn't the case. I love the way you just decide the actual value of the car. Shoulda made it €20k. Shur why not? It's as random as €18,500.

But if you substitute your situation into your own example, you've done your 3 years' mileage in one year. Continue that over the next 2 years, and you've 110k kms on the car that you should only have 36k kms. So you've gone over your limit by 74k kms.

There's a penalty for every kilometre you go over. I don't know yours, but I'm gonna use Kia's 10c per kilometre as they're also offering 0% PCP.

Now, using your real life situation in your perfect example.
You know have a penalty of €7400 owing due to mileage.
Plus you've €15k outstanding to the finance company.

Now you've a 3 year old car, with 110k kms on the clock.
You've already paid €21388.28 for the last 3 years of ownership.
To buy it outright, you have to pay €22,400.

So the car is now after costing you a minimum of €43,788.28, as I'm sure with such high mileage, the dealer will be quick to point out the extra wear and tear on all other components, thus reducing the value even more.

And you think I don't understand things!

Soarer

EndaHonesty wrote: »

Tell me where the "catch" is in my deal? I paid the same amount for the car as I would've if I had given them cash on day one.

Tell us all the details of your deal, and I'll have no problem telling you where the catch is.

Marcusm

Soarer wrote: »

Why?

Basically you're borrowing €20k (GFV) over 3 years, paying interest on said €20k (GFV), and then giving back the €20k (GFV). All the while you're paying for the depreciation.

The US has also had student loans and sub-prime mortgages, both of which are ace!

Because of basic economics, you are financing a 40k asset by placing a deposit, making some regular payments plus then a balloon equal to the GMFV. Of course there is an inherent interest charge included in the calculation of the balloon. You cannot use the 40k which the finance company has to pay to the dealer without paying interest on the full 40k.

It's easiest if you honk about it in absurd terms.

Say the deposit was €1 and the monthlies were €1 each. Would you still expect the final payment or GMFV to be 40,000-1-(36x1) = 39,963? Who would provide finance on that basis?

Soarer

Marcusm wrote: »

Because of basic economics, you are financing a 40k asset by placing a deposit, making some regular payments plus then a balloon equal to the GMFV. Of course there is an inherent interest charge included in the calculation of the balloon. You cannot use the 40k which the finance company has to pay to the dealer without paying interest on the full 40k.

It's easiest if you honk about it in absurd terms.

Say the deposit was €1 and the monthlies were €1 each. Would you still expect the final payment or GMFV to be 40,000-1-(36x1) = 39,963? Who would provide finance on that basis?

I understand the maths behind it. Just can't understand how people think it's a good idea.

Different strokes for different folks I guess.

Soarer

OSI wrote: »

The mileage penalty is only applicable if you're handing the car back, it does not come into play in any other scenario.

Ah ok, didn't know that.

That means that you have to pay a €15k lumpsum for a car that's actually only worth €10k due to excessive mileage.

Still can't see how it's a good idea.

Brian Scan

EndaHonesty wrote: »

Lads you clearly don't understand pcp car finance, or indeed interest and principle.

What did I say that indicated that?

conzy

People seem so put off by this PCP scheme. You can put in a decent deposit and have nice friendly monthly payments and still owe a huge amount that you can't afford at the end. Just like you can get an unsustainable mortgage or buy a phone you can't afford by hiding the costs in a 2 year contract. Whether its a car, a phone or a house its up to the consumer not to end up in an unsustainable situation.

Jack lemmon

Soarer wrote: »

That example you gave is the perfect scenario, which almost always isn't the case. I love the way you just decide the actual value of the car. Shoulda made it €20k. Shur why not? It's as random as €18,500.

But if you substitute your situation into your own example, you've done your 3 years' mileage in one year. Continue that over the next 2 years, and you've 110k kms on the car that you should only have 36k kms. So you've gone over your limit by 74k kms.

There's a penalty for every kilometre you go over. I don't know yours, but I'm gonna use Kia's 10c per kilometre as they're also offering 0% PCP.

Now, using your real life situation in your perfect example.
You know have a penalty of €7400 owing due to mileage.
Plus you've €15k outstanding to the finance company.

Now you've a 3 year old car, with 110k kms on the clock.
You've already paid €21388.28 for the last 3 years of ownership.
To buy it outright, you have to pay €22,400.

So the car is now after costing you a minimum of €43,788.28, as I'm sure with such high mileage, the dealer will be quick to point out the extra wear and tear on all other components, thus reducing the value even more.

And you think I don't understand things!

You don't pay the mileage penalty if your buying the car at the end or if you trade up to a new car at the end! You only pay that penalty if you hand the car back, very very few ppl will do that if any as it would be a poor division even with no mileage penalty.

grogi

EndaHonesty wrote: »

Tell me where the "catch" is in my deal? I paid the same amount for the car as I would've if I had given them cash on day one.

I am just saying that in that business there is no charity.

Jack lemmon

grogi wrote: »

I am just saying that in that business there is no charity.

0% interest is a fantastic deal for any financial agreement. And there's no catch to PCP.

Zonda999

Jack lemmon wrote: »

You don't pay the mileage penalty if your buying the car at the end or if you trade up to a new car at the end! You only pay that penalty if you hand the car back, very very few ppl will do that if any as it would be a poor division even with no mileage penalty.

That can't be correct surely if you're "trading up" because the dealer is left with a car with a substantially higher mileage compared to someone on the same PCP who has stuck within their mileage allowance. the car with the higher mileage is worth less, the customer will be paying for that surely?

I won't lie, I'm a bit sceptical as regards PCP but seeing as I don't see myself buying a brand new car for a very long time, I'm delighted that they're fuelling this big upsurge in new sales because I would hope it will increase depreciation leading to relatively "cheaper" used cars in two or three years from now. Ultimately though, this is where I see the danger. The more cars that are sold by PCP, naturally, there will be a greater supply of used cars which will have the effect of limiting the "equity" that a person will have above the GMFV at the end of the contract, meaning they will have to fork out another chunk of cash at the end to trade up to a new model on the same monthly repayment. Its the uncertainty of this that would really put me off and it is this, I think, that some PCP buyers may not be taking into account currently.

26000 Elephants

Jack lemmon wrote: »

0% interest is a fantastic deal for any financial agreement. And there's no catch to PCP.

Experience a slight change in your circumstances during the agreement, and you will find the catches quick enough.

conzy

26000 Elephants wrote: »

Experience a slight change in your circumstances during the agreement, and you will find the catches quick enough.

How would you be any better off if you had a similar shift in circumstance several months into a 3 year credit union / bank loan?

26000 Elephants

Zonda999 wrote: »

That can't be correct surely if you're "trading up" because the dealer is left with a car with a substantially higher mileage compared to someone on the same PCP who has stuck within their mileage allowance. the car with the higher mileage is worth less, the customer will be paying for that surely?

Of course you are correct. The GMFV is contingent on sticking to the mileage limits. Exceed them, the GMFV increases considerably.

Do people seriously not see this?

26000 Elephants

conzy wrote: »

How would you be any better off if you had a similar shift in circumstance several months into a 3 year credit union / bank loan?

You can sell your car. You can extend your loan. You have several options.

mickdw

Zonda999 wrote: »

That can't be correct surely if you're "trading up" because the dealer is left with a car with a substantially higher mileage compared to someone on the same PCP who has stuck within their mileage allowance. the car with the higher mileage is worth less, the customer will be paying for that surely?

Yes the car is worth less but still typically worth more than the gfv so it's a matter of getting the best price for your trade in when changing up. As you say the mileage will have an effect here but the comment above would be referring to not having to pay the actual mileage penalty per mile over the allowable which can be expensive.

Jack lemmon

26000 Elephants wrote: »

You can sell your car. You can extend your loan. You have several options.

It's all down to everyone's personal needs and security in their job. The loan is secured on the car being financed. So if you don't keep up the payment you will loose the car. After 50% of the loan is payed you can hand back the car. Very low interest rate did it for me. And when trading up you'll get the value of the car, higher mileage will affect that but not by x cent per mile over.

Lantus

26000 Elephants wrote: »

Of course you are correct. The GMFV is contingent on sticking to the mileage limits. Exceed them, the GMFV increases considerably.

Do people seriously not see this?

The mileage values are low and the penalties there primarily to prevent fleet owners availing of cheap PCP over 3 years, racking up hundreds of thousands of km and then just handing the keys back.

For most normal users they will exceed the limits but its not a huge issue. Most normal comparable cars will have very similar mileage.

The mileage can also be applied to an individual if they hand back the keys but I'm not aware of this.

Ultimately the best way out if a PCP is to finance the outstanding balance and pay it off within 3 years.

roadrunnermick

So what I can establish so far is PCP is rigged against the buyer if your trading in at the end of the 2 or 3 year

Is there any downside if your intent is to buy out the car instead of taking out another PCP agreement ?

EndaHonesty

roadrunnermick wrote: »

So what I can establish so far is PCP is rigged against the buyer if your trading in at the end of the 2 or 3 year

Is there any downside if your intent is to buy out the car instead of taking out another PCP agreement ?

There is no rigging. There are no catches. Everything is clearly laid out in the agreement and explained before one signs up.

Adults understand how financial products work.

Your comment shows you are just another who doesn't understand how this product works.

Soarer

EndaHonesty wrote: »

There is no rigging. There are no catches. Everything is clearly laid out in the agreement and explained before one signs up.

Adults understand how financial products work.

Your comment shows you are just another who doesn't understand how this product works.

Adults also know how to engage in discussion, can listen to the other point of view, and don't dismiss all other viewpoints just because they disagree with their own!

You're the most obnoxious poster in this thread, full of this "holier than thou" attitude.

If you're happy with paying €20k over the next 3 years, and then having to stump up another €15k for a 3 year old car with 100k kms on the clock, good for you.

But your condescending attitude towards people that dare to question your way of doing things is immature to say the least.

jelutong

Who can possibly predict what the value of a used car will be in 3 years time?

roadrunnermick

Well really it's all a matter of prospective , if you understand the financial product and accept the possibility that the market in 3 years maybe swamped with used cars thus reducing the residual value of your trade in, As an adult you know what you are getting into ,

My approach is financial conservative and not willing to accept the risk involved.

Given the history of this country with mortgages and loans and adults , I respectively disagree !

It maybe appealing to me as I would be able to to pay off the ballon payment , However I am just trying to understand the possible clauses that would be accosiated with that part of PCP

Any other advice from an "adult" with my prospective would really great rather than sentiment

roadrunnermick

Soarer wrote: »

EndaHonesty wrote: »

There is no rigging. There are no catches. Everything is clearly laid out in the agreement and explained before one signs up.

Adults understand how financial products work.

Your comment shows you are just another who doesn't understand how this product works.

Adults also know how to engage in discussion, can listen to the other point of view, and don't dismiss all other viewpoints just because they disagree with their own!

You're the most obnoxious poster in this thread, full of this "holier than thou" attitude.

If you're happy with paying 20k over the next 3 years, and then having to stump up another 15k for a 3 year old car with 100k kms on the clock, good for you.

But your condescending attitude towards people that dare to question your way of doing things is immature to say the least.

Well said , think a good 2nd hand car and a credit union loan is the way to go for me , I am cash buyer , with no trade in ,should have better leverage to drive a better deal

the devil is in the detail in relation to PCP

Soarer

roadrunnermick wrote: »

Well said , think a good 2nd hand car and a credit union loan is the way to go for me , I am cash buyer , with no trade in ,should have better leverage to drive a better deal

the devil is in the detail in relation to PCP

You're in a great position to buy a 3 year old, low mileage, ex-PCP car, that someone else has happily paid the depreciation for you.

roadrunnermick

Soarer wrote: »

roadrunnermick wrote: »

Well said , think a good 2nd hand car and a credit union loan is the way to go for me , I am cash buyer , with no trade in ,should have better leverage to drive a better deal

the devil is in the detail in relation to PCP

You're in a great position to buy a 3 year old, low mileage, ex-PCP car, that someone else has happily paid the depreciation for you.

Appreciate the advice

Following for sure !

Thanks

EndaHonesty

Soarer wrote: »

Adults also know how to engage in discussion, can listen to the other point of view, and don't dismiss all other viewpoints just because they disagree with their own!

You're the most obnoxious poster in this thread, full of this "holier than thou" attitude.

If you're happy with paying €20k over the next 3 years, and then having to stump up another €15k for a 3 year old car with 100k kms on the clock, good for you.

But your condescending attitude towards people that dare to question your way of doing things is immature to say the least.

You have posted many long-winded and silly posts about this subject, each one shows you have no understanding of PCP finance, Loan Interest, Second-hand Car Residuals and indeed buying cars in general.

100k kms is 60,000 miles.
The general consensus on this forum is low miles are bad for a diesel car.
20,000 mile per year is nothing for a diesel car and yet you think one would be penalised by €5,000 for having this mileage.
Ridiculous.

You have described PCP finance as an "interest only loan".
Ridiculous.

You seem to think that the only cars that suffer depreciation are PCP financed cars.
Ridiculous.

You think that a residual value of 55% after 3 years is impossible.
Ridiculous.

You don't understand PCP finance, you should stop posting your misguided and uniformed rubbish in a thread that is specifically about PCP finance.

grogi

EndaHonesty wrote: »

You have posted many long-winded and silly posts about this subject, each one shows you have no understanding of PCP finance, Loan Interest, Second-hand Car Residuals and indeed buying cars in general.

/.../

You don't understand PCP finance, you should stop posting your misguided and uniformed rubbish in a thread that is specifically about PCP finance.

You must add "You don't understand Insurance" to that list!

EndaHonesty

grogi wrote: »

You must add "You don't understand Insurance" to that list!

Has he posted rubbish about insurance too?!

dissed doc

Soarer wrote: »

Adults also know how to engage in discussion, can listen to the other point of view, and don't dismiss all other viewpoints just because they disagree with their own!

You're the most obnoxious poster in this thread, full of this "holier than thou" attitude.

If you're happy with paying €20k over the next 3 years, and then having to stump up another €15k for a 3 year old car with 100k kms on the clock, good for you.

But your condescending attitude towards people that dare to question your way of doing things is immature to say the least.

If you want to own a €35K car you still actually have to pay €35K. PCP means you don't need to come up with it all in one go. It also allows you to borrow at usually much lower rates than direct financing of e.g. 35K at once from a bank.

Unless people are under the illusion that they can own a 35K car for €20K? But that would require a lot of stupidity. You are still responsible for the deal.

PCP is a pretty decent way to buy a nice new car, for those that can afford it but without making huge monthly finance payments or spending loads of cash savings. With interest so low, sometimes 0%, it makes a lot of sense.

Maybe there are people who think they can own a 35K car by paying 10K + 36 payments of 250 each or something but that is just being an idiot.