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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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Falcon L

OK maybe hatred is too strong a word.

As for the market being flooded with 3 year old cars. Is it now? Was it last year? How about the year before?

VW have been selling cars on PCP finance since 2010. Other countries have had PCP for many years before that. The market hasn't collapsed.

bidiots

In that example, PCP has the manageable monthly, but surely you'd need to be saving the other 400pm to help with the balloon of 14k at the end?
Or just refinance the 14k at the end, but would it work out cheaper then?

Edit: as fits said

fits

Monthly payment definitely more manageable but you'd have to save an extra 14500/36 = 402 euro per month to meet final balloon payment.

GavMan

Skoda Superb PCP vs. HP Example.

PCP works out slightly cheaper on cost of credit but monthly's are much more manageable. HP is 5.9% and that has got to be one of the lowest around.

PCP
On the Road Price
€36,855.00

Deposit Amount
€9,213.75

Finance Amount
€27641.25

APR % Fixed
3.90%

Acceptance Fee
€75

Completion Fee
€75

Total Monthly Payments
€430.24

Guaranteed Minimum Future Value:
€14,502.00

Total Cost of Credit
€2,499.39

Date of quote
28 Jul 2016

HP
On the Road Price
€36,855.00

Deposit Amount
€9,213.75

Finance Amount
€27641.25

APR % Fixed
5.9%

Acceptance Fee
€75

Completion Fee
€75

Total Monthly Payments
€833.66

Total Cost of Credit
€2,520.51

Date of quote
28 Jul 2016

bidiots

Where is this hatred?
From this thread alone there is confusion about certain elements of the agreement. But I totally agree with you, it is useful for some.
From what I'm seeing, people who can afford a new car, can avail of PCP if it suits.
Flip side - people who would not have been able to afford a new car, see the low monthly repayment and go for the new car, without seeing the deposit/GMFV(Balloon) side of it.
I still think there will be a bubble in a couple of years when a lot of this group can't afford the balloon and do as you suggest, sell it privately. We'll go from a piss poor second hand market circa 08 - 12, to a flooded second hand market. Good news for me:)
Another consideration for some is when they want to trade up to a 3 or more year old car. Now the feeling is 'Why bother when you can get a new one on PCP'....
It's excellent marketing and financing tool. But I am still of the belief that there are a lot of people driving new cars that realistically can't afford them, but, sure what's new there!

Falcon L

What's with all the hatred of PCP? It's a financial product, nothing more. It will suit some, it won't suit everybody. If you don't understand the terms used, ask the questions. If you still don't understand, don't commit to it.

The GMFV is only a baloon payment if you actually decide to keep the car you have. Nothing to stop you handing the car back and walking away (not a good idea, financially) or roll into a new contract. If you decide to walk away, the best course would be to pay the GMFV, then sell the car privately. You should, at the very least, get your GFMV back.

I find it pretty simple. At the end of the contract, you will have paid in full for the car and for the cost of borrowing for it. If you want to enter into a new contract, no problem, but there is no guarantee that the terms will be exactly the same as the last one.

26000 Elephants

Perhaps Visa could stop telling me that i owe them money each month, and instead tell me that my card now has a GMFV of €1200.....

Zonda999

bidiots wrote: »

Maybe if the term 'Balloon Payment' was used instead of GMFV it would make things less confusing.....oh yeah, why the hell would they do that:D

You mean to tell me the industry would use a nice ambiguous term like GMFV instead of a term such as "Balloon Payment" in order to make the whole thing more "cuddly"? Well I never!:D:D

bidiots

Maybe if the term 'Balloon Payment' was used instead of GMFV it would make things less confusing.....oh yeah, why the hell would they do that:D

grogi

26000 Elephants wrote: »

People are always doing this when comparing PCP and HP. They forget to subtract the deposit from the HP sale price, thus leading to huge repayments compared to PCP.

That's the beauty of PCP - it makes people forget about loads of things

26000 Elephants

fits wrote: »

the financed amount was 33 660 though, not 49500.

People are always doing this when comparing PCP and HP. They forget to subtract the deposit from the HP sale price, thus leading to huge repayments compared to PCP.

MuddyDog

fits wrote: »

the financed amount was 33 660 though, not 49500.

Is there a HP loan out there at 5.9% though? I can't find one meaning PCP will be cheaper.

fits

R.O.R wrote: »

Can you get Hire Purchase at 5.9% though? Just had a quick look at AIB and €49,500 over 36 months is €1,559.75 per month.

BOI are quoting 7.3% on HP over €7,000

Is there a very cheap HP company you are aware of?

the financed amount was 33 660 though, not 49500.

fits

I never looked into Hire Purchase. Have a pathological dislike of paying interest at all. Bought a second hand car straight in the end.

R.O.R

fits wrote: »

At the same interest rate, PCP is more expensive over three years than Hire purchase over a three year term. Because of the low monthly repayments the capital does not reduce as fast, hence higher interest.

Eg. PCP At 5.9% over 3 years

Hire purchase at 5.9% over 3 years (with much higher monthly payments obviously). Almost 2k less interest.

(obviously that offer was mental and I wouldn't touch with a barge pole)

Can you get Hire Purchase at 5.9% though? Just had a quick look at AIB and €49,500 over 36 months is €1,559.75 per month.

BOI are quoting 7.3% on HP over €7,000

Is there a very cheap HP company you are aware of?

MuddyDog

Slightly dearer car alters it a little. But I know what you're getting at. I was only looking at HP through a bank though and 4,255 would be the interest over 3 years for that loan amount. Is 5.9% widely available for HP from somewhere?

fits

At the same interest rate, PCP is more expensive over three years than Hire purchase over a three year term. Because of the low monthly repayments the capital does not reduce as fast, hence higher interest.

Eg. PCP At 5.9% over 3 years

Hire purchase at 5.9% over 3 years (with much higher monthly payments obviously). Almost 2k less interest.

(obviously that offer was mental and I wouldn't touch with a barge pole)

MuddyDog

fits wrote: »

You are wrong though. your monthly payments also cover i.e. include interest on the 14.6k, and it works out as higher than hire purchase equivalent because you are paying so little off the total. If you are getting 0% finance and a good deal on the car, it might make sense. Above 3% though, I think its very expensive.

If you get 0% though which many dealers are then it makes so much sense. However, even at the top end at 6.9% PCP you'll still be paying less interest provided you come up with the GMFV after 3 years.

For example, if I paid 12.4k upfront now I'd have to finance 27.6k. Through HP over 3 years that's the guts of 4k interest paid. I've got numerous PCP quotes from different dealers and for a similarly priced car the max interest I was paying over 3 years was around 3.5k.

fits

MuddyDog wrote: »

If you pay the full 31% deposit at the start (for a 40k car that is 12.4k) and if the GMFV will be around 14.6k (these are actual quotes I've got) then you'll pay monthly payments to cover the 13k. Provided you know you can afford the 14.6k at the end then you actually end up paying very little interest.

You are wrong though. your monthly payments also cover i.e. include interest on the 14.6k, and it works out as higher than hire purchase equivalent because you are paying so little off the total. If you are getting 0% finance and a good deal on the car, it might make sense. Above 3% though, I think its very expensive.

MuddyDog

In my opinion, as long as you can afford the GMFV payment at the end of the 3 years then PCP is by far the best option for buying a new car (unless you've the full cash up front obviously).

If you pay the full 31% deposit at the start (for a 40k car that is 12.4k) and if the GMFV will be around 14.6k (these are actual quotes I've got) then you'll pay monthly payments to cover the 13k. Provided you know you can afford the 14.6k at the end then you actually end up paying very little interest.

I believe Soarer was baffled by someone wanting to pay the GMFV at the end of 3 years as the car is now 3 years old with say 100k on the clock. I'm not sure why that would be. You've entered into an agreement (and assuming you always planned to have the car outright after 3 years) then of course you should fork out the money. The car will always be worth more than the GMFV as well (unless unforseen circumstances come into play and for me anyway you can't not do something because something might happen) and it makes sense to buy it at this point as you're clearing off the loan and if rather than using the equity to trade up, you can more than likely sell it for a bit more privately if you wanted.

drkdrk

Drummerboy08 wrote: »

Call the company who it's through and get a settlement figure.

Call the garage you bought it from and ask if they'll buy it back.

If the figure they offer is higher than the settlement, happy days.

If it's lower, either sell it privately for more or take the hit.

Thanks for the input, i'll try that.

Drummerboy08

Call the company who it's through and get a settlement figure.

Call the garage you bought it from and ask if they'll buy it back.

If the figure they offer is higher than the settlement, happy days.

If it's lower, either sell it privately for more or take the hit.

drkdrk

I'm about a year into a year into a 3 year PCP agreement. No longer need the car.
(yes, i rushed into it and probably shouldn't have went the pcp route)
Is there any way out at this early stage? I don't mind taking a small hit financially if it's necessary. Is there a professional i should talk to?
Or am i stuck with the 3 year commitment?
Thanks for any advice

Soarer

cuterob wrote: »

I'm thinking of going PCP on a new car for myself and the missus, I can cycle to work but she needs something for the 15 min spin up to work, public transport is useless for her route, it'll prob do one motorway a week (1 hour trip each way). have an 02 almera to trade in,

At the moment what are the best PCP deals for a hatchback that is 1.0l-1.2l engine, polo, fabia, clio? i see a few are doing 0% interest until 31st july

Any help much appreciated

You can get 0% finance. On the flip side, Nissan will give you €4k trade in on your Almera. So you'll have to do the maths.

Soarer

grogi wrote: »

True... However many marketing materials claim otherwise...

This graphics suggests that you're financing only the part that's remaining after taking GFV and deposit... We all know, after sixtish pages, that's the lie...

That's what I was trying to ask/say earlier.

Also heard an "expert" mention it on Matt Cooper(?) last week. ie. you finance the difference between (price - deposit) - GMFV.

grogi

OSI wrote: »

If the car is 40k and you pay 10k deposit with a 20k GMFV, you are borrowing 30k, paying payments on 10k and interest on the 30k, and left with 20k to pay at the end.

True... However many marketing materials claim otherwise...

This graphics suggests that you're financing only the part that's remaining after taking GFV and deposit... We all know, after sixtish pages, that's the lie...

Lantus

cuterob wrote: »

I'm thinking of going PCP on a new car for myself and the missus, I can cycle to work but she needs something for the 15 min spin up to work, public transport is useless for her route, it'll prob do one motorway a week (1 hour trip each way). have an 02 almera to trade in,

At the moment what are the best PCP deals for a hatchback that is 1.0l-1.2l engine, polo, fabia, clio? i see a few are doing 0% interest until 31st july

Any help much appreciated

For such small amount if driving a std loan and second hand may be better. Break out excel and crunch the numbers.

Ultimately if you can afford a new car and want one (who wouldn't?) Then it makes good sense.

With such minimal motorway driving the 1.2 engine isn't essential but it may be desirable.

Skoda and vw use the same engines and a myriad of other common parts. Your getting a different shell and a better internal finish in the vw.

Interest rates are often zero. No harm in taking 3 or 4 for a good spin one Saturday morning.

jca

cuterob wrote: »

I'm thinking of going PCP on a new car for myself and the missus, I can cycle to work but she needs something for the 15 min spin up to work, public transport is useless for her route, it'll prob do one motorway a week (1 hour trip each way). have an 02 almera to trade in,

At the moment what are the best PCP deals for a hatchback that is 1.0l-1.2l engine, polo, fabia, clio? i see a few are doing 0% interest until 31st july

Any help much appreciated

There's a new 1.2 three cylinder TSI being launched by Skoda very soon, it might be worth waiting to see what cars they put it in.

GavMan

cuterob wrote: »

I'm thinking of going PCP on a new car for myself and the missus, I can cycle to work but she needs something for the 15 min spin up to work, public transport is useless for her route, it'll prob do one motorway a week (1 hour trip each way). have an 02 almera to trade in,

At the moment what are the best PCP deals for a hatchback that is 1.0l-1.2l engine, polo, fabia, clio? i see a few are doing 0% interest until 31st july

Any help much appreciated

You wont get a much better deal than 0%

Do some research and see if those models are likely to launch new designs soon. That will affect the resale value in 3 years

cuterob

I'm thinking of going PCP on a new car for myself and the missus, I can cycle to work but she needs something for the 15 min spin up to work, public transport is useless for her route, it'll prob do one motorway a week (1 hour trip each way). have an 02 almera to trade in,

At the moment what are the best PCP deals for a hatchback that is 1.0l-1.2l engine, polo, fabia, clio? i see a few are doing 0% interest until 31st july

Any help much appreciated