PCP finance.

drkdrk · 25-07-2016 09:39PM

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.

MuddyDog · 26-07-2016 11:20AM

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.

fits · 26-07-2016 11:31AM

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 · 26-07-2016 11:33AM

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 · 26-07-2016 11:55AM

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 · 26-07-2016 12:02PM

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?

R.O.R · 26-07-2016 12:14PM

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?

fits · 26-07-2016 12:25PM

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

fits · 26-07-2016 12:26PM

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.

MuddyDog · 26-07-2016 01:03PM

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.

26000 Elephants · 26-07-2016 11:36PM

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.

grogi · 27-07-2016 09:29AM

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

bidiots · 27-07-2016 10:17AM

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

Zonda999 · 27-07-2016 07:09PM

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

26000 Elephants · 28-07-2016 01:31AM

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.....

Falcon L · 28-07-2016 08:23AM

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.

bidiots · 28-07-2016 10:13AM

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!

GavMan · 28-07-2016 10:14AM

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

fits · 28-07-2016 10:20AM

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

bidiots · 28-07-2016 10:20AM

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

Falcon L · 28-07-2016 10:24AM

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.

GavMan · 28-07-2016 10:53AM

fits wrote: »

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

Surely the value of a low mileage, 3 year old Superb will exceed €14.5k to cover that

I wouldn't imagine you'll have €9k equity to get another one in 3 years without putting cash to it, but then again, it's a depreciating asset, not magic beans.

grogi · 28-07-2016 11:02AM

GavMan wrote: »

Surely the value of a low mileage, 3 year old Superb will exceed €14.5k to cover that

I wouldn't imagine you'll have €9k equity to get another one in 3 years without putting cash to it, but then again, it's a depreciating asset, not magic beans.

But your example clearly shows that despite significantly lower interest rate, PCP is not cheaper at all - €21 is not a difference really. I don't forget that one can still lodge the monthly savings and get some from the interest on it - but how much will that be? Another €50?

What I have a problem with is that PCP is a product that is purposely packaged in a way to confuse the customer. There are people who understand it and all the quirks of all financing products, but let's be honest - average Joe does not. PCP takes advantage of that: false advertising (it can be yours for only €59/week), purposely convoluted and misleading terms (Guaranteed Minimum Future Value - it sounds the more, the better) etc.

fits · 28-07-2016 11:04AM

GavMan wrote: »

Surely the value of a low mileage, 3 year old Superb will exceed €14.5k to cover that

I wouldn't imagine you'll have €9k equity to get another one in 3 years without putting cash to it, but then again, it's a depreciating asset, not magic beans.

Yes but you will still need a car at the end of it. so it needs to be covered in some way. whether that is paying the balloon payment, entering a new deal with new terms, or refinancing the balance.

bidiots · 28-07-2016 11:16AM

Falcon L wrote: »

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.

It's only the last couple of years that PCP has taken a stranglehold and become the norm, the next couple of years will tell a lot on it's affect on the market, imo.

Drummerboy08 · 28-07-2016 11:41AM

bidiots wrote: »

It's only the last couple of years that PCP has taken a stranglehold and become the norm, the next couple of years will tell a lot on it's affect on the market, imo.

In Ireland yes, but it's been available in the UK since the 70's, via the same outlets as here.

Haven't seen the UK market crash yet as a result....

Jasper79 · 28-07-2016 11:45AM

Drummerboy08 wrote: »

In Ireland yes, but it's been available in the UK since the 70's, via the same outlets as here.

Haven't seen the UK market crash yet as a result....

In the UK most used cars lose 50% of value in 3 years , not seeing that here at the moment due to the lack of supply I assume.

Myself I'm hoping to get a nice 3 year old car in 2018 that is not overpriced as they are now.

bidiots · 28-07-2016 11:51AM

Drummerboy08 wrote: »

In Ireland yes, but it's been available in the UK since the 70's, via the same outlets as here.

Haven't seen the UK market crash yet as a result....

I shudder when comparisons are made between us and other countries:p
The UK also have other options which we don't have here, eg affordable leasing, therefore PCP might not be as popular there as it is here at the moment....

I'd be all over something like this if it was available here http://www.hotukdeals.com/deals/audi-a4-1-4tfsi-sport-2-year-10-000-miles-p-a-6-23-lease-192-incl-vat-per-month-2479905 or http://www.hotukdeals.com/deals/insane-brand-new-scirocco-2-0tsi-gt-man-lease-106-69-per-month-2400-deposit-other-2475346

GavMan · 28-07-2016 01:19PM

grogi wrote: »

But your example clearly shows that despite significantly lower interest rate, PCP is not cheaper at all - €21 is not a difference really. I don't forget that one can still lodge the monthly savings and get some from the interest on it - but how much will that be? Another €50?

The cost of the HP will be upped by about 25-50% if you applied a more common available at banks and CU's. Hardly anyone is doing HP at less than 6% like Skoda.

This example is an outlier.

I don't disagree with you on PCP. People need to do more homework when getting one and if possible tweak the deal where they end up with the most equity possible in the car.

Drummerboy08 · 28-07-2016 02:07PM

bidiots wrote: »

I shudder when comparisons are made between us and other countries:p
The UK also have other options which we don't have here, eg affordable leasing, therefore PCP might not be as popular there as it is here at the moment....

You do realise that leasing and PCP are pretty much the same, only without the 10% deposit up front on the lease agreement.

However the lease will have no equity at the end of the agreement either, so it's much of a muchness.

The only reason that personal leasing is cheap in the UK is volume.

PCP finance.

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