PCP finance.

Soarer · 31-07-2016 10:29AM

vintagevrs wrote: »

Of course I can. But that is not unique to pcp was my point. If you buy a car with a case full of cash, or on hp, if you go to change in 3 years time it will be the same scenario. Your trade in will be worth less, that is all.

That's my point.

If you don't use PCP, you don't have a mandatory decision to make in 3 years' time. With PCP, you do.

Therefore, to my mind, you've more freedom with a regular loan.

Soarer · 31-07-2016 10:32AM

grogi wrote: »

Well - in that case a PCP is a brilliant option. Hand it back without any hassle and buy something similar on the open market for less.

Don't think you understand what happens when you try hand back a car when you haven't met the conditions of the PCP contract.

Do you actually think you can rag the car for 3 years, and you can just hand it back?

Soarer · 31-07-2016 10:35AM

@ monkeysnapper. Have a look at Nissan. Think they'll still give you €4k for your old car, so with your deposit, you'll have €7k off whatever the sticker price is.

fits · 31-07-2016 10:57AM

monkeysnapper wrote: »

From what I can see at end of 3 year PCP the car would be paid off and still have another 2 years warranty.

Now I don't see me changing it at year 3 , with my lot can't see car being in any condition

The interest rates seem better than any credit union and there won't be any further loan at end of PCP period .

In people in the knows opinion is this the cheapest route.

It might be. It might not. Calculate the actual interest you will be charged and compare with hire purchase, credit union etc. using the same deposit against the principal. Also 0% deals often have a more expensive purchase price so factor that in as well.

Edit the car wouldn't be paid off at year 3 unless you come up with final balloon payment

26000 Elephants · 31-07-2016 06:40PM

vintagevrs wrote: »

Of course I can. But that is not unique to pcp was my point. If you buy a car with a case full of cash, or on hp, if you go to change in 3 years time it will be the same scenario. Your trade in will be worth less, that is all.

The difference is that you are forced to settle your position at end year 3. You will have to crystalise the loss, or use your insurance to do so.

If you owned the car you could have postponed that for a few years and reduce its impact.

By financing/paying yourself, you give yourself several more options than PCP.

vintagevrs · 31-07-2016 09:01PM

But if you owned the car you would have paid the full amount for the car already. It's 6 of one.

Lantus · 31-07-2016 09:59PM

Soarer wrote: »

@ monkeysnapper. Have a look at Nissan. Think they'll still give you €4k for your old car, so with your deposit, you'll have €7k off whatever the sticker price is.

Interest rates are high though. Your cost of credit could easily exceed 4k on all the cars I looked at. They run a special 4% PCP deal but the mileage is 10k a year which is a trip to the shops and a short run to the country once a week. Not for anyone who needs to drive anywhere presumably.

Just run the numbers over and over. Personally I couldn't make it stack up.

mickdw · 01-08-2016 12:51PM

26000 Elephants wrote: »

The difference is that you are forced to settle your position at end year 3. You will have to crystalise the loss, or use your insurance to do so.

If you owned the car you could have postponed that for a few years and reduce its impact.

By financing/paying yourself, you give yourself several more options than PCP.

But you can just op to keep the car via another couple of years finance and wait it out as you would be doing if you owned the car from the start.

Zonda999 · 20-08-2016 12:43PM

http://www.independent.ie/life/motoring/car-news/10-things-you-still-need-to-understand-about-pcps-before-you-buy-a-new-car-34970473.html

I'm genuinely surprised the independent actually have documented some of the truth about PCP in the above piece, because whether it be a property boom or whatever, I always assume they're only prerogative is to encourage its continuation.

4. Equity is NOT the GMFV. Lots of people think it is. Equity is whatever the car is worth, or you can get, over and above the Guaranteed Minimum Value at a particular point in time. Say the car has a GMFV of €10,000. Say the market happens to be strong when you come to renew and you can get €13,000.

Your equity is the GMFV minus the market value - which is €3,000. That's the bit that can go towards your next deposit.

5. It follows from this that it is vital your PCP is structured in such a way that you are not left with a huge gap to bridge when you come to sign up for another car. That is where you have to make sure you are getting a realistic GMFV.

The above here is the most important thing, which I think an awful lot of people are confused about.

bidiots · 20-08-2016 01:07PM

As I said before, if people use the term Balloon payment rather than GMFV, that gets rid of a lot of confusion.

26000 Elephants · 20-08-2016 11:09PM

mickdw wrote: »

But you can just op to keep the car via another couple of years finance and wait it out as you would be doing if you owned the car from the start.

You certainly could - but if you PCP'ed in the first place, you more than likely will be itching for a new car in 3 years. Isn't that the idea?

GavMan · 22-08-2016 02:41PM

https://www.facebook.com/LindersRenault/videos/1086595284751529/

Is he being economical with the truth here when explaining where you're paying interest? I thought you were paying interest on the invoice price minus deposit and/or trade in. Here he seems to suggest you're not paying interest on the GFMV amount either

Zonda999 · 22-08-2016 07:06PM

GavMan wrote: »

https://www.facebook.com/LindersRenault/videos/1086595284751529/

Is he being economical with the truth here when explaining where you're paying interest? I thought you were paying interest on the invoice price minus deposit and/or trade in. Here he seems to suggest you're not paying interest on the GFMV amount either

That is indeed what he seems to be mplying.

In fairness, he's at least being honest when he says that he and the manufacturer would want you to get a new car in three years time, as if we ever needed any confirmation of that. But IMHO, there's also something of a contradiction when they mentioned the "equity you've built up" while also mentioning that you have certainty over the depreciation by way of the GMFV. It doesn't work both ways, ether you'll be paying another lump sum toward the deposit or facing higher monthly repayments on the next PCP term

spuddy · 23-08-2016 12:52AM

GavMan wrote: »

https://www.facebook.com/LindersRenault/videos/1086595284751529/

Is he being economical with the truth here when explaining where you're paying interest? I thought you were paying interest on the invoice price minus deposit and/or trade in. Here he seems to suggest you're not paying interest on the GFMV amount either

Saying that you're effectively leasing a 1/3 of the car, but still owe the GFMV, so are being charged interest on 2/3's of it, is no great secret. I actually found him quite refreshing. Considering how frank is he otherwise, I can't help but feel he's let himself down by skipping over this point.

jca · 23-08-2016 10:22AM

spuddy wrote: »

Saying that you're effectively leasing a 1/3 of the car, but still owe the GFMV, so are being charged interest on 2/3's of it, is no great secret. I actually found him quite refreshing. Considering how frank is he otherwise, I can't help but feel he's let himself down by skipping over this point.

Maybe that's how he thinks it works. That's how I thought it worked until I started following this thread.

grogi · 15-09-2016 04:05AM

I don't know why, but I felt it deserves a place in this thread...

NIMAN · 15-09-2016 07:49AM

Perhaps some experts could drop me some advice on my current predicament.

I own a 13 Focus, and was thinking of changing up to a 15 car, more than likely a Golf.

Now my original plan was to just trade-in the Focus, add cash and take the newer car. My current car is valued at €14k, and I would have to add approx €7k to change.

I saw VWs 0% finance plans on their Highline models, and decided to enquire about that option, taking a new 162 Golf.

So there is a max deposit, which would mean the dealer would take the Focus but give me back approx €5000.
Then I'd pay €290 / month for 36 months (€10450), with a balloon payment of €10200.

So I'm trying to work out if it would be better for me to buy a 15 car with cash thats already depreciated, or avail of 3yrs of 0% finance and get a new car? In 3 years time, say the Golf is worth €15k, then that means I would have approx €5k to carry into a new deal (considering I am also getting almost €5k back now as a refund from the dealer).

So what would you choose? Go 2nd hand with cash or new with PCP?

vintagevrs · 15-09-2016 08:48AM

New golf is gonna cst you 29k and 2nd hand one 21k? The newer one will depreciate harder than the year old car.

Were you going to finance the 7k or do you have that? If you have it i would buy the 15 plate.

grogi · 15-09-2016 09:01AM

NIMAN wrote: »

Perhaps some experts could drop me some advice on my current predicament.

I own a 13 Focus, and was thinking of changing up to a 15 car, more than likely a Golf.

/.../

So what would you choose? Go 2nd hand with cash or new with PCP?

The most fundamental question is - why do you want to change the Focus? If you got bored of it and want to try something else, you feel it is too old now, your Fold dealer is a wanker but VW guys are sound etc.?

IMHO if you will want to get another car when the one you get now turns 3 years old, get the PCP deal. You'll get have three years of motoring with predictable costs. Can you put those €5k the dealer will give you back against your mortgage (if you're not on tracker of course...)

But if you just get bored with cars very fast, don't get new cars - unless you really can afford it and really want to. You'd be financing the biggest depreciation for the next buyer.

NIMAN · 15-09-2016 12:57PM

I am looking to change mainly to keep a fresh car, which will likely give me less bother, need less repairs, not need NCT, etc.

We made the mistake a while back of buying a car and keeping it til it was giving a lot of bother, so I would always like to keep a car thats pre-NCT if possible, so maybe up to 4 yrs old max. So by this logic, maybe PCP is the way to go? If I always want to change every 2 or 3 yrs, perhaps changing to a new car is best idea? I was just wondering if I would end up losing the collateral I have built up in the 13 car I now own outright faster going new with PCP than secondhand with cash?

I bought the 13 Focus in Jan 2015, so trading to a 15 now seems the logical thing to do.

As for VW over Ford, no Ford gave me no bother, but I was a Golf driver in the past and think its a better car than the Focus and would like to get back to the Golf. Hence that reason.

Soarer · 15-09-2016 04:41PM

Heard on the radio there that Renault are offering 0% PCP on new Clios.

Might suit.

Lantus · 16-09-2016 06:48AM

NIMAN wrote: »

Perhaps some experts could drop me some advice on my current predicament.

I own a 13 Focus, and was thinking of changing up to a 15 car, more than likely a Golf.

Now my original plan was to just trade-in the Focus, add cash and take the newer car. My current car is valued at €14k, and I would have to add approx €7k to change.

I saw VWs 0% finance plans on their Highline models, and decided to enquire about that option, taking a new 162 Golf.

So there is a max deposit, which would mean the dealer would take the Focus but give me back approx €5000.
Then I'd pay €290 / month for 36 months (€10450), with a balloon payment of €10200.

So I'm trying to work out if it would be better for me to buy a 15 car with cash thats already depreciated, or avail of 3yrs of 0% finance and get a new car? In 3 years time, say the Golf is worth €15k, then that means I would have approx €5k to carry into a new deal (considering I am also getting almost €5k back now as a refund from the dealer).

So what would you choose? Go 2nd hand with cash or new with PCP?

If your going to max the deposit then I'd be looking to keep the car. Remember your monthly payments are determined by the deposit. So after 3 years the equity in the car (real world value vs gmfv) will be the same whether you started with a 10,20 or 30℅ deposit.

The equity is probably equal to around 10-15℅ deposit. So if you started with that then your monthly payments will be similar moving into your second 3 year deal. But with the 30℅ deposit your monthly will jump massively unless you inject more deposit the second time around.

Run the numbers with a lower deposit and push dealer for real world equity examples. Then be a little conservative based on their answer. If it still makes sense and you want a new car every 3 years then go for it.

Ultimately you need to compare the second hand route with the PCP route and compare everything over 3 to 6 years. Interest, capital payments, running costs etc. That will give you the financial answer. Then you need to ask what it is you really want to drive and if your willing to pay for it.

Edit: with say 4500 equity moving forward your monthly payment will be around 420 a month on the same car.

It's only 290 because you have given the dealer more cash up front. That also assumes zero interest in three years time. Is 420 affordable?

GavMan · 16-09-2016 10:38AM

Soarer wrote: »

Heard on the radio there that Renault are offering 0% PCP on new Clios.

Must be a new model due out

lawred2 · 16-09-2016 10:41AM

Deleted User wrote: »

I used to think that blowing savings on a car was mad, which maybe it is but if you're buying a car I think it's better to use money that you got than to borrow and pay interest however on VW low interest it would probably make more sense to just borrow the money and pay as you drive.

I think I agree with bpmull though that pcp is made to look attractive for people that don't have the money. I'm not sure if garages are making ultra clear that after the 3 years you got to come up with the same deposit again.

I think a lot of the advertised pcp deals deliberately try to make people think that they will have much more than the gfv to use as a deposit but they will need to come up with much more even if you do get more than the gfv.

In other words your cheap 300 a month turns into 500-550 because you got to add up what you'll need to pay to be able to come up with the deposit in 3 years.

I was under the impression that the car you were returning was that deposit

Now I always buy with at least 60% deposit so I never do PCP but still I thought that's how it was supposed to work.

grogi · 16-09-2016 10:49AM

lawred2 wrote: »

I was under the impression that the car you were returning was that deposit

No, it is not.

The deposit is formed from the difference between the value of the car you are returning (or how much the dealer wants to pay for it) and the money you still owe (also called Guaranteed Future Value).

acronym Chilli · 16-09-2016 10:54AM

lawred2 wrote: »

I was under the impression that the car you were returning was that deposit

Now I always buy with at least 60% deposit so I never do PCP but still I thought that's how it was supposed to work.

That's not how it works, and Grogi has it right in the following post.

However, it's how i imagined it worked the first time I saw it described.

So many times, here and on other forums, folk say that "everyone knows how PCP works, it's just another alternative to finance a car". It is just a financing instrument, but this post and others highlight that lots of people don't get it, and I don't think many car dealers are going to work hard to disabuse people of a faulty interpretation.

lawred2 · 16-09-2016 10:58AM

acronym Chilli wrote: »

That's not how it works, and Grogi has it right in the following post.

However, it's how i imagined it worked the first time I saw it described.

So many times, here and on other forums, folk say that "everyone knows how PCP works, it's just another alternative to finance a car". It is just a financing instrument, but this post and others highlight that lots of people don't get it, and I don't think many car dealers are going to work hard to disabuse people of a faulty interpretation.

Well in my defence I never needed to get informed about it... I don't like starting with less than 50% equity in anything.

My house on the other hand broke that rule

In fact most cars I've bought have been with cash. It's just the last one was needed a little sooner than I'd have liked. An extra addition to the family rendered the previous unsuitable.

16-09-2016 11:01AM

NIMAN wrote: »

...... My current car is valued at €14k, and I would have to add approx €7k to change.

.....

So there is a max deposit, which would mean the dealer would take the Focus but give me back approx €5000.
Then I'd pay €290 / month for 36 months (€10450), with a balloon payment of €10200.
.....
So what would you choose? Go 2nd hand with cash or new with PCP?

Are the VW dealer valuing your Focus at 14k? If so a 29.5k highline golf is a serious upgrade on a Focus.

Late in the year though.... could you push for a 171 with same figures?

bazz26 · 16-09-2016 11:06AM

The Golf is getting a mid life facelift towards the end of this year and they recently upgraded the Highline spec on existing models so I'd imagine there is a push now by VW to sell existing stock. Spec on the facelifted Highline model could also potentially end up reduced for MY17. If it were me I'd try and get a current model Highline now as spec wise it is very good value.

Toyotafanboi · 16-09-2016 11:19AM

They are similar to the figures we got on our Golf, 162 Highline on 0%, it's working out @ €260 x 36 and €9500 final payment. Got €500 cash back for the old car too as it was valued over the max deposit.

Couldn't have went 171 for the same money. It was made clear that there's a good incentive to move current stock and get it reg'd asap.

PCP finance.

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