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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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nc6000

bazz26 wrote: »

The discount will totally depend on the margin percentage that the dealer has on the car in question. How you pay for the car should not change that unless there are specific conditions attached to the PCP deal.

What sort of discount (if any) should you expect if you're getting a good scrappage-type deal?

Ryath

techdiver wrote: »

Thinking of going down the PCP route on a new car worth €37,000 including extras. I'll have the maximum 30% deposit. What if any discount from the dealer could I realistically hope to get if i haggle?

You'll still get a discount going with PCP can't remember the exact figures now but when I was pricing an Octavia earlier in the year I was getting in the region of €1900-2000 of a €28,000 OTR price. At least €2500 should be achievable maybe a little more.

Bigger question is what you plan in 3 years time. Are you planning to buy out right and will have the full GMFV to buy it. Or are you planning to role over and get another new car in 3 years. Putting down a 30% deposit now is tempting to keep repayments down but in three years time you won't have enough equity in the car for a 30% deposit again and will have higher repayments or having to put more money in to bring up the deposit.

Also when you are getting you are getting 0% finance why put up more money up front. Better putting down a 10% deposit and keeping in your pocket and putting it towards paying of the GMFV in 3 years. If you can't afford the repayments at 10% PCP may not be the best option.

techdiver

Ryath wrote: »

You'll still get a discount going with PCP can't remember the exact figures now but when I was pricing an Octavia earlier in the year I was getting in the region of €1900-2000 of a a €28,000 OTR price. At least €2500 should be achievable maybe a little more.

Bigger question is what you plan in 3 years time. Are you planning to buy out right and will have the full GMFV to buy it. Or are you planning to role over and get another new car in 3 years. Putting down a 30% deposit now is tempting to keep repayments down but in three years time you won't have enough equity in the car for a 30% deposit again and will have higher repayments or having to put money more money in to bring up the deposit.

Also when you are getting you are getting 0% finance why put up more money up front. Better putting down a 10% deposit and keeping in your pocket and putting it towards paying of the GMFV in 3 years. If you can't afford the repayments at 10% PCP may not be the best option.

thanks for the advice. I know what you are saying about the deposit, but since I'm using a trade in as deposit as opposed to raiding savings I said i'd use as much as possible.

As regards equity in the future, the GMFV will be €13,398 and from looking on carzone etc, the cheapest 3 year old low mileage version of the car we are buying is at €25,000, so that leaves pretty much the same equity we are starting with deposit wise.

If you have a large deposit, would you be better off going down the HP route instead?

techdiver

Ryath wrote: »

You'll still get a discount going with PCP can't remember the exact figures now but when I was pricing an Octavia earlier in the year I was getting in the region of €1900-2000 of a a €28,000 OTR price. At least €2500 should be achievable maybe a little more.

Bigger question is what you plan in 3 years time. Are you planning to buy out right and will have the full GMFV to buy it. Or are you planning to role over and get another new car in 3 years. Putting down a 30% deposit now is tempting to keep repayments down but in three years time you won't have enough equity in the car for a 30% deposit again and will have higher repayments or having to put money more money in to bring up the deposit.

Also when you are getting you are getting 0% finance why put up more money up front. Better putting down a 10% deposit and keeping in your pocket and putting it towards paying of the GMFV in 3 years. If you can't afford the repayments at 10% PCP may not be the best option.

Thanks for the advice. I know what you are saying about the deposit, but since I'm using a trade in as deposit as opposed to raiding savings I said i'd use as much as possible.

As regards equity in the future, the GMFV will be €13,398 and from looking on carzone etc, the cheapest 3 year old low mileage version of the car we are buying is at €25,000, so that leaves pretty much the same equity we are starting with deposit wise.

If you have a large deposit, would you be better off going down the HP route instead?

bazz26

If you have a trade in then a discount off the new car doesn't apply in the normal sense. The discount on the new car is applied to the value of your trade-in. So the figure you need to concentrate on is the "cost to trade up" price. This can vary between dealers as dealers might value your old car differently to others. So it is best to shop around for the best deal and don't be afraid to travel for the right deal where practical to do so.

ShadowHearth

techdiver wrote: »

thanks for the advice. I know what you are saying about the deposit, but since I'm using a trade in as deposit as opposed to raiding savings I said i'd use as much as possible.

As regards equity in the future, the GMFV will be €13,398 and from looking on carzone etc, the cheapest 3 year old low mileage version of the car we are buying is at €25,000, so that leaves pretty much the same equity we are starting with deposit wise.

If you have a large deposit, would you be better off going down the HP route instead?

One way or another, he is better off with pcp then hp even if he is planing to keep the car. Half of amount borrowed will be on 0% Apr. And then the rest for around 3.9%. Even better pay off a few grand off that balloon payment and even less Apr to pay on outstanding amount left.

Lantus

techdiver wrote: »

Thanks for the advice. I know what you are saying about the deposit, but since I'm using a trade in as deposit as opposed to raiding savings I said i'd use as much as possible.

As regards equity in the future, the GMFV will be €13,398 and from looking on carzone etc, the cheapest 3 year old low mileage version of the car we are buying is at €25,000, so that leaves pretty much the same equity we are starting with deposit wise.

If you have a large deposit, would you be better off going down the HP route instead?

It doesn't work like that. Your saying you will have 11k equity which sounds wrong. The dealer will not be giving you that. They still need to make a margin on any car they sell. Plus you really need to look at a 4 year old car for comparison ( the dealer will.)

The equity in the car is generally the mid point of the deposit which is 15% give or take depending on the exact model. You will not get your 30% back so invest at peril. Highly desirable cars may go to 17-20% equity. I'd always buy at 12.5% deposit unless I was sure if be buying after ³ years. Then I would overload the deposit and it make good sense at zero interest.

Remember car prices go up as well. Even a few thousand can have a large effect on the monthly payment all else being equal after 3 years.

Dealers won't refuse your money but caveat emptor applies.

Lantus

techdiver wrote: »

Thanks for the advice. I know what you are saying about the deposit, but since I'm using a trade in as deposit as opposed to raiding savings I said i'd use as much as possible.

As regards equity in the future, the GMFV will be €13,398 and from looking on carzone etc, the cheapest 3 year old low mileage version of the car we are buying is at €25,000, so that leaves pretty much the same equity we are starting with deposit wise.

If you have a large deposit, would you be better off going down the HP route instead?

vintagevrs

Another thing to be wary of is a3 year old car today has held its value relatively well as there weren't many sold. New car sales by comparison now are high, so expect residuals to suffer,and will likely not be as strong as todays three year old stock.

techdiver

Thanks for the replies.

I still don't see a downside to going the PCP route with a large deposit as long as I'm confident of being able to come up with the final balloon payment, which I will be.

I have a good job and up until recently enough had lots of savings. We had to clear those savings to buy a house and had a couple of kids, but are building back up again. For now, especially with 0% PCP is the best option. At the end of the day the maximum you will pay is the actual sale price of the car with the deposit, payments over 36 months and baloon. There is no other means to do that interest free apart from a straight cash sale.

grogi

techdiver wrote: »

Thanks for the replies.

I still don't see a downside to going the PCP route with a large deposit as long as I'm confident of being able to come up with the final balloon payment, which I will be.

If you are responsible, then there is not any.

A lot of people go PCP route, because any other way they cannot afford the repayments. They calculate if they can afford the monthly payment - but if it goes up, they would not be able to... That is absolutely irresponsible, insane even...

But if you can afford the car, PCP is a nice alternative to freezing your cash, especially 0% PCP. You can invest the money into something else (overpay this high % mortgage) and save in the longer term.

[Deleted User]

Lantus wrote: »

It doesn't work like that. Your saying you will have 11k equity which sounds wrong. The dealer will not be giving you that. They still need to make a margin on any car they sell. Plus you really need to look at a 4 year old car for comparison ( the dealer will.)

The difference between the gfv and the price of the car is the equity. Now that 25k is the dealer selling price which will be more than he will give in trade in but it won't be massively less to bring it way down to 12.5%. Alternately you can sell the car yourself if you can get more than the trade in, pay off the gfv and you have your deposit.

grogi wrote: »

If you are responsible, then there is not any.

A lot of people go PCP route, because any other way they cannot afford the repayments. They calculate if they can afford the monthly payment - but if it goes up, they would not be able to... That is absolutely irresponsible, insane even...

The pcp repayments are fixed so they can't go up.

techdiver

grogi wrote: »

If you are responsible, then there is not any.

A lot of people go PCP route, because any other way they cannot afford the repayments. They calculate if they can afford the monthly payment - but if it goes up, they would not be able to... That is absolutely irresponsible, insane even...

But if you can afford the car, PCP is a nice alternative to freezing your cash, especially 0% PCP. You can invest the money into something else (overpay this high % mortgage) and save in the longer term.

Andres Slimy Staircase wrote: »

The difference between the gfv and the price of the car is the equity. Now that 25k is the dealer selling price which will be more than he will give in trade in but it won't be massively less to bring it way down to 12.5%. Alternately you can sell the car yourself if you can get more than the trade in, pay off the gfv and you have your deposit.

The pcp repayments are fixed so they can't go up.

Agreed. I've done the sums and I can easily afford the repayments. I currently overpay my mortgage, clear my credit card every month and have no other borrowings.

The last car I purchased was a second hand car for €19,000, which is now 3 years later worth €11,500. So €7,500 depreciation.

I'll attach a premium to a new car as a result of it being less likely to cost money on repairs etc. My current car always needed something done every now and again. Timing Belt, Brake Disks, etc. These items should not be an issue on a new car even after 3 years. I know there will be the usual wear and tear items, (tyres, pads etc).

You also get the reassurance of a warranty with a new car that you don't have with many/most second hand cars.

If my total outlay on a new car over 3 years is €37,000 for a car worth €23,000 - €25,000 in 3 years (I know this can change), then the depreciation is roughly €12,000 - €14,000. It is higher than the depreciation suffered on my current car, but my current car is second hand and high mileage with often higher maintenance costs.

To add to all of that you get to own a new car also.

As said by others above PCP shouldn't be a replacement for not being able to pay for a car through other means, but it is a cheaper way to finance a car if you can afford to.

grogi

techdiver wrote: »

Agreed. I've done the sums and I can easily afford the repayments. I currently overpay my mortgage, clear my credit card every month and have no other borrowings.

The last car I purchased was a second hand car for €19,000, which is now 3 years later worth €11,500. So €7,500 depreciation.

I'll attach a premium to a new car as a result of it being less likely to cost money on repairs etc. My current car always needed something done every now and again. Timing Belt, Brake Disks, etc. These items should not be an issue on a new car even after 3 years. I know there will be the usual wear and tear items, (tyres, pads etc).

You also get the reassurance of a warranty with a new car that you don't have with many/most second hand cars.

If my total outlay on a new car over 3 years is €37,000 for a car worth €23,000 - €25,000 in 3 years (I know this can change), then the depreciation is roughly €12,000 - €14,000. It is higher than the depreciation suffered on my current car, but my current car is second hand and high mileage with often higher maintenance costs.

To add to all of that you get to own a new car also.

As said by others above PCP shouldn't be a replacement for not being able to pay for a car through other means, but it is a cheaper way to finance a car if you can afford to.

You are overly optimistic with that... I think that if you get €20k for the car in three years, you'd be lucky...

You cannot really compare the depreciation now and in future. 2nd hand prices are inflated now a lot (My previous car lost a grand over three years, and it wasn't a banger by any means!) - because in the recession fewer were buying... But 2-3 years from now there will be a sea of cars getting out of PCP. Plus electric cars will be much more mature, which will put additional price pressure on the ICE cars.

digitaldr

Considering PCP on my first new car purchase. If God forbid the dealership went under I presume there would be no one to guarantee a minimum value at the end of the term if they are using a bank for their finance? I believe some manufacturers such as vw and BMW provide their own finance.

ShadowHearth

grogi wrote: »

You are overly optimistic with that... I think that if you get €20k for the car in three years, you'd be lucky...

You cannot really compare the depreciation now and in future. 2nd hand prices are inflated now a lot (My previous car lost a grand over three years, and it wasn't a banger by any means!) - because in the recession fewer were buying... But 2-3 years from now there will be a sea of cars getting out of PCP. Plus electric cars will be much more mature, which will put additional price pressure on the ICE cars.

Without knowing about particular car it's hard to say how much value it will still have. Some brands keep their value vary damn well. For example skoda Octavia vrs brand new is about 37k and it keeps value really well, to the point it's better go for new then 1-3 year old one.
In a way we are in very unsecured pcp world. Its very fresh in Ireland and as all good ideas, it goes out of control very damn fast and becomes a massive problem few years later. As always "we didn't knew it will happen" excuse given.

The rest of the world managing their pcp really well and it's moderately popular, where's in UK they are already expecting pcp bubble bursting. Everyone in UK and Ireland just going with newest best fad. Completely ignoring things around it. In this example second hand car market of 1-3 year old cars, which are outrpriced of actually being good value to buy and only serve as a advertising to how great pcp is. Its a bubble and it is damn growing.

Buying a car on pcp with intention to trade up in 3 years is dodgy, if you just able to put down deposit and pay payments, without thinking in advance is very dodgy as market really looks unstable.
Buying car or pcp with intention to keep it is actually really damn good idea and so far the cheapest and most flexible way of doing it.

bazz26

digitaldr wrote: »

Considering PCP on my first new car purchase. If God forbid the dealership went under I presume there would be no one to guarantee a minimum value at the end of the term if they are using a bank for their finance? I believe some manufacturers such as vw and BMW provide their own finance.

I don't think individual dealers set the GFV figures, I'd say it's set by the financial institution who is underwriting the finance based on information they get from the likes of the S.I.M.I., the same way Revenue get information on the OMSP of used cars for VRT purposes.

techdiver

ShadowHearth wrote: »

Without knowing about particular car it's hard to say how much value it will still have. Some brands keep their value vary damn well. For example skoda Octavia vrs brand new is about 37k and it keeps value really well, to the point it's better go for new then 1-3 year old one.
In a way we are in very unsecured pcp world. Its very fresh in Ireland and as all good ideas, it goes out of control very damn fast and becomes a massive problem few years later. As always "we didn't knew it will happen" excuse given.

The rest of the world managing their pcp really well and it's moderately popular, where's in UK they are already expecting pcp bubble bursting. Everyone in UK and Ireland just going with newest best fad. Completely ignoring things around it. In this example second hand car market of 1-3 year old cars, which are outrpriced of actually being good value to buy and only serve as a advertising to how great pcp is. Its a bubble and it is damn growing.

Buying a car on pcp with intention to trade up in 3 years is dodgy, if you just able to put down deposit and pay payments, without thinking in advance is very dodgy as market really looks unstable.
Buying car or pcp with intention to keep it is actually really damn good idea and so far the cheapest and most flexible way of doing it.

The exact car I'm looking at.

grogi

techdiver wrote: »

The exact car I'm looking at.

Great motor... Me is envious

I think you should go for it, it seems you definitely can afford it and are sensible about it

I think you're still too optimistic about the future value, hope I am wrong. Just answer this question to yourself: would you pay €24000 cash for a 3 year old vRS, just out of the warranty, when you can have a brand new for €37k (with 0% PCP).

jca

bazz26 wrote: »

I don't think individual dealers set the GFV figures, I'd say it's set by the financial institution who is underwriting the finance based on information they get from the likes of the S.I.M.I., the same way Revenue get information on the OMSP of used cars for VRT purposes.

GFV is what's owed on the car it's just a pr rename on the old fashioned balloon payment. Market value Above this balloon payment is what will be your deposit going into the next pcp deal. What that market value will be in 3 years time is the 64000 dollar question!! I can see many a shouting match on dealers forecourts in 2019.

hymanyman

jca wrote: »

GFV is what's owed on the car it's just a pr rename on the old fashioned balloon payment. Market value Above this balloon payment is what will be your deposit going into the next pcp deal. What that market value will be in 3 years time is the 64000 dollar question!! I can see many a shouting match on dealers forecourts in 2019.

I have a 141 Passat, bought new on PCP, a 1.6 comfortline ....67km...VW now want 6k deposit along with car to get a 2.0 comfortline...an upgrade yes, but didn't expect that!
VW was talking about cost of cars coming in from England influencing the market price here.
So I agree, you can't predict what the situation will be at the end of your 3 year term. Plan for worst case scenario, not just best case.

(Still looking at PCP, maybe 161 Audi, very high spec, but have yet to see the fine print)

hymanyman

jca wrote: »

GFV is what's owed on the car it's just a pr rename on the old fashioned balloon payment. Market value Above this balloon payment is what will be your deposit going into the next pcp deal. What that market value will be in 3 years time is the 64000 dollar question!! I can see many a shouting match on dealers forecourts in 2019.

I have a 141 Passat, bought new on PCP, a 1.6 comfortline ....67km...VW now want 5k deposit along with car to get a 171 1.6 comfortline...didn't expect that!
VW was talking about cost of cars coming in from England influencing the market price here.
So I agree, you can't predict what the situation will be at the end of your 3 year term. Plan for worst case scenario, not just best case.

(Still looking at PCP, maybe 161 Audihigh spec, but have yet to see the fine print)

mickdw

Old model id say is your biggest problem there. You bought an end of life model new. Regardless of how you pay for that, you are going to get scalded.
Don't be tempted by a slightly used A6 if you are considering an Audi. These are long in the tooth now so you will loose your shirt on the double there in 3 years.
An A4 should be a reasonable buy being a new model.

kala85

hymanyman wrote: »

I have a 141 Passat, bought new on PCP, a 1.6 comfortline ....67km...VW now want 5k deposit along with car to get a 171 1.6 comfortline...didn't expect that!
VW was talking about cost of cars coming in from England influencing the market price here.
So I agree, you can't predict what the situation will be at the end of your 3 year term. Plan for worst case scenario, not just best case.

(Still looking at PCP, maybe 161 Audihigh spec, but have yet to see the fine print)

What trade value in did the dealer give you on the 141 passat. How did you find them on fuel economy

Micky 32

Quick question. Say one buys a new car on pcp with the intention of buying it out at the end, paying the ballon payment to own the car. Does that mean you wouldn't have to worry about what mileage you put up? Would you still get charged for extra mileage even if you intended to buy the car out? I do 50,000 km a year.

vintagevrs

No, if you pay the balloon payment the car is yours regardless of millage.

Micky 32

vintagevrs wrote: »

No, if you pay the balloon payment the car is yours regardless of millage.

Ah , so mileage and conditions only really apply when the car is used as a deposit on another new one at the end of the term?

ShadowHearth

Micky 32 wrote: »

Ah , so mileage and conditions only really apply when the car is used as a deposit on another new one at the end of the term?

Yes. If you intend to keep it, not just rent it for 3 years, then just pay off balloon or refinance it. Or even repay half and refinance the bit left over. Up to you.

sheff the ref

If you get PCP on a €20,000+ car at 0% for the first three years. You are left with a three year old car and owe maybe €6000-€7000 on it

Where will you get a €20,000 three year old car for €7000 and you have had the first of the car, so you know the history

Lets say you refinance the remaining sum over another 3 years and own the car outright after 6 years. You have a deposit to put towards a new model and the PCP starts again if you can get a 0% deal. Might be more cost effective than changing every 3 years depending on mileage and wear and tear.

Marcusm

Micky 32 wrote: »

Quick question. Say one buys a new car on pcp with the intention of buying it out at the end, paying the ballon payment to own the car. Does that mean you wouldn't have to worry about what mileage you put up? Would you still get charged for extra mileage even if you intended to buy the car out? I do 50,000 km a year.

No issue if you are buying the car out at the end. The only place I could see you marginally exposed would be on a total loss where the insurance payout would reflect the higher mileage but you would face the same issue with any other form of finance anyway, although with a PCP I would expect the finance to be terminated on a total loss which would not be the case with a bank loan. So, if the true Apr on the PCP is attractive, no reason not to proceed.