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Will PCP go POP?

rubbadubdub

Just seeing peoples thoughts regarding PCP and the potential burst that could happen in the next few years.

Like alot of people I opted for PCP as was getting a Brand New Ford Focus for less (€35 a month less) than taking out a loan on 3 - 4 year old focus. Surely would have been mad to get the 2nd hand one as when the 5 year loan was up I would just want another car again and so the cycle continues.

My worry would be with so many people doing this and going again on new PCP deal every 2- 3 years the garages will struggle to sell these 2 year old cars on to traders/customers that are returned to them at the price they are looking for.

Does this mean that the customers original deposit that covers the extra cost from the GFMV (guaranteed future market value) to go again will become less valuable as dealers wont be able to get the price they need to make up value to go again?

I know the new car trade is flying but it just doesn't stack up in my opinion. I believe these extra costs will passed on to the consumer in the new car deals and also people on rolling PCP deal currently.

Anyone else any thoughts? Sorry not sure if there is a thread on this, couldnt see anything.

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[Deleted User]

Augeo wrote: »

With a €7k deposit and borrowing €18K off AIB over 3 years the Total amount repayable is €20,418.48, so €2,2418 in interest.

Monthly payment is €567 but there's no balloon payment.

The way you phrase it is exactly how a car salesman would, and many people are dim enough to go for it when they can't actually afford a €40k car.

576 is a lot to be paying a month. If you have a decent car already that's going to make up a lot of the deposit for a lot of people and you don't actually have to pay the balloon payment, in fact I would think very few would plan on paying it (I know personally I wouldn't, I'd be looking to upgrade).

This might not go down well but PCP enables you to own a car worth 40k fairly comfortably (once you have a good deposit) even if you would struggle to afford it by getting a normal loan/HP etc and the way it's structured I actually think that's ok.

ShadowHearth wrote: »

Obviously people miss baloon payment and just pretend that car will have enough equality left for next one.

Cars I've been looking at are close enough to having the 30% deposit in equity going into the next PCP. GFV of around 14k and plenty of cars for sale 3 years old for 24k or more.

mickdw

Paisley Rapid Newscast wrote: »

576 is a lot to be paying a month. If you have a decent car already that's going to make up a lot of the deposit for a lot of people and you don't actually have to pay the balloon payment, in fact I would think very few would plan on paying it (I know personally I wouldn't, I'd be looking to upgrade).

This might not go down well but PCP enables you to own a car worth 40k fairly comfortably (once you have a good deposit) even if you would struggle to afford it by getting a normal loan/HP etc and the way it's structured I actually think that's ok.

Cars I've been looking at are close enough to having the 30% deposit in equity going into the next PCP. GFV of around 14k and plenty of cars for sale 3 years old for 24k or more.

For sale but are they selling.
You are basically saying that 10k equity is 30 percent so we are talking about new car costing circa 33k. They are not going to be worth 24k after 3 years. Better budget for the car to be worth 50 percent of new price instead of hoping it will be worth 70 percent.
If there is a change of model during your ownership, you could be looking at closer to 5 percent equity.

ShadowHearth

Paisley Rapid Newscast wrote: »

576 is a lot to be paying a month. If you have a decent car already that's going to make up a lot of the deposit for a lot of people and you don't actually have to pay the balloon payment, in fact I would think very few would plan on paying it (I know personally I wouldn't, I'd be looking to upgrade).

This might not go down well but PCP enables you to own a car worth 40k fairly comfortably (once you have a good deposit) even if you would struggle to afford it by getting a normal loan/HP etc and the way it's structured I actually think that's ok.

Cars I've been looking at are close enough to having the 30% deposit in equity going into the next PCP. GFV of around 14k and plenty of cars for sale 3 years old for 24k or more.

Thing is, its very very hard to predict what will happen in 3 years. All changes and there is always a wild card.

For example cars of around 7-5 years old hold value very well, because there is feck all in that range due to new cars sales in 2010-2012 being very bad.
Already mentioned point was that 1-3 year old cars very strangely keep their value in dealers garage, but no one buying them. We all know already that those prices are not normal prices. So checking their value now and expecting same value in 3 years is dodgy to say the least.
We got a wild card of all this uk stock flooding Ireland, it only started, but holy crap those cars are cheap! It is taking time for locals to adjust and no dealer wants to slash 5k off their stock now.

we already had example few days ago in pcp thread. The lad had 141 Passat and now to take out 171 same passat it is costing him 5k deposit again. So we already seeing it, just dont have a lot of hard evidence as pcp is very new thing here. I would almost wait until March next year to see how people getting on with pcp who trading in their 3 year old cars now and not taking on new cars for 3 years.

[Deleted User]

mickdw wrote: »

For sale but are they selling.
You are basically saying that 10k equity is 30 percent so we are talking about new car costing circa 33k. They are not going to be worth 24k after 3 years. Better budget for the car to be worth 50 percent of new price instead of hoping it will be worth 70 percent.
If there is a change of model during your ownership, you could be looking at closer to 5 percent equity.

Car I'm using for illustration purposes here (as its one I'm interested in) is a Golf GTD approx 40k new. just under 12k deposit, 400 per month and a GFV of 14.4k (apr 1.9%). Asking prices for 3 year old ones range from around 24k up to 30k. No way on earth a car like that will go bust and be worth only 5%.

[Deleted User]

Paisley Rapid Newscast wrote: »

..............

Cars I've been looking at are close enough to having the 30% deposit in equity going into the next PCP. GFV of around 14k and plenty of cars for sale 3 years old for 24k or more.

Paisley Rapid Newscast wrote: »

........... Asking prices for 3 year old ones range from around 24k up to 30k. No way on earth a car like that will go bust and be worth only 5%.

You do realise there is an amount between the asking price and the price the dealer gives you? Profit margin for the dealer and negotiation off the asking price and also money to cover prep, service and warranty.

With a GFV of €14k there is a decent chance that's all you'll be getting for it.

The 5% being mentioned is you being offered €14K + €2K = €16k.

[Deleted User]

Augeo wrote: »

You do realise there is an amount between the asking price and the price the dealer gives you? Profit margin for the dealer and negotiation off the asking price and also money to cover prep, service and warranty.

With a GFV of €14k there is a decent chance that's all you'll be getting for it.

Yeah 1 or 2k difference not 12. There is no way on earth you are going to get anywhere near only getting the gfv.

If the dealer isn't offering you enough you can always buy it out sell it privately and go back in for a new one with a cash deposit too.

Augeo wrote: »

The 5% being mentioned is you being offered €14K + €2K = €16k.

I understand what the 5% is, there is no chance on earth a desirable diesel VW is going to drop like that. We aren't talking about an Alfa or other car that loses value hand over fist.

I've seen people get near 14k for 3 year old normal 1.6tdi golfs in trade ins.

carsfan2

With brexit and now trump in the us the Irish economy could be in for a rocky ride for a few years. Some that took out pcp may not have secure employment going forward. I think a lot of people treated themselves to new cars after the austerity years but could only afford to if they went pcp. A lot used their old car as deposit. They may find that their circumstances have changed come balloon time and will not want or be able to put their hands in their pockets again for a deposit on a newer car.you would hope that they will be able to finance the balloon payment in this case.
I think pcp is a very legitimate way to run a car but do have concerns that like many financial products some customers don't understand them.

[Deleted User]

Paisley Rapid Newscast wrote: »

Yeah 1 or 2k difference not 12. There is no way on earth you are going to get anywhere near only getting the gfv..............

I think you have a conceptual problem with the meaning of GFV, if what you are saying is factually true and not subject to many factors the GFV would be higher

Paisley Rapid Newscast wrote: »

.............

If the dealer isn't offering you enough you can always buy it out sell it privately and go back in for a new one with a cash deposit too..................

Sure people will be queuing up to throw €20k at you when garages are full of ones asking just a tad more, yup.

Paisley Rapid Newscast wrote: »

.......

I've seen people get near 14k for 3 year old normal 1.6tdi golfs in trade ins.

But you can't predict the future, GFV is just that, dealer's mitigation for potential market situations in 3 years time.

[Deleted User]

Augeo wrote: »

I think you have a conceptual problem with the meaning of GFV, if what you are saying is factually true and not subject to many factors the GFV would be higher

I know exactly what it is. The GFV is how much you are left owing on the car after 3 years. Leaving interest aside GFV = new car price - (deposit + (36 x monthly repayment)).

The difference between what you get for the car and the GFV is your deposit simple as that.

Good luck finding a 3 year old GTD for 20k in a private sale either btw.

ShadowHearth

Paisley Rapid Newscast wrote: »

I know exactly what it is. The GFV is how much you are left owing on the car after 3 years. Leaving interest aside GFV = new car price - (deposit + (36 x monthly repayment)).

The difference between what you get for the car and the GFV is your deposit simple as that.

Good luck finding a 3 year old GTD for 20k in a private sale either btw.

I think you taking this a bit too harsh on board m8. Just lighten up a bit, it's good advice going around and as Any forum, you see a lot of opinions and most critical situations.

Just think personally about your own situation amd work from there.

Can you afford deposit and payments comfortably?
Will you fit in the millage restriction. Any extra millage will cost you in trade in. 0.09eu per km.
Are you ready for some external damage? Marks and bumps to lower it's value? No matter how safe you will be, there always going to be an asshole or soccer mom with its spawns, who will bangle doors.
In the end of 3 years, will you be in comfortable position to put 5-8k deposit to new car in very worst case scenario?

If all these things are covered, then nobody is saying that you should not do it. What a lot of people trying to say: be realistic and cover your own arse in advance.

Nonoperational

PCP absolutely ideal for me. Guaranteed job, easily afford the monthly payments, no service fees for the 3 years, low tax, no problem buying the car for cash at the end or going again, very low interest rates, nice new car to sit into.

If I'm being conned here then sell me some more magic beans.

mickdw

Nonoperational wrote: »

PCP absolutely ideal for me. Guaranteed job, easily afford the monthly payments, no service fees for the 3 years, low tax, no problem buying the car for cash at the end or going again, very low interest rates, nice new car to sit into.

If I'm being conned here then sell me some more magic beans.

Sounds like you are a good candidate for pcp. Not everyone is though.
Would you be happy with the monthly figure if you calculate it based on 15 percent deposit. If so, you are set.

mickdw

Paisley Rapid Newscast wrote: »

I know exactly what it is. The GFV is how much you are left owing on the car after 3 years. Leaving interest aside GFV = new car price - (deposit + (36 x monthly repayment)).

The difference between what you get for the car and the GFV is your deposit simple as that.

Good luck finding a 3 year old GTD for 20k in a private sale either btw.

To be fair, that is probably one of the better cars in terms of retaining value.
VW tend to set up the pcp to leave 15 percent or so equity at year 3.
So in this case 15 percent is 6k equity with a car being valued at 20k at year 3 and having depreciated 50 percent.
I wouldnt be assuming any better than that.
That will leave you looking for 6k additional deposit to go for new car again with same monthly.
In your shoes, I would be putting 150 per month aside so that I had 5400 available to throw at next deposit if needed. If not needed, you get your new car and a holiday!

[Deleted User]

mickdw wrote: »

To be fair, that is probably one of the better cars in terms of retaining value.
VW tend to set up the pcp to leave 15 percent or so equity at year 3.
So in this case 15 percent is 6k equity with a car being valued at 20k at year 3 and having depreciated 50 percent.
I wouldnt be assuming any better than that.
That will leave you looking for 6k additional deposit to go for new car again with same monthly.
In your shoes, I would be putting 150 per month aside so that I had 5400 available to throw at next deposit if needed. If not needed, you get your new car and a holiday!

I very much understand the equity varies and the cars I am looking at are ones that particularly hold their value (not the reason I am looking at these cars they are the ones I like). I also would expect to have to put a little money towards a deposit and agree with your put money aside along with the repayments.

It was some of the scaremongering earlier talking about 5% equity or only getting the GFV that I was finding issue with.

GerryDerpy

I think it's mad altogether the amount of people that buy cars on PCP. In my book, if you need PCP then you can't afford the car.

How anyone can keep a PCP contract rolling for years, paying €300 per month, driving around a frugal diesel. Blows my mind to be frank.

J.pilkington

GerryDerpy wrote: »

I think it's mad altogether the amount of people that buy cars on PCP. In my book, if you need PCP then you can't afford the car.

That's a very general and ignorant comment.

Do you also think that anyone who takes out a mortgage can't afford the house and instead should live in a caravan?

[Deleted User]

GerryDerpy wrote: »

I think it's mad altogether the amount of people that buy cars on PCP. In my book, if you need PCP then you can't afford the car.

How anyone can keep a PCP contract rolling for years, paying €300 per month, driving around a frugal diesel. Blows my mind to be frank.

Does the same apply to loans? So the only people who should buy new are are the very very few who can buy outright in cash (and even those who can rarely if ever would).

If you can make the repayment comfortably you can afford it simple as that. I also don't see anything wrong with paying the monthly repayment and keeping it rolling so you are in a new car all the time. It's a lot less outlay over each 3 years than if you bought the car outright so you are essentially owning a new car of a lot less money and have no worries about nct, wear and tear problems, warranty to cover things that do go wrong, nice tight new cars, up to date spec etc etc.

frozenfrozen

There are people who have done their sums, they can afford a new car, they want a new car, they are posting here (rightly) upset that people are claiming anyone on pcp can't afford the car.

In my opinion its simply, those who PCP suits as above, would be buying a car with a loan otherwise, what makes pcp good for you is that it's 0% or thereabouts.

The reason they can make it 0% I think, is that they are 'tricking' a lot of people into getting a new car with this sales technique.

PCP if it is going to POP will not be down to the people who did their sums. It's the people who walked into a dealership to buy a 7-8 year old car, or were interested in a 2 year old car, and they walked out having signed up for a 171 on PCP. Not the people who got their calculator out, or the people who picked the car they wanted, THEN the finance option to buy it.

Oafley Jones

carsfan2 wrote: »

With brexit and now trump in the us the Irish economy could be in for a rocky ride for a few years. Some that took out pcp may not have secure employment going forward. I think a lot of people treated themselves to new cars after the austerity years but could only afford to if they went pcp. A lot used their old car as deposit. They may find that their circumstances have changed come balloon time and will not want or be able to put their hands in their pockets again for a deposit on a newer car.you would hope that they will be able to finance the balloon payment in this case.
I think pcp is a very legitimate way to run a car but do have concerns that like many financial products some customers don't understand them.

I think you were the first poster to mention brexit. Which tells me - in a thread where multiple people have commented on floods of U.K. cars coming here - that people haven't fully appreciated the potential impact of them pulling out of the common trade area.

[Deleted User]

frozenfrozen wrote: »

There are people who have done their sums, they can afford a new car, they want a new car, they are posting here (rightly) upset that people are claiming anyone on pcp can't afford the car.

In my opinion its simply, those who PCP suits as above, would be buying a car with a loan otherwise, what makes pcp good for you is that it's 0% or thereabouts.

The reason they can make it 0% I think, is that they are 'tricking' a lot of people into getting a new car with this sales technique.

PCP if it is going to POP will not be down to the people who did their sums. It's the people who walked into a dealership to buy a 7-8 year old car, or were interested in a 2 year old car, and they walked out having signed up for a 171 on PCP. Not the people who got their calculator out, or the people who picked the car they wanted, THEN the finance option to buy it.

The thing is someone not being able to pay the final payment etc and having to just hand the car back is actually the best outcome for the dealer as they will make a load of money on selling the car compared to taking it as a trade in or someone buying it out.

Sam Kade

CIP4 wrote: »

Upto now the newest car I have owned was 4.5 years old so I have never been involved in car finance. However in the last few months I have been looking at brand new and demo cars. A few things I noticed, with most makes and models it only makes sense to buy brand new, demo save a few thousand or then 4 year old plus to get a substantially cheaper car. The 2/3 year old cars are too close to the new/demo prices in many cases to warrant buying them.

I am still undecided about PCP. I think it would have worked a lot better if half the people had been buying out the cars after 3 years and keeping them a few years whereas as it is almost all people are giving them back after 3 years and getting a new one. For me I have no intention of getting rid of a perfectly good 3 year old car that I have minded like a baby. But When I said it to salesman that I would be buying it out after 3 years they looked at me like I had 10 heads why would I do that if I could get another new one and just pay PCP monthly repayments forever. So for me if I could get a decent interest rate on HP that's the road I would go. But it obviously works for some people and some are happy to have permanent car repayment long long term.

My biggest surprise is the amount of people on PCP I have asked who don't know how much the balloon payment is on there car at all :eek: my favourite response is oh well we would be taking another new one out after 3 years as the car would be getting abit old for us at that. 90% of the time that's coming from someone who had €500 15 year old car before PCP came.[/QUOTE]

Exactly, all a lot of people think about is having a new car and how much a week it will cost them rather than thinking about the overall cost. Would pcp add 1/3 to the list price of the car by the time you have it paid for?

frozenfrozen

Paisley Rapid Newscast wrote: »

The thing is someone not being able to pay the final payment etc and having to just hand the car back is actually the best outcome for the dealer as they will make a load of money on selling the car compared to taking it as a trade in or someone buying it out.

It's a grand outcome for someone unable to keep up with payments too I think, very dignified just handing the car back compared to having to sell a car that you have a loan against or worse having it repossessed.

But I think in terms of the PCP 'bubble', there has been definitely an inflation in 'old new' car prices which will have to come down - nobody will buy a 2 year old car when it's actually more expensive than a brand new one, therefore the price of the 2 year old car must be too high. How much does it have to come down in price? enough to make it worth not getting a new car.. could catch a lot of people out who were counting on the gfmv being enough to go towards the next deposit..

Vicxas

Just checking some websites for PCP offers and the Kilometers/Annum seems quite low. My yearly commute alone would put me 9k over the limit.

I'm assuming you can haggle but the repayments would get worse?

[Deleted User]

Paisley Rapid Newscast wrote: »

................

If you can make the repayment comfortably you can afford it simple as that. I also don't see anything wrong with paying the monthly repayment and keeping it rolling so you are in a new car all the time. It's a lot less outlay over each 3 years than if you bought the car outright so you are essentially owning a new car of a lot less money and have no worries about nct, wear and tear problems, warranty to cover things that do go wrong, nice tight new cars, up to date spec etc etc.

Again, deposit, GFMV & baloon payment can all make the bolded piece not at all factual but many who go the PCP route are thinking along those lines as they aren't financially savvy.

Over 3 years you pay out 70% to effectively lease the car.

Read this....

frozenfrozen wrote: »

........ could catch a lot of people out who were counting on the gfmv being enough to go towards the next deposit..

NIMAN

frozenfrozen wrote: »

It's a grand outcome for someone unable to keep up with payments too I think, very dignified just handing the car back compared to having to sell a car that you have a loan against or worse having it repossessed.

Its a rubbish outcome for them.

They will have paid a deposit, 36 monthly payments and now have no car at all, so they will have to find the money to go out and buy another one.

frozenfrozen

NIMAN wrote: »

Its a rubbish outcome for them.

They will have paid a deposit, 36 monthly payments and now have no car at all, so they will have to find the money to go out and buy another one.

I agree - but if they had got a loan they could be in a position where they can't keep up with repayments after 3 years, and the value of the car isn't enough to clear the loan if they were to sell it. So as far as not being able to keep up with payments goes PCP is better than a loan.

I completely see what you're saying though and agree. you're paying 70% of the price of the car for only 3 years use of it.

[Deleted User]

Sam Kade wrote: »

Exactly, all a lot of people think about is having a new car and how much a week it will cost them rather than thinking about the overall cost. Would pcp add 1/3 to the list price of the car by the time you have it paid for?

It won't that's why pcp is so attractive compared to hp or loans from the bank. If you get a 0% pcp you pay back the same as you would buying the car upfront for cash. 1.9% interest you pay a small bit of interest and so on.

Augeo wrote: »

Again, deposit, GFMV & baloon payment can all make the bolded piece not at all factual but many who go the PCP route are thinking along those lines as they aren't financially savvy.

Over 3 years you pay out 70% to effectively lease the car.

Read this....

Firstly balloon payment and gfmv are the same thing. If you read my post you would see that I said you may have to put forward something towards the deposit on a new car but you are scaremongering talking about only having 5% equity etc which is just not going to happen.

twin_beacon

I looked into PCP in 2014 with VW and Ford. It wasn't for me though as there was a mileage limitation. You were limited to 60k km over the 3 years, then you were charged 1c for every km after the 60k. Iver 3 years, Id easily do over 100k km so it was a non runner. Ended up buying a second hand car, and got a car loan, the monthy repayments were the same as the pcp payments would have been as the pcp deal. however I had my car loan paid off in 2 years and had an asset worth 5-6k, where as I would have been paying pcp for 3 years, plus the initial deposit, and own nothing after it.

There is no mandatory balloon payment. however, handing back a car that you have paid around 17k on over 3 years would be painful.

The only people that pcp is really good for are people that comfortable financially and don't do large annual mileage.

GerryDerpy

J.pilkington wrote: »

That's a very general and ignorant comment.

Do you also think that anyone who takes out a mortgage can't afford the house and instead should live in a caravan?

Does the houses value drop to 1,000 after 10 years?

GerryDerpy

Paisley Rapid Newscast wrote: »

Does the same apply to loans? So the only people who should buy new are are the very very few who can buy outright in cash (and even those who can rarely if ever would).

If you can make the repayment comfortably you can afford it simple as that. I also don't see anything wrong with paying the monthly repayment and keeping it rolling so you are in a new car all the time. It's a lot less outlay over each 3 years than if you bought the car outright so you are essentially owning a new car of a lot less money and have no worries about nct, wear and tear problems, warranty to cover things that do go wrong, nice tight new cars, up to date spec etc etc.

Yes same applies to loans. Obviously not getting a few grand loan from credit union because you don't have cash. That's fine. But if you need a 30k loan for a car then maybe it's better to not take on the risk given the security will plummet in value.