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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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twin_beacon

GerryDerpy wrote: »

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.

While I agree, and I would not take out such a loan for a car myself, but if the the person taking out the loan has the required deposit, and is able to make the repayments, let them off.

[Deleted User]

Paisley Rapid Newscast wrote: »

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

............. but you are scaremongering talking about only having 5% equity etc which is just not going to happen.

Was your crystal ball that accurate before the property crash in 2008?
The GFMV is just that, there's a chance that's all the garage will offer you come end of the three years. That's what folks sign up to with PCP.

"just not going to happen" is your opinion and not at all factual, it's a meaningless statement of opinion, in 3 years time there could be levies placed on diesel and additional motor tax that could make a 3 year old diesel quite unattractive.

Much like when the C02 based tax system was introduced many petrol cars lost thousands in value over a very short time.

The motor trade cover themselves for this and other possibilities with the GFMV which seems low to folks now but the risk is all on the consumer. That is fact.

screamer

The insurance companies are compunding the issue with Pcp card imho. They reluctantly insure 10 year old cars and you'll really struggle to insure older than that. This really takes the shine off buying a 3 year old car not to mention value. I think it'll force people to PCP and TBH I think the days of car ownership are over cars will be leased (pcpd) and given back at the end of the term. You'll have no value built up in an ever depreciating vehicle with a resale value of 0 at ten years.

Special Circumstances

screamer wrote: »

The insurance companies are compunding the issue with Pcp card imho. They reluctantly insure 10 year old cars and you'll really struggle to insure older than that. This really takes the shine off buying a 3 year old car not to mention value. I think it'll force people to PCP and TBH I think the days of car ownership are over cars will be leased (pcpd) and given back at the end of the term. You'll have no value built up in an ever depreciating vehicle with a resale value of 0 at ten years.

You must be able to agree with all of the following assumptions in order to take out a valid Policy of Insurance with FBD.

The Quick Car Insurance quote assumes that your car is under 8 years old and that you meet full underwriting eligibility criteria which is established through the full quote process.

ShadowHearth

Special Circumstances wrote: »

You must be able to agree with all of the following assumptions in order to take out a valid Policy of Insurance with FBD.

The Quick Car Insurance quote assumes that your car is under 8 years old and that you meet full underwriting eligibility criteria which is established through the full quote process.

What are the chances it's going to be soon " your car is under 3 years" :pac:

GerryDerpy

twin_beacon wrote: »

While I agree, and I would not take out such a loan for a car myself, but if the the person taking out the loan has the required deposit, and is able to make the repayments, let them off.

Of course we let them off. They do give me used car options so I am grateful. But it still stands that getting a huge loan to purchase a rapidly depreciating asset is mental. Don't get me wrong, I'd be the first to blow money on a car or motorbike. But I can afford them.

goz83

I have been looking online and I am not impressed either with the 2-3 year old car prices. This PCP is having a negative impact and is seeing perfectly good cars rotting away after only 3 years of use.

I plan to upgrade my car (03 E200k) and maybe the family car (06 Zafira) too, but I am not sure what to do, mainly because insurance companies reluctantly insure 10+ year old cars. Up until 2014, I happily drove a 97 Mitsi FTO and older than that. It's a disgrace.

I feel like I am being forced to buy a new car (or 2) the way things are. The PCP numbers are really the only thing that seem any way attractive. Add scrappage of the other cars and it seems like a no brainer.

oppenheimer1

The problem with PCP is that many go into these contracts not fully informed, and the headline figures make it look like it's a great deal. A €50,000 car costs €50,000 minimum whatever way it's financed to own it.

PCP gives the feeling of ownership when all it is is a glorified lease. If you were told it's going to cost you €25k to lease that car for three years, then almost no one would go for it. PCP gives the illusion of a better deal.

Eric Cartman

you can see a shift now in PCP offers with options. VW are especially pimping high line golfs etc.. and giving away a load of extras for half nothing, realising that a forecourt full of silver, manual, cloth seat bog boxes only has so much appeal, whereas a second hand golf with an R kit, leather and all the tech toys has export sale and a lot more appeal domestically.

GerryDerpy

oppenheimer1 wrote: »

The problem with PCP is that many go into these contracts not fully informed, and the headline figures make it look like it's a great deal. A €50,000 car costs €50,000 minimum whatever way it's financed to own it.

PCP gives the feeling of ownership when all it is is a glorified lease. If you were told it's going to cost you €25k to lease that car for three years, then almost no one would go for it. PCP gives the illusion of a better deal.

That's a good summary. People are kidding themselves thinking they can own such cars when in fact they are paying to have a go of it for a few years.

[Deleted User]

Are there any published statistics on PCP purchases?

It will be interesting to see what happens when a lot of these arrangements start ending at the same time.

Dealers can't sit with second hand cars on their forecourt indefinitely.

mickdw

Eric Cartman wrote: »

you can see a shift now in PCP offers with options. VW are especially pimping high line golfs etc.. and giving away a load of extras for half nothing, realising that a forecourt full of silver, manual, cloth seat bog boxes only has so much appeal, whereas a second hand golf with an R kit, leather and all the tech toys has export sale and a lot more appeal domestically.

Thats a good point. I only really considered it from the point of view them pushing high margin extras by offering a low rate but certainly your point is valid. If you know you are getting a car back at 3 years old, the better the spec, the easier to shift.

mikeecho

PCP is the best thing ever..... for people who rock up looking for a 3 or 4 yr old car.

Great bargains to be have on a forecourt near you soon.

[Deleted User]

mikeecho wrote: »

PCP is the best thing ever..... for people who rock up looking for a 3 or 4 yr old car.

Great bargains to be have on a forecourt near you soon.

I don't think you have read the thread, one of the main points people are making is 3 years old cars don't make sense at the moment as you usually can't get PCP on them so are looking at very high interest loans and the value of the cars is also quite high. People are buying new cars instead and ending up paying similar or in some cases less per month.

codie

I think people might be in for a shock when they go back after 3 years.If after the 3 years there is a new model out what happens then.Is the GFMV set in the customer getting the exact same car again?E.g VW golf mk8 out in the new year. Somebody with a mk7 trading up to a newer model is going to be asked for more than if trading against a new mk7.What will happen on PCP will it be garage telling the customer the GFMV plus 2k for coming up to new model.

mickdw

codie wrote: »

I think people might be in for a shock when they go back after 3 years.If after the 3 years there is a new model out what happens then.Is the GFMV set in the customer getting the exact same car again?E.g VW golf mk8 out in the new year. Somebody with a mk7 trading up to a newer model is going to be asked for more than if trading against a new mk7.What will happen on PCP will it be garage telling the customer the GFMV plus 2k for coming up to new model.

The gfmv is what will be owed. The actual value of the car at year 3 is what will decide the deposit available for next car.
You are correct. That equity available to form a deposit will be seriously reduced if you are trading in an old model. So much reduced that the car will be worth only marginally more than gfmv meaning a cash injection will be required.
The biggest point here is that this is always the case and is not just specific to pcp.
If one buys a car that is a run out model, you can expect to loose your shirt if you plan to sell it in a few years.
Anyone should be doing basic research before buying any car and if tying yourself into a 3 year deal, be damn sure there is no model change coming up in that period. It's not hard to do.

codie

mickdw wrote: »

The gfmv is what will be owed. The actual value of the car at year 3 is what will decide the deposit available for next car.
You are correct. That equity a viable to form a deposit will be seriously reduced if you are trading in an old model. So much reduced that the car will be worth only marginally more than gfmv meaning a cash injection will be required.
The biggest point here is that this is always the case and is not just specific to pcp.
If one buys a car that is a run out model, you can expect to loose your shirt if you plan to sell it in a few years.
Anyone should be doing basic research before buying any car and if tying y out r self into a 3 year deal, be damn sure there is no model change coming up in that period. It's not hard to do.

Agree with you its not hard to do, but bet my bottom dollar people don't. A good smooth talking salesman is all it takes .

robtri

mickdw wrote: »

The gfmv is what will be owed. The actual value of the car at year 3 is what will decide the deposit available for next car.
You are correct. That equity a viable to form a deposit will be seriously reduced if you are trading in an old model. So much reduced that the car will be worth only marginally more than gfmv meaning a cash injection will be required.
The biggest point here is that this is always the case and is not just specific to pcp.
If one buys a car that is a run out model, you can expect to loose your shirt if you plan to sell it in a few years.
Anyone should be doing basic research before buying any car and if tying y out r self into a 3 year deal, be damn sure there is no model change coming up in that period. It's not hard to do.

so if the GMFV is higher than the value of the car, what happens??
and the value of the car is based on trade values or retail values?

[Deleted User]

codie wrote: »

Agree with you its not hard to do, but bet my bottom dollar people don't. A good smooth talking salesman is all it takes .

If you are in the market for a new car though and the model change is 2 years away you are not going to wait or pick a car that isn't your first choice.

robtri wrote: »

so if the GMFV is higher than the value of the car, what happens??
and the value of the car is based on trade values or retail values?

The GFMV is always going to be the amount that's left owed on the car after the deposit and 36 monthly repayments. The value of the car is what you will get in a trade in or if you buy the car out and sell it yourself its what you get in the private sale.

Grueller

mikeecho wrote: »

PCP is the best thing ever..... for people who rock up looking for a 3 or 4 yr old car.

Great bargains to be have on a forecourt near you soon.

This might just come to pass soon. At the moment there is not a lot of three year old cars due to poor sales in 2013. In 2019 there will be a lot more of them around forecourts and economics 101 says larger supply equals lower price.
However people may also be caught with having to put in a large deposit and in turn decide to read finance the balance and hold the car. It is all too new here to be able accurately speculate. Our family car is 8 now so I await the outcome with interest as I would typically be a two to three year old car buyer!!!

mickdw

Grueller wrote: »

However people may also be caught with having to put in a large deposit and in turn decide to read finance the balance and hold the car. It is all too new here to be able accurately speculate. Our family car is 8 now so I await the outcome with interest as I would typically be a two to three year old car buyer!!!

Good point. If prices crash, people will end up not being able to afford new again so overall it will probably work out reasonably enough in the long term as there will have to be a balance of new v used sales.supply and demand etc.

[Deleted User]

mikeecho wrote: »

PCP is the best thing ever..... for people who rock up looking for a 3 or 4 yr old car.

Great bargains to be have on a forecourt near you soon.

Possibly

Paisley Rapid Newscast wrote: »

I don't think you have read the thread, one of the main points people are making is 3 years old cars don't make sense at the moment as you usually can't get PCP on them so are looking at very high interest loans and the value of the cars is also quite high. People are buying new cars instead and ending up paying similar or in some cases less per month.

Pcp wasn't as popular 3 years ago, the point he makes is referring to the future.

John_Rambo

I work in advertising. It's all below and above the line, digital and traditional.

Two of the advertisers I work with are the most popular motoring brands in Ireland. The push for PCP is very focused, they're targeting young social climbing men that are brand and year-reg obsessed diesel drivers whom are gearing for a new car to show off to contemporaries and family. And it's working very very well.

Making normally unaffordable purchases all of a sudden affordable along with the typical Irish hankering for the newest 162/171 latest reg to impress the neighbours is the new black.

If you're buying a 60k car. You will pay 60k for that car. One way or another. You will pay for it, now, then, three years down the line, fifteen years down the line. You Will pay the top price for these cars. These deals have been very well thought out with the best minds in finance. Don't for a minute think you're cleverer than them. You're not. It's absurd to think that you're getting a deal.

rustynutz

I bought a Seat Toledo on PCP finance almost 3 years ago. Up until this I always bought a 8-10 year old car, but with the NCT requiring yearly tests and costly bills everytime, and also getting stranded on a motorway with my partner and two toddlers when the engine blew on my 10 year old corolla 100 miles from home, I decided to go the brand new route.

I looked at car loans and weighed it up against PCP, If you get a car loan over 3 years, even with a deposit you are looking at the repayments been double the PCP repayments, at the end of the 3 years you own the car, so what? If you want to change the car at this point for brand new in order to have a car with a warranty (the main reason for me wanting a new car as opposed to a 3 year old one, no nasty unexpected repair bills) you either have to take out another loan or pay a large lump sum.

I paid 5000 deposit, monthly repayments of 216 with final payment of 7000. At the end of the 3 years I have been offered 12000 trade in value for the car, this means I have a deposit of 5000 in order to buy a new car again so my monthly repayments should be the same as I'm paying now, or I can pay the 7k with a credit union or other loan and own the car. I will probably change as I want to keep a car within warranty, maybe a kia or something with a longer warranty next time so I have the option of keeping it longer.

I accept it doesn't suit everyone but to me PCP was a no brained and was by far the cheapest route to hassle free motoring.

rubbadubdub

rustynutz wrote: »

I bought a Seat Toledo on PCP finance almost 3 years ago. Up until this I always bought a 8-10 year old car, but with the NCT requiring yearly tests and costly bills everytime, and also getting stranded on a motorway with my partner and two toddlers when the engine blew on my 10 year old corolla 100 miles from home, I decided to go the brand new route.

I looked at car loans and weighed it up against PCP, If you get a car loan over 3 years, even with a deposit you are looking at the repayments been double the PCP repayments, at the end of the 3 years you own the car, so what? If you want to change the car at this point for brand new in order to have a car with a warranty (the main reason for me wanting a new car as opposed to a 3 year old one, no nasty unexpected repair bills) you either have to take out another loan or pay a large lump sum.

I paid 5000 deposit, monthly repayments of 216 with final payment of 7000. At the end of the 3 years I have been offered 12000 trade in value for the car, this means I have a deposit of 5000 in order to buy a new car again so my monthly repayments should be the same as I'm paying now, or I can pay the 7k with a credit union or other loan and own the car. I will probably change as I want to keep a car within warranty, maybe a kia or something with a longer warranty next time so I have the option of keeping it longer.

I accept it doesn't suit everyone but to me PCP was a no brained and was by far the cheapest route to hassle free motoring.

So I will be in similar scenario this July when we go to hand car back to go again.

I think the majority of people who trade up this year will do ok on what the original deposit they made for their PCP deal V the new car.

I'm being very realistic this time, what ever car We go for we will more than likely have our hand forced to pay balloon payment as the amount of equity on top of the GMFV won't be close to going again which I'm ok with. You buy 20k car you owe 20k.

Other posters pointed out on thread, this is inevitably around the corner (next 2 years maybe) so alot of people will be in for shock if they think will be as simple as handing keys back and going again.

joebloggs32

The wife has a 152 reg on pcp and I have a ten year old corolla. In a quandary as to whether change the corolla or trade in early on the pcp as I recon by the time 182 comes around dealers might be flooded with second hand cars, and may not offer much over the gmfv.
The corolla is going fine, and I only have about 10k km per year, but with high tax, nct and insurance changing is looking attractive. As others have said, no value really in buying a 2 or 3 year old car now with low interest pcp deals out there.
Edit
Forgot to say so far have saved for the balloon. If I trade in 152 now this can go to new deposit. If I scrap corolla, probably won't keep saving for balloon payment, or not all of it anyway for the 152 reg

Lantus

rubbadubdub wrote: »

So from my point of view I invested 6.5k (30% of cost) as a deposit on a new car for PCP deal over 2 years.

MY monthly payment is 200 so after the 2 years my total investment will be 6.5k Deposit + 4.8k in monthly payments. The GFMV is around 11k I think.

If I had only invested 10% so around 2k my payments would have increased to between 350/400. So 9600 in total payments if its at the higher scale.

So total investment over the period is roughly the same.........So scratch that point

No sane person is handing the car back and saying toodle doo. The GFMV for my car is about 4-5k below market value and that cushion is what lets you rollover again but if that market value decreases significantly then the gap between GFMV and the extra cash you may become not existent not allowing you to roll over without adding another cash deposit or increasing your payment.

The equity in your car will be consistent irrespective of the deposit you put down. With increases in the costs of cars the monthly will always generally go up. Most equity's are in the 15 to 20% range.

A 30% deposit makes sense when your buying. Otherwise your going to see your monthly rise on the next 3 years unless you inject additional cash to offset. Dealer said similar and they would generally steer away from such a high deposit unless intention is to buy.

Having looked at these deals in detail 15% seems to be the ideal place to ensure a sustainable and affordable car deal. More than that and your injecting a cash asset into the deal you will never get back.

We have a 171 on order. Low deposit, affordable monthly, zero interest and a model with very high market values that has been around a long time. We are ready to buy this if needed and this is the most anyone can do to protect themselves.

Ultimately we all need a car. Our commute is long and kid critical for pick up and drop off.

The money we spend on the cars is offset by the piece if mind we get from reliability.

RayCun

5000 deposit and 2500 a year is a high price to pay for a warranty.

digitaldr

It's in the dealers interest to offer a good warranty especially for cars bought on PCP. It's a great way of protecting their (not yours as you don't own the car) property. Most cars are very reliable these days so the chances of anything major going wrong are slim, meanwhile they get to inspect the car regularly and get a nice bit of income from servicing as most warranties stipulate this has to be done by the dealer.

GerryDerpy

rustynutz wrote: »

I bought a Seat Toledo on PCP finance almost 3 years ago. Up until this I always bought a 8-10 year old car, but with the NCT requiring yearly tests and costly bills everytime, and also getting stranded on a motorway with my partner and two toddlers when the engine blew on my 10 year old corolla 100 miles from home, I decided to go the brand new route.

I looked at car loans and weighed it up against PCP, If you get a car loan over 3 years, even with a deposit you are looking at the repayments been double the PCP repayments, at the end of the 3 years you own the car, so what? If you want to change the car at this point for brand new in order to have a car with a warranty (the main reason for me wanting a new car as opposed to a 3 year old one, no nasty unexpected repair bills) you either have to take out another loan or pay a large lump sum.

I paid 5000 deposit, monthly repayments of 216 with final payment of 7000. At the end of the 3 years I have been offered 12000 trade in value for the car, this means I have a deposit of 5000 in order to buy a new car again so my monthly repayments should be the same as I'm paying now, or I can pay the 7k with a credit union or other loan and own the car. I will probably change as I want to keep a car within warranty, maybe a kia or something with a longer warranty next time so I have the option of keeping it longer.

I accept it doesn't suit everyone but to me PCP was a no brained and was by far the cheapest route to hassle free motoring.

Do you really believe that your chosen method represents value over buying a €7k used car outright? No offence but it is a Seat for used S-Class money.

The reality is that your judgement is likely clouded by that episode of being stranded on the side of the road.