PCP finance.

From what I have been reading, normally the max deposit on a PCP deal is around 30% which is €16,800 on a 56k car. If I'm correct you would need the dealer to give you back just over 9k in cash to meet that target if your current car is valued at 26k as a trade in. Would be a nice little sum to put into a savings account for 3 years earning a bit of interest and then use to either pay towards the final balloon payment or new deposit for another car. Not sure many dealers would like the idea of giving cash your way though.

mickdw wrote: »

I doubt you can pay 26k deposit on a PCP on a 56k car.

what is the gfv cause the more that is left outstanding til the end, the more interest you will pay.

On straight forward hire purchase, the 5.9 rate while borrowing 4k less due to contribution would certainly be the best but I will run rough figures if you give pcp details re deposit and gfv

Am checking on the GMV, thanks. i assume they will only take 30% max deposit

TheBigEvil wrote: »

The one thing that got me when looking into PCP deals is the fact that the GMFV is purely the financial value of the loan that is outstanding (your balloon payment) and has actually not relationship to the actual value of the car. And this is what trips a lot of people up, as they think the fact that they paid a 30% deposit and did 2 or 3 years of payments, that there will be equity in the car. Most likely there will be none, or it will be very small.

This means that if you want to go again, you have to find your 30% deposit yourself, as you have no where near enough equity in the car for your next PCP deal if you want to keep the repayments the same the next time around.

I would recommend people do the sums on this if they are looking to change every couple of years, because it looks like a very expensive way to "rent" a car, as you do not own it because of that balloon payment.

If you putting shown say 11K as a deposit (from a trade in) and paying say 450 a month of 37 months, that over 27K of an outlay of 3 years for a car that you dont own, and you will have to find that 11K again in 3 years time. Because it wont be in the car you are trading in.

If you buy a new car for 30k the gmvf will be around 10k, but the car after 3 years in real terms is worth 18k, pay the final 10k payment and sell the car for 18k then use the 8k as deposit for next car or just keep the car "rent free" !

Tyson Fury wrote: »

If you buy a new car for 30k the gmvf will be around 10k, but the car after 3 years in real terms is worth 18k, pay the final 10k payment and sell the car for 18k then use the 8k as deposit for next car or just keep the car "rent free" !

What if you dont have the 10K to pay off your balloon payment?
Who is buying the car for 18k off you? Are you selling it privately?

Your point is true that people need to know what they are getting into, however I would expect a 38k car to be worth more than 11k in 3 years.

TiltedBrain wrote: »

Just checked my own car there to see what the 3 yr olds are selling at now, and they are over 2 times the gmfv.

I don't get the scare mongering being thrown around here.

It's not scaremongering, just people trying to show all sides. Current 2ñd hand car values are strong as few cars were sold in 2013. Compare that to how many new cars are sold now. Supply and demand will change and as such it would be logical to believe that 2nd values will not be as strong in 2020.

TiltedBrain wrote: »

I don't get the scare mongering being thrown around here.

Its not scaremongering - its just that a lot of people dont understand the details of PCP. GMFV is nothing to do with the value of your car, its just what you owe the bank.

TiltedBrain wrote: »

So theres more cars being sold now? so the supply and demand should also mean the price of new cars should also be coming down. It's relative

Price of new cars is related more to economic and manufacturing factors, additionally manufacturers can control the rate of production, stockpile, etc.

demand will dictate supply of new cars, not the price.

In second hand cars, the supply is less controlled ( zero control to be fair) so demand has a more direct effect on price.

Row back a little there.
Sure I agree that if you come along and pay 30 percent day one, you certainly will have to add cash to the deal if looking to go again in year 3 with same monthly.
If however you started with a 15 percent deposit, were comfortable with the monthly figures, it is quite likely that the equity will form a similar deposit at year 3 meaning same monthly can continue and no additional cash required. In my opinion people should therefore be stress testing themselves to see if they can afford to buy the car day one with 15 percent down. If they can, happy days.
Now if the buyer is foolish enough to buy a run out model, they will likely have zero equity but they would suffer similarly no matter how they bought.

TheBigEvil wrote: »

However, wind on 2 or 3 years, you are not getting back behind the wheel of a new version of the car for €320pm unless you stump up the same deposit that you did previously. And you are not going to get retail value of the car when you trade it in. you will be lucky to get 1 or 2 thousand above the GMFV from the dealer.

That is simply not true. They will give you fair market value for your car as otherwise you will simply go to another brand dealer who will.
So if your GMFV on your Golf is 9k and your car is currently worth about 18k, the VW dealer you bought it from ( for example) is not going to offer you 11k as you will simply walk across the road to a ford dealer who will offer you the 18k with which you can pay off the VW PCP and have the deposit (or most of it) for a new Focus.

TheBigEvil wrote: »

I agree they are fairly upfront about the costs, but they are selling cars on PCP by advertising that you can get behind the wheel of a brand new car for just (for example) €320pm (after your 10, 20 or 30% deposit, however you come up with that)

However, wind on 2 or 3 years, you are not getting back behind the wheel of a new version of the car for €320pm unless you stump up the same deposit that you did previously. And you are not going to get retail value of the car when you trade it in. you will be lucky to get 1 or 2 thousand above the GMFV from the dealer.

PCP deals are a win-win for dealers, and poor for consumers. The dealer holds all the cards. If you decide to walk way, you have flushed away thousands and the dealer will stick the for sale up at the retail price, certainly not the GFMV price ! So it is always stacked in the dealers favour

I'm only posting this so people understand that it is not as simple to turn up in 2 or 3 years and expect to get into a new car for the same repayments. something has to give, either a bigger repayment or you have to fork out of your own savings your new deposit

This scenario is only going to be the case if you put in max deposit. I know you're trying to warn people but you're actually confusing the way PCP works just as much by some of your post. If you put in 10-15% chances are you will NOT have to put any further cash deposit into the next car.

As people have said a well balanced deposit in the 10 to 15 range ensures a sustainable monthly payment moving forwards.

However, there are a few other factors relating to equity. Firstly the type of car may result in a slightly lower equity than expected. Cars from the same manufacturer can vary as some models are rock solid sellers and others less so. Entry level specs depreciate more so upgrading makes better financial sense.

Also cars tend to go up in price so even the same car could be 1 to 2 k more in three years time resulting in 30 to 60 EU more a month. Interest rates can add in another increase. You would of paid this anyway but it can feel like a price hike. Something to be considered or prepared for.

Also, remember you can trade back in at any time. The 3 year term is the max. Most people trade in after 2 years I'm told. A lot are getting monthly valuations from the dealer and weighing up the outstanding balance versus current deals and trading early as car value is slightly higher. Savvy approach and it costs nothing. Has anyone else done this? Or wished they had.

We are preparing to get a new 171 at zero interest with the plan to buy outright. But I will be getting a valuation after 24 months to see where we stand. Cover all angles..

Tyson Fury wrote: »

Bigger deposit is better as you'll have lower monthly repayments and the cost of credit will be less.

Yes, generally if your buying outright and are paying interest.

However, the equity in any car is independent of deposit and will be the same at the end of the three years. So a max deposit will require another cash deposit if you want to maintain the same monthly payment. Otherwise the monthly payment will rise considerably.

Not an issue if your buying but those looking to get a new car can be in for a shock re monthly payments moving forwards.

It's about getting the right deal. Being well informed and tailoring the system to suit your needs.

Lantus wrote: »

As people have said a well balanced deposit in the 10 to 15 range ensures a sustainable monthly payment moving forwards.

However, there are a few other factors relating to equity. Firstly the type of car may result in a slightly lower equity than expected. Cars from the same manufacturer can vary as some models are rock solid sellers and others less so. Entry level specs depreciate more so upgrading makes better financial sense.

Also cars tend to go up in price so even the same car could be 1 to 2 k more in three years time resulting in 30 to 60 EU more a month. Interest rates can add in another increase. You would of paid this anyway but it can feel like a price hike. Something to be considered or prepared for.

Also, remember you can trade back in at any time. The 3 year term is the max. Most people trade in after 2 years I'm told. A lot are getting monthly valuations from the dealer and weighing up the outstanding balance versus current deals and trading early as car value is slightly higher. Savvy approach and it costs nothing. Has anyone else done this? Or wished they had.

We are preparing to get a new 171 at zero interest with the plan to buy outright. But I will be getting a valuation after 24 months to see where we stand. Cover all angles..

Just check what's the story with buying it out right.
I was going through Citroën pcp conditions and ot was worded that you can buy it out right in 3 years for balloon payment plus "Buying out fee".
Now that fee is very interesting thing. They don't say how much is it and why you should pay it. I would ask then out right what's the story with it.

Lantus wrote: »

As people have said a well balanced deposit in the 10 to 15 range ensures a sustainable monthly payment moving forwards.

However, there are a few other factors relating to equity. Firstly the type of car may result in a slightly lower equity than expected. Cars from the same manufacturer can vary as some models are rock solid sellers and others less so. Entry level specs depreciate more so upgrading makes better financial sense.

Also cars tend to go up in price so even the same car could be 1 to 2 k more in three years time resulting in 30 to 60 EU more a month. Interest rates can add in another increase. You would of paid this anyway but it can feel like a price hike. Something to be considered or prepared for.

Also, remember you can trade back in at any time. The 3 year term is the max. Most people trade in after 2 years I'm told. A lot are getting monthly valuations from the dealer and weighing up the outstanding balance versus current deals and trading early as car value is slightly higher. Savvy approach and it costs nothing. Has anyone else done this? Or wished they had.

We are preparing to get a new 171 at zero interest with the plan to buy outright. But I will be getting a valuation after 24 months to see where we stand. Cover all angles..

There are very few occasions where trading in early is a good idea. Depreciation from new every 2 years is going to be higher than the Depreciation on a new car every 3 years.
That depreciation just gets hidden in the short term within pcp.

26000 Elephants wrote: »

The trick is to pay as low a deposit as possible to keep the monthlies at a realistic level. This will ensure you drive a car that you can really afford, and at the end of the term you will be in a better position to get yourself into a new car with minimum pain.

I'm no fanboy of PCP, but if you can afford to borrow and repay the full price of a new car, then PCP (esp. at 0%) makes real sense.

If you cant and you are using PCP to get into a car above your budget, then you are in for a painful experience.

Surely a lower deposit means larger monthly repayments because you are financing a larger amount?