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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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26000 Elephants

TheBigEvil wrote: »

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

I deliberately used the phrase "Payments at realistic levels". If you are looking to keep yourself in a new car every 24/36 months then you need to ensure you are paying a realistic payment. Otherwise you end up needing to find a large lump sum for a deposit every time you want to change.

Obviously if you are looking to keep the car long term, then its less of an issue. But that is not the real goal or advantage of PCP. If you want to buy the car outright, you may as well just HP it.

Falcon L

In my case, I worked the numbers and decided to put up the full 30% deposit. I figured that the monthly amount I would have paid with 15% deposit, minus the amount I pay monthly with the 30% deposit, was enough to divert to a saving account monthly, allowing me to pay the next deposit with cash to spare. Better in my pocket than the finance house.

Villain

The deposit amount is a personal choice and depends on what you can afford, if you do have some scope in what you can put in it is worth remembering that you pay interest on the TOTAL loan amount including the GMFV so it depending on the interest rate offered it might be best to try increase the deposit if the interest rate is high, however if it is low or even 0% you might be better off keeping the deposit low and keeping your savings.

26000 Elephants

Falcon L wrote: »

In my case, I worked the numbers and decided to put up the full 30% deposit. I figured that the monthly amount I would have paid with 15% deposit, minus the amount I pay monthly with the 30% deposit, was enough to divert to a saving account monthly, allowing me to pay the next deposit with cash to spare. Better in my pocket than the finance house.

Good for you! Although I suspect you are probably among a minority in terms of your discipline with saving.

Also, I suspect the cost difference in the 2 strategies is marginal, with a lot of extra overhead on your part ( having to maintain the saving account for one thing, not to mention the temptation to blow it on a telly or some such!)

Falcon L

26000 Elephants wrote: »

Good for you! Although I suspect you are probably among a minority in terms of your discipline with saving.

Also, I suspect the cost difference in the 2 strategies is marginal, with a lot of extra overhead on your part ( having to maintain the saving account for one thing, not to mention the temptation to blow it on a telly or some such!)

The difference is pretty marginal in the greater scheme of things, but it costs me nothing in terms of charges or time, so why not? I just increased my automatically transferred monthly savings by the difference in the two payments.

It saves me around €600 each year, which, over three years covers the extra needed for the next deposit with about €300 to spare. Like I say, better in my pocket.

Mooooo

Essentially if you are looking to keep the car after the 3 years basically work out if you can afford to pay the monthly figure and put away an amount every month to clear the final balloon payment. Unless the interest rate is much better you may be better off financing over 5 years to make it more manageable if keeping the car. Everyone most work it out for themselves put you could see people who may be stretching themselves going for it getting caught at the end of the 3 years and having to hand it back

mickdw

Ludo wrote: »

Really? I am 24 months in now myself and got a quote to change over the weekend to upgrade slightly..I am considering it as I cant see why I shouldn't.
Can you explain please why I should hold off? My car would presumably lose about a grand over the next year which I would have to come up with to pay into next deposit then to maintain repayment level.
I was also thinking that interest rates may go up slightly by this time next year so may be worth changing now.
What am I missing?

The reason I imagine a lot are doing it by the way is probably the same reason i am considering it...I wanted to know figures for what I will be looking at next year when I have to deal with it and to give myself time to shop around. But now that I have started looking, I may well end up changing now rather than in a year.

I don't know your figures but yes your car will lose over the next year but you are still paying for it monthly over the next year so the settlement figure with the finance company will be a higher figure today than next year. Basically, your car is worth more at 2 years but you also owe more on it. I would suggest the Depreciation on your current car over year 2 to 3 would be less than the total of your monthly repayments over the same single year period therfore you should be better off at end of year 3.
In addition, if it was a case that your deal needed some additional cash deposit to be found, it would mean that you were injecting cash every 2 years instead of every 3 which again will generally work out more expensive for you as the long and short if it us that you are going to be taking the new car depreciation more often so it will cost more.
I'd love to know what your figures were....retail price, deposit, gfv, monthly, and then new deal.

Ludo

mickdw wrote: »

Basically, your car is worth more at 2 years but you also owe more on it. I would suggest the Depreciation on your current car over year 2 to 3 would be less than the total of your monthly repayments over the same single year period therfore you should be better off at end of year 3.

That is true alright.....good point. Balance that also against the fact it is slightly cheaper to pay off the finance early rather than over another year by a few hundred and new tyres which will be needed this year which is another few hundred.

Decisions, decisions...

mickdw

Ludo wrote: »

That is true alright.....good point. Balance that also against the fact it is slightly cheaper to pay off the finance early rather than over another year by a few hundred and new tyres which will be needed this year which is another few hundred.

Decisions, decisions...

In addition, people convince themselves re the deal in front of them.
Sometimes people are given a deal needing a cash input of 5k for example. Now if you got that same deal at 2 years it would still be more expensive because you would be putting in 5k every 2 years instead of every 3.
Arguing that its cheaper to pay the finance off a year early is fine but when you are jumping straight into another similar deal that will extend to a later finish date than the first deal, its not a valid argument.
There may be an argument to jump early if you were to get out of a high interest pcp into a zero percent but the figures would need to make sense overall.

.G.

26000 Elephants wrote: »

I deliberately used the phrase "Payments at realistic levels". If you are looking to keep yourself in a new car every 24/36 months then you need to ensure you are paying a realistic payment. Otherwise you end up needing to find a large lump sum for a deposit every time you want to change.

Obviously if you are looking to keep the car long term, then its less of an issue. But that is not the real goal or advantage of PCP. If you want to buy the car outright, you may as well just HP it.

This is my plan but then I'm hindered by the fact the APR for HP is higher and for some manufacturers the minimum deposit is quite high, 40% or up so I'm back at PCP finance cos its cheaper.

Mooooo wrote: »

Essentially if you are looking to keep the car after the 3 years basically work out if you can afford to pay the monthly figure and put away an amount every month to clear the final balloon payment. Unless the interest rate is much better you may be better off financing over 5 years to make it more manageable if keeping the car. Everyone most work it out for themselves put you could see people who may be stretching themselves going for it getting caught at the end of the 3 years and having to hand it back

This is how I'm doing my calculations, the monthly payment plus whatever amount I need to save to wipe the balloon at the end but the option to PCP over a longer term isn't available from what I've seen. It's all 3 year deals and as said above, HP come's with its own issues.

mickdw

Attempting to fully finance a new car over 3 years can be quite severe money wise.
I don't see an issue with financing the outstanding amount over another couple of years if you wish to keep the car.
One thing though. Anyone going into a PCP should be pretty sure that they will qualify for finance on the remainder at end of term. It would be a disaster to get caught at end of 3 years with no cash to buy car outright and no way to finance it.

Lantus

Ludo wrote: »

That is true alright.....good point. Balance that also against the fact it is slightly cheaper to pay off the finance early rather than over another year by a few hundred and new tyres which will be needed this year which is another few hundred.

Decisions, decisions...

Good point re tyres. We needed new ones in year 3 start plus an extra service out of contract due to mileage. That would be a cost of 300 to 500 depending on tyre quantity and quality and any service issues.

Ludo

mickdw wrote: »

One thing though. Anyone going into a PCP should be pretty sure that they will qualify for finance on the remainder at end of term. It would be a disaster to get caught at end of 3 years with no cash to buy car outright and no way to finance it.

Just sell it privately and settle PCP...yeah you will have no car you should have a few quid left over at least. Not ideal but better than this idea of just walking away.

Aka Ishur

Ludo wrote: »

Just sell it privately and settle PCP...yeah you will have no car you should have a few quid left over at least. Not ideal but better than this idea of just walking away.

The only reason they wouldn't qualify for finance is if they missed payments and if that's the case PCP was the wrong choice from the start.

.G.

mickdw wrote: »

Attempting to fully finance a new car over 3 years can be quite severe money wise.
I don't see an issue with financing the outstanding amount over another couple of years if you wish to keep the car.
One thing though. Anyone going into a PCP should be pretty sure that they will qualify for finance on the remainder at end of term. It would be a disaster to get caught at end of 3 years with no cash to buy car outright and no way to finance it.

Yeah that's an option but I like to get things over with asap. The last car I bought was 9k and I paid it off over a year. This will be a much bigger expense though so I'll be paying the monthly and as much of the final balloon I can each month, finance the rest if I'm short. All depends on what the car cost me as I've no idea what bloody car I want yet!

Penalty

Ludo wrote: »

Just sell it privately and settle PCP...yeah you will have no car you should have a few quid left over at least. Not ideal but better than this idea of just walking away.

This could be a problem as you need to clear the PCP before you sell as any intelligent buyer will do a finance check - could get buyer to write check for finance company but messy me may put buyers off

Lantus

Penalty wrote: »

This could be a problem as you need to clear the PCP before you sell as any intelligent buyer will do a finance check - could get buyer to write check for finance company but messy me may put buyers off

Quite. Also selling a car can take time and once you reach the end you must pay the balance on the alloted date or you have renaged on a contract and effectively have stolen the vehicle. Poor idea.

Also being without a car for most people for even a day is simply not feasible re work, kids and other commitments.

Ludo

Penalty wrote: »

This could be a problem as you need to clear the PCP before you sell as any intelligent buyer will do a finance check - could get buyer to write check for finance company but messy me may put buyers off

Of course you are right. is possible to do it but organising it may be tricky privately alright.

mickdw

Aka Ishur wrote: »

The only reason they wouldn't qualify for finance is if they missed payments and if that's the case PCP was the wrong choice from the start.

I wouldn't be so sure. it's easier to obtain finance from vw bank for example when you are buying a new car from vw than to obtain finance on the general market.
One could easily find that the finance offered from vw bank to refinance balloon is of much higher rate and some marginal borrowers could find themselves out of favour with the traditional banks.
I'm just saying it's an eyes wide open type of deal but the deals can be excellent. The only issue I have with pcp is that it does allow people who cannot afford the car to use the car for 3 years and leaves them up sh1t Street after.
I buyer who can afford the car using a PCP with zero interest is a no brainer.

Aka Ishur

mickdw wrote: »

I wouldn't be so sure. it's easier to obtain finance from vw bank for example when you are buying a new car from vw than to obtain finance on the general market.
One could easily find that the finance offered from vw bank to refinance balloon is of much higher rate and some marginal borrowers could find themselves out of favour with the traditional banks.
I'm just saying it's an eyes wide open type of deal but the deals can be excellent. The only issue I have with pcp is that it does allow people who cannot afford the car to use the car for 3 years and leaves them up sh1t Street after.
I buyer who can afford the car using a PCP with zero interest is a no brainer.

Yup I think the one consistent message everyone seems to be reiterating is you need to know what you are getting, as with any financial product.

Carson10

Visited a Vw garage last week with a friend who was looking at a new Polo Fun.

They got a PCP quote as follows.

Trade in-/deposit €3700 followed by 3 years monthly payments of €260

At the end of the 3 years, they simply swap the car for a new 2020 polo for zero cost, and just keep paying the monthly repayments.

techdiver

Carson10 wrote: »

Visited a Vw garage last week with a friend who was looking at a new Polo Fun.

They got a PCP quote as follows.

Trade in-/deposit €3700 followed by 3 years monthly payments of €260

At the end of the 3 years, they simply swap the car for a new 2020 polo for zero cost, and just keep paying the monthly repayments.

I would double check that "zero cost" claim. Some dealers don't even understand the terms 100% themselves.

For the payment of €260 to be the same for the new car in 2020, there would have to be sufficient equity left in the old car (Trade in value - GFMV) to cover the same deposit again to keep the payments at €260.

26000 Elephants

techdiver wrote: »

I would double check that "zero cost" claim. Some dealers don't even understand the terms 100% themselves.

For the payment of €260 to be the same for the new car in 2020, there would have to be sufficient equity left in the old car (Trade in value - GFMV) to cover the same deposit again to keep the payments at €260.

At 0% apr, he'd have 13K paid into the car that lists at 16300. I'd say thats doable.

His GMFV must be around 3.5K

techdiver

26000 Elephants wrote: »

At 0% apr, he'd have 13K paid into the car that lists at 16300. I'd say thats doable.

His GMFV must be around 3.5K

I'm not saying it isn't, but some people are sold the PCP deal as a matter of turning up after 3 years and getting a new car and continuing on as before, when that might not always be the case.

Carson10

the APR on the polo fun is 3.9%. This was the quote:

Car costs €17,900
Deposit part ex €3700
Finance amount €14,200
Total Interest €1,118

Car GMV in 3 years will be worth around €12/13000 given its the 'fun' model with sunroof, alloys, etc, which will be used against the trade for the 2020 polo, in which you will be just swapping one car for the other with no cost. (That was our take on it anyway)

They said your better off not giving a big deposit.

Current car is 11 years old which we got new, and costs about €1300 a year in repairs and tax (€445), window regulators, airbag lights, nct, tyres, etc etc...

owning the polo would cost tax €190, service €100. so €290 in total. 3 year warranty, and a 3 year service pack for €300..

SteelyDanJalapeno

Carson10 wrote: »

the APR on the polo fun is 3.9%. This was the quote:

Car costs €17,900
Deposit part ex €3700
Finance amount €14,200
Total Interest €1,118

Car GMV in 3 years will be worth around €12/13000 give its the 'fun' model with sunroof, alloys, etc, which will be used against the trade for the 2020 polo, in which you will be just swapping one car for the other with no cost. (That was our take on it anyway)

They said your better off not giving a big deposit.

Current car is 11 years old which we got new, and costs about €1300 a year in repairs and tax (€445), window regulators, airbag lights, nct, tyres, etc etc...

owning the polo would cost tax €190, service €100. so €290 in total. 3 year warranty, and a 3 year service pack for €300..

Whats the final payment? about 4 or 5k?

valuation looks high

Carson10

TiltedBrain wrote: »

Whats the final payment? about 4 or 5k?

valuation looks high

Yeah maybe I done that valuation a bit high for the GMV, say its around €11,000. Final payment is €6,500 (give or take) only if you want to keep the car.

Carson10

OSI wrote: »

GMV doesn't mean what you think it means. GMV (GMFV) is the mimimum they guarantee the car is worth at the end for the purposes of calculating a final payment. If your final payment is €6,500 your GMV is €6,500. Anything above this is equity and can be used towards a deposit on the next car. If when you go back they decide the car is worth €11,000 as a trade in, you'll have €4,500 to use as a deposit on the next car.

Thanks Op..

What do you think the reality would be in 3 years time? Car value wise?

ShadowHearth

I don't want to be that guy, but no way 18k polo now, will be worth 12-13k in 3 years with very mature pcp at that point.
Dealers can paint a very bright lies, with fecking bells hanging of them, because they covered. When trade in tome comes, I wouldn't be surprised that op will need to inject at least some sum to keep same repayments.

bidiots

When they say that they walk into a new car, what spec is agreed?