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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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mickdw

Lantus wrote: »

It lost 50% which is relative to the value of the car. The more expensive the car the larger the real value. A 20k car would lose 10k. Also half. That's third of the merchant but it's a third of the cost. If you can afford the car the depreciation is meaningless.

I bought my current car for 52k new back in 08.
If I'd sold it on after 2 or 3 years, the depreciation would have been frightening. At this stage, it averages out at about 4.5k per year which is ok.
Trading new e class every 3 years will never be cheap motoring.

Lantus

adam88 wrote: »

I'd be well sickened if my car lost 30 k in three years

It lost 50% which is relative to the value of the car. The more expensive the car the larger the real value. A 20k car would lose 10k. Also half. That's third of the merchant but it's a third of the cost. If you can afford the car the depreciation is meaningless.

Casati

26000 Elephants wrote: »

I suppose the market for used cars is larger and more fluid than new cars? There will always be people on a lower budget.

Plus many people will prefer to pay cash for cars, e.g. retired people who might have large savings but dont have large income are generally reluctant to get into debt of any sort. The trick is buying a new car that will appeal to second-hand buyers and which will hold its value

mickdw

To be honest, I don't believe anyone should be going around in a new e class if producing an additional 7k deposit for new deal is an issue for them or alternatively an additional 200 or so per month if they had only been paying 600 or so.
It all comes back to the same point - if you can afford the car with 15 percent deposit, good. If not, it's too expensive.
But sure anyway, isn't a kia lovely

26000 Elephants

mickdw wrote: »

Ah but it is. Typically equity across alot of manufacturers ends up at circa 15 percent of new price. 9k in this case.
It's not enough equity for someone who could only afford the new car with max deposit up front. It is enough equity for someone who can buy with 15 percent deposit and still afford the repayments.
The long and short of it is - If you cannot afford the repayments based on 15 percent deposit, it's likely that you are not in a sustainable situation and will need to be putting cash in as per the above example.

Ah yeah, I know what you mean, but the default Mercedes 'use case' is max deposit, to keep the payments around €560. Some shock for the poor bugger in 3 years time when he has to go back to the wife and explain the new feckin Kia.

26000 Elephants

TiltedBrain wrote: »

Why is that not in turn lowering th price of the 2014 car so, if people are not buying them. price reflects the current demand/market.

I suppose the market for used cars is larger and more fluid than new cars? There will always be people on a lower budget.

Aka Ishur

adam88 wrote: »

If that's the case then for example a 30k car, your deposit is forever lost. Why would someone do that. Not only are you spending your monthly repayments your also loosing your deposit.

Think an old credit union loan is way better. At least you know what your paying then

If you do not understand how it works by now you should stick with the financial product you understand. That is the overall rule, if you don't understand PCP it is not for you.

mickdw

26000 Elephants wrote: »

Sure. If you are replacing it with a Hyundai.

As per the previous example of 50% depreciation, lets say they offer you 32K. Pay back the 24K, that leaves you with 8K. Thats not enough to get into a new e class today ( 15K deposit) never mind in 3 years.

Ah but it is. Typically equity across alot of manufacturers ends up at circa 15 percent of new price. 9k in this case.
It's not enough equity for someone who could only afford the new car with max deposit up front. It is enough equity for someone who can buy with 15 percent deposit and still afford the repayments.
The long and short of it is - If you cannot afford the repayments based on 15 percent deposit, it's likely that you are not in a sustainable situation and will need to be putting cash in as per the above example.

Squeaksoutloud

TiltedBrain wrote: »

Why is that not in turn lowering th price of the 2014 car so, if people are not buying them. price reflects the current demand/market.

I can only presume there is still a market for them but possibly less than in the past. Between the lower numbers sold and dealers keeping prices high for PCP the prices appear to be holding higher than in the past.

SteelyDanJalapeno

Squeaksoutloud wrote: »

One thing to bear in mind is that in 2014 (3 years now so PCP returns now) there was only 75,000 cars sold versus twice that amount of 150,000 in 2016...will surely have a big effect on used car values. All 3 year old cars seem over priced to me at the mo. I mean they seem to be at 60% of new price vs uk mags 3 year cost usually have the values at 40-45%! Trade in v sale price maybe some of the difference? Taken into account loan rates of 9% v 0% PCP and its easy to see why people plump for the new car.

Why is that not in turn lowering th price of the 2014 car so, if people are not buying them. price reflects the current demand/market.

Squeaksoutloud

One thing to bear in mind is that in 2014 (3 years now so PCP returns now) there was only 75,000 cars sold versus twice that amount of 150,000 in 2016...will surely have a big effect on used car values. All 3 year old cars seem over priced to me at the mo. I mean they seem to be at 60% of new price vs uk mags 3 year cost usually have the values at 40-45%! Trade in v sale price maybe some of the difference? Taken into account loan rates of 9% v 0% PCP and its easy to see why people plump for the new car.

Shane732

adam88 wrote: »

171 skoda vrs. Won't be loosing 30k but you get the idea

Do they do a VRS now? Thought they'd changed the name.

It's not really comparing like with like.

adam88

Shane732 wrote: »

Interesting comment - what are you driving?!

Unfortunately when you buy a car it is likely that the car will fall in value. For something like an E-Class I wouldn't think that 50% is outrageous.

171 skoda vrs. Won't be loosing 30k but you get the idea

adam88

OSI wrote: »

You have no equity to use as a deposit towards the next agreement.

Can you not just give them the car and take a new one.

If that's the case then for example a 30k car, your deposit is forever lost. Why would someone do that. Not only are you spending your monthly repayments your also loosing your deposit.

Think an old credit union loan is way better. At least you know what your paying then

Aka Ishur

Soarer wrote: »

Work out the figures.

It's very likely that it'd be cheaper to declare 10k kms per year and go over, than declare 20k kms and stay under.

So in the 6c per 100km example, it'll cost €600 to go 10k kms over. But to up your annual allowance by 4k per year might cost you €20 per month over 3 years!

At the end of the day if the car is worth more than what the GMFV and penalty say you will get that. The dealers largely overestimate the depreciation anyways to protect themselves. This means the GMFV will be lower than what the car is worth barring exceptional events.

They don't want someone swanning up with a perfect 3 year old car, fulfilling all the conditions of the PCP, they have to say the car is worth 6K when its only worth 4.5. They can't chase the lost equity then.

Shane732

adam88 wrote: »

I'd be well sickened if my car lost 30 k in three years

Interesting comment - what are you driving?!

Unfortunately when you buy a car it is likely that the car will fall in value. For something like an E-Class I wouldn't think that 50% is outrageous.

Soarer

forzacalcio wrote: »

I certainly wont be paying a lump sum to keep it, I would be either upgrading or selling it and pay them back what I owe. I went for 15k but I do think Id be hitting 18/19k per year. Just want to make sure Im not shooting myself in the foot

Work out the figures.

It's very likely that it'd be cheaper to declare 10k kms per year and go over, than declare 20k kms and stay under.

So in the 6c per 100km example, it'll cost €600 to go 10k kms over. But to up your annual allowance by 4k per year might cost you €20 per month over 3 years!

forzacalcio

MojoMaker wrote: »

lol.

You mean paying them back and then selling it...which is....paying a lump sum to keep it

You know what I mean, I wont be handing over a lump sum to keep it, Ill be selling it off or upgrading, I wont have that cash to come up with that payment is what I mean

grogi

adam88 wrote: »

I'd be well sickened if my car lost 30 k in three years

That's normal - around 50% in three years...

MojoMaker

forzacalcio wrote: »

I certainly wont be paying a lump sum to keep it, I would be either upgrading or selling it and pay them back what I owe.

lol.

You mean paying them back and then selling it...which is....paying a lump sum to keep it

forzacalcio

OSI wrote: »

The excess mileage payment only comes in to affect if you are handing the car back I seem to remember. Which is hilarious as handing the car back is probably the most profitable option for them anyway.

I certainly wont be paying a lump sum to keep it, I would be either upgrading or selling it and pay them back what I owe. I went for 15k but I do think Id be hitting 18/19k per year. Just want to make sure Im not shooting myself in the foot

forzacalcio

Thanks OSI, On the basis 6 cent is the cost, If I go 10,000 KM over does this mean on top of my final baloon payment I will owe them another €600 or is it more serious than that?
Does it get added onto what I owe or taken off what the car is worth?

forzacalcio

What is the cost per km if you go over the PCP limit in Ireland? Does it differ from Garage to garage?

adam88

Aka Ishur wrote: »

He didn't mention another deposit. The value of the old car over that of the GMFV is acting as the deposit. That's why payments remain the same.

AND what happens if your car value is the same as gmfv

SteelyDanJalapeno

MidMan25 wrote: »

What about the cost of massive depreciation?

It's amazing how many people look at running costs and nothing else.

Based on the above it's costing you 1400 a year for tax and diesel. Your 29k new car is now worth about 20k as a trade in. So your real cost per year is 5900 a year (Based on 4500 depreciation per year).

2014 Leon FRs averaging about 19 - 20k, so you're values are off a fair bit unless you're trying to predict the future?

either way, it's the same for all new cars, its not a symptom of PCP.

MidMan25

jca wrote: »

Why? All cars lose money unless you're a banger or classic car driver.

I think the value lost is key here!

jca

adam88 wrote: »

I'd be well sickened if my car lost 30 k in three years

Why? All cars lose money unless you're a banger or classic car driver.

jca

ofcork wrote: »

That's some drop 30k in 3 years.

50℅ in 3 years is the norm, some slightly more and some slightly less (for mainstream cars anyway) according to any of the car buyers magazines.

26000 Elephants

mickdw wrote: »

There will be a fair amount of equity over and above 24k at year 3 for an e class that cost 63k..

Sure. If you are replacing it with a Hyundai.

As per the previous example of 50% depreciation, lets say they offer you 32K. Pay back the 24K, that leaves you with 8K. Thats not enough to get into a new e class today ( 15K deposit) never mind in 3 years.

mickdw

Mercedes currently have gfv for a new E Class worth 63k set at 24k.
In fairness to mercedes, they offer pretty realistic deals not making the monthly cost super low. There will be a fair amount of equity over and above 24k at year 3 for an e class that cost 63k.
Your friend is losing out cause he bought a model that was due to be renewed within the time that he was keeping the car.
You can get a very nice new E Class for a little over 50k therefore an old model 3 year old car is never going to be worth much over 30k.
Having said that, it would be a very nice car at that price.