PCP finance.

mickdw · 20-02-2017 12:55PM

TiltedBrain wrote: »

Would some kind soul put together a list of pro's and con's to PCP?

Well for a start:

Pros: Allows client to buy car for relatively low monthly payment
Often very low interest rates from manufacturers
Drive new car for similar payment to buying used car outright.
All benefits of new car over old.

Cons: Allows client to buy car that they may not really be able to afford.
Low monthly can hide the true cost. Customer may own trade in day 1, giving them deposit. At end of term, there may or may not be equity in the car to form some of next deposit. Result is that customer may not be able to get into another new car and then in order to keep the car, need to come up with about 40% of the original cost (money still owed). If they cannot do either of those, you hand back the keys and walk away. You then have no car.

Basically, it is cheap for the first deal as customer typically has deposit via fully owned trade in. Second deal may require cash deposit again but this will depend on how much deposit you want to put in and the model you buy.
Anyone should see if they can afford the car with 15% deposit. If so, its a safe enough deal cause you might get 10 to 15 percent out at the other end.
If on the other hand you are just managing the monthly based on 30% deposit, you will run into trouble at year 3 unless you are happy to throw cash at it again.

sheff the ref · 22-02-2017 03:35PM

NIMAN wrote: »

I'd say you are the exception to the rule, to have a 10yr old car with 260k on the clock and not have had to replace something costly.

Miles or KM?

belmulletman · 06-03-2017 09:27PM

Can anyone tell me more about what happens if you have an accident. Someone mentioned the insurance company covers the loss in value, I can't find much about this. We're with 123.ie and fully comp with full no claims protection, but obviously that won't help the value of the car in 3 years.

Any help would be great!

mickdw · 06-03-2017 09:43PM

If the accident is caused by other party and you successfully claim against their insurance, you can also claim for depreciation due to the damage. You should get 10 percent of repair cost as depreciation compensation.
If it's your own damage, I believe you get nothing.

bazz26 · 06-03-2017 09:48PM

belmulletman wrote: »

Can anyone tell me more about what happens if you have an accident. Someone mentioned the insurance company covers the loss in value, I can't find much about this. We're with 123.ie and fully comp with full no claims protection, but obviously that won't help the value of the car in 3 years.

Any help would be great!

You sure you're not thinking of GAP insurance which is a separate product? GAP insurance is where you insure your car for the full value you paid for the car. In the event the car is wrote off down the road. GAP insurance will pay you the difference between what you originally paid for it and the current market value of the car that your regular insurance policy will pay out. For example, you pay 20k for a car, 2 years later it is wrote off in accident but only worth 12k. Your regular insurance pay you it's current value (12k) while the GAP insurance company will pay you the 8k on top of that for between what you bought it for and it's current value. So you get the 20k back that you paid for it.

belmulletman · 06-03-2017 09:53PM

mickdw wrote: »

If the accident is caused by other party and you successfully claim against their insurance, you can also claim for depreciation due to the damage. You should get 10 percent of repair cost as depreciation compensation.
If it's your own damage, I believe you get nothing.

Thanks! It was damage due to rubble on the road. Will double check with the insurance company tomorrow and see.

belmulletman · 06-03-2017 09:55PM

bazz26 wrote: »

You sure you're not thinking of GAP insurance which is a separate product? GAP insurance is where you insure your car for the full value you paid for the car. In the event the car is wrote off down the road. GAP insurance will pay you the difference between what you originally paid for it and the current market value of the car that your regular insurance policy will pay out. For example, you pay 20k for a car, 2 years later it is wrote off in accident but only worth 12k. Your regular insurance pay you it's current value (12k) while the GAP insurance company will pay you the 8k on top of that for between what you bought it for and it's current value. So you get the 20k back that you paid for it.

Never even heard of that!
Pcp, the car should be, for example, work 8k in 3 years, but I'm guessing due to the accident (which will be fully repaired by an insurance company certified company) it will be worth less. Guess I'm trying to figure out how much less!

mickdw · 06-03-2017 09:56PM

I believe you are more so asking how your fair out when returning to trade in a previously repaired car whether it be on pcp or not. The repaired car will be worth less and as such you lose out unless you get a depreciation payment as part of claim.

I've seen pcp terms state that as long as the car repair has not been more than 60 percent of value, (basically a write off) that there is no problem taking the car back or trading in. It should also still be worth more that the amount owed at end of term. You are correct though that the value will be hit so will result in less equity to go forward to next car. This is where your depreciation payment comes into play.
In relation to gap insurance, I don't quite know how that is even legal. It's an insurance product that puts you in a far better financial position.... an incentive to write off the car basically as it means replacing a 3 year old car with a new car for zero cost.

bazz26 · 06-03-2017 10:08PM

I haven't looked into GAP insurance in any big way but I'm sure the GAP insurance company would scrutinize any claim with a fine tooth comb. GAP insurance is a big product pusher for dealers these days. I'm sure there are lots of t&c too.

MarkN · 06-03-2017 10:20PM

mickdw wrote: »

In relation to gap insurance, I don't quite know how that is even legal. It's an insurance product that puts you in a far better financial position.... an incentive to write off the car basically as it means replacing a 3 year old car with a new car for zero cost.

But sure in the same way a fraudulent claim on 'normal' insurance is open to being taken advantage of. The risk of being caught should be enough to determine the average person from doing something dodgy. We were offered 3 years cover for €400 on the car we got last weekend, given 30 days in case I decide I want to take it out. In some ways, I think 400 for 3 years cover is not bad but I'm also wondering how much is in it for the dealer.

mickdw · 06-03-2017 10:43PM

yes but typically when acting legally, insurance returns you to pre loss state. With gap insurance, if you are unlucky or lucky enough to write off your car, while still acting perfectly legally, you can gain significantly. It's just an odd product. It has a place is covering loss if writing off a newish car but at 3 years old, it is quite sufficient to be repaid the market value. A policy offering g full value back after 3 years is a frauds charter really.
At 3 or 400, it is worthwhile but seeing as it only pays out in case of write off, it's probably a good earner for insurer too

26000 Elephants · 07-03-2017 02:37AM

insurance companies themselves have offered old-for-new cover for years so its legality is without question.
But its the terms that will get you...

MarkN · 07-03-2017 06:44AM

In many cases that's only year one though.

mickdw · 07-03-2017 11:28AM

26000 Elephants wrote: »

insurance companies themselves have offered old-for-new cover for years so its legality is without question.
But its the terms that will get you...

I'm not saying is illegal. I said i didn't know how it was legal. It is clear that it is a product that is offered. My point was that it appeared to go against the basic principle of insurance. Gap allows substantial profits to be made from an accident situation while acting honestly and legally and within the terms of the policy.
Insurers themselves offer new for old for 1 year typically.

26000 Elephants · 07-03-2017 11:54AM

MarkN wrote: »

In many cases that's only year one though.

Terms and conditions vary.

26000 Elephants · 07-03-2017 12:09PM

mickdw wrote: »

I'm not saying is illegal. I said i didn't know how it was legal.

Why would you question how it is legal?

Its a commercial decision by an insurance company to offer a product. I'm sure the actuaries have worked out their win angle.

How people try to game it is their business, but dont be so naive as to think the insurance companies haven't thought about that already.

Typical policies in the UK seem to be about the £180 mark, so the 400 euros quoted earlier seems about the right level of gouging to be expected here.

Shedite27 · 07-03-2017 12:17PM

bazz26 wrote: »

You sure you're not thinking of GAP insurance which is a separate product? GAP insurance is where you insure your car for the full value you paid for the car. In the event the car is wrote off down the road. GAP insurance will pay you the difference between what you originally paid for it and the current market value of the car that your regular insurance policy will pay out. For example, you pay 20k for a car, 2 years later it is wrote off in accident but only worth 12k. Your regular insurance pay you it's current value (12k) while the GAP insurance company will pay you the 8k on top of that for between what you bought it for and it's current value. So you get the 20k back that you paid for it.

Open to correction, but my understanding was that Gap Insurance covers the gap between what you owe on the car and what it's worth. If you had a crash 2 years later you'd have paid off (say) €250*24, €6000 in repayments so in the scenario above, Regular Insurance would pay €12k, you'd still owe €20-6k, €14k, so the Gap Insurance would cover the €2k.

And more likely, you've paid a deposit more than €2k anyway so get nothing from Gap insurance.

26000 Elephants · 07-03-2017 12:30PM

Shedite27 wrote: »

Open to correction, but my understanding was that Gap Insurance covers the gap between what you owe on the car and what it's worth. If you had a crash 2 years later you'd have paid off (say) €250*24, €6000 in repayments so in the scenario above, Regular Insurance would pay €12k, you'd still owe €20-6k, €14k, so the Gap Insurance would cover the €2k.

And more likely, you've paid a deposit more than €2k anyway so get nothing from Gap insurance.

Most gap policies ( they vary) return you to the original invoice price of the car, so whatever the insurance company adjudge you ball of scrap to be worth, you get paid the difference.

But dont make the mistake to think that its designed to just look after the consumer, its primarily designed to protect the finance company. As they have first interest in the vehicle, they will be made whole before you see a penny.

mickdw · 07-03-2017 01:27PM

Shedite27 wrote: »

Open to correction, but my understanding was that Gap Insurance covers the gap between what you owe on the car and what it's worth. If you had a crash 2 years later you'd have paid off (say) €250*24, €6000 in repayments so in the scenario above, Regular Insurance would pay €12k, you'd still owe €20-6k, €14k, so the Gap Insurance would cover the €2k.

And more likely, you've paid a deposit more than €2k anyway so get nothing from Gap insurance.

That would make perfect sense and possibly some do offer that policy and that would be very useful.
Certainly what I was offered from axa a few years back was return to invoice & also a further product - new for old which would pay the new price of same model even if more than original invoice.

mickdw · 07-03-2017 01:35PM

26000 Elephants wrote: »

Why would you question how it is legal? Its a commercial decision by an insurance company to offer a product. I'm sure the actuaries have worked out their win angle.

How people try to game it is their business, but dont be so naive as to think the insurance companies haven't thought about that already.

Typical policies in the UK seem to be about the £180 mark, so the 400 euros quoted earlier seems about the right level of gouging to be expected here.

Im well aware that they have a win angle as if they are charging 300 and the average car costs 30000 and say the average write off happen when car is worth 15000, anything better than 1 in 50 cars under cover getting written means profit. Id say there is significant profit in it for them.
My point was just that it goes against the basics of insurance. You should not be in a financially better position due to n insurance claim. Sure alot of people end up better off due to fraudulent injury claims etc but this product creates a financial advantage without fraudulent activity - its like a lottery, a write off lottery. Nothing against it, just an odd product.

veryangryman · 10-03-2017 11:00AM

Hey guys

Approaching end of my PCP term... do the garage/company ring you to discuss options or write to you or how does it work? Im planning to pay the balloon and keep the car.

mickdw · 10-03-2017 11:04AM

You should get fair notice from the finance provider but I'd also expect your salesman to be strong arming you to call in to put you in a new car.

Micky 32 · 10-03-2017 11:27AM

mickdw wrote: »

You should get fair notice from the finance provider but I'd also expect your salesman to be strong arming you to call in to put you in a new car.

Probably depending on what car you bought, if you had bought a Golf you can bet they'll pressure him.

Lantus · 10-03-2017 10:43PM

veryangryman wrote:

Approaching end of my PCP term... do the garage/company ring you to discuss options or write to you or how does it work? Im planning to pay the balloon and keep the car.

Usually they write letting you know your getting to end. There are 3 options.....

Best bet is to call the dealer and head in. You can trade in at any time up to the end of the 36 month term. Pick a car, arrange finance but the more time to prepare the better.

griff87 · 19-03-2017 12:38PM

Hi all,

Apologies for probably posing a scenario that has been discussed to death but in those better educated in me in the PCP world would greatly appreciate some advice:

Am looking at buying a A4. For someone doing c. 40k mileage a year currently on roads that would not be anywhere near the quality of M50 what is the general concensus as what is best value for money
1. Go new with PCP over 3 years (monthly repayments are at 2.9% apr with 30% deposit agreed final balloon payment is €15,519) and if mileage is remaining high be prepared to pay the balloon payment at the end.

2. Go for a 2 year old model (carzone has 151/152 at 26-30k) on a traditional finance that would have a similar monthly payment on a higher APR over 4 years rather than 3
Is it possible to negotiate on mileage limit for PCP and is it correct that it is limited to 30k annually?
(Websites are pretty sparse on info related to this!!)
Thanks in advance just feel dealers are trying to spin the PCP and trying to get facts straight!!

MarkN · 19-03-2017 12:47PM

You're at the high end of the annual mileage that's for sure. 15,000-20,000kms per year is the norm.

Your GFV plus the figure that is your 30% is the combined amount that you need the equity in the car to be at a minimum in 3 years. Will the A4 realistically be worth more than those two figures then as if not, you're going to need more money again to get similar repayments.

I wouldn't really worry about the type of roads you're on. They do have to allow for normal wear and tear.

Lantus · 19-03-2017 01:43PM

Griff

40k is high and could erode equity significantly after 3 years. It's almost double the average 60k that these deals are based on. But if your keeping the car for some time it's not an issue. If the PCP allows you to buy new cheaper then fair enough.

Micky 32 · 21-03-2017 09:02PM

I do 50k a year and got my 171 on a pcp but i intend to buy it out and sell off privately when i'm finished with the car. Will keep for 4-5 years.

bazz26 · 21-03-2017 09:39PM

High mileage only becomes an issue if you plan on handing back the car in 3 years time or use it as a deposit on another PCP financed car. If you plan to buy the car outright after the PCP deal expires then it makes no difference, just make sure you can afford the final payment at the end of the PCP term.

Kaiser84 · 22-03-2017 12:51AM

Can you use the equity at the end of pcp towards a deposit to go standard finance on a one year old car?

PCP finance.

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