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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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EndaHonesty

jca wrote: »

He isn't wrong, what he meant was that if you start your first PCP deal with a good trade in(high deposit) which will give you nice low manageable monthly payments you won't have that nice high deposit next time around and the monthly payments will be higher.

The deposit on a PCP is limited to between 10 & 30%.

This spoofer is creating a situation that doesn't exist.

mickdw

EndaHonesty wrote: »

The deposit on a PCP is limited to between 10 & 30%.

This spoofer is creating a situation that doesn't exist.

It does exist. Too many people are barely scraping into an expensive car by way of having 30 percent deposit in their existing owed car. These people then return after 3 years and get anything from 5% equity to about 15% and they get snookered in that they cannot afford to get into a similar car again. Even keeping the car can be a kick in the teeth if the gfv is around 20k - that would be 400 per month for 5 further years just to keep the car they intended to jump out of.

EndaHonesty

mickdw wrote: »

It does exist. Too many people are barely scraping into an expensive car by way of having 30 percent deposit in their existing owed car. These people then return after 3 years and get anything from 5% equity to about 15% and they get snookered in that they cannot afford to get into a similar car again. Even keeping the car can be a kick in the teeth if the gfv is around 20k - that would be 400 per month for 5 further years just to keep the car they intended to jump out of.

Give a solid example of it existing?!

The GMFV is a constant in all PCP deals.

It is never set so high that there will be only 5% left.

The whole point of it is to make it easy for someone to change their car and be tied in for another 3 years.

You're just scaremongering.

jca

mickdw wrote: »

It does exist. Too many people are barely scraping into an expensive car by way of having 30 percent deposit in their existing owed car. These people then return after 3 years and get anything from 5% equity to about 15% and they get snookered in that they cannot afford to get into a similar car again. Even keeping the car can be a kick in the teeth if the gfv is around 20k - that would be 400 per month for 5 further years just to keep the car they intended to jump out of.

Exactly. I've entered a pcp deal on an Octavia, deposit is around 20% (my car+€500), monthly payments of €314 leaving a gmfv of €10,500. I reckon I'll have 6 to 6500 equity in three years time I'll probably have to put between 500 and 1000 into the deal to get another Octavia and keep the payments around the €300 mark. If I have to finance the gmfv it would still be manageable.

EndaHonesty

jca wrote: »

Exactly. I've entered a pcp deal on an Octavia, deposit is around 20% (my car+?500), monthly payments of ?314 leaving a gmfv of ?10,500. I reckon I'll have 6 to 6500 equity in three years time I'll probably have to put between 500 and 1000 into the deal to get another Octavia and keep the payments around the ?300 mark. If I have to finance the gmfv it would still be manageable.

Exactly?!

You'll have 6,000 to 6,500 euro equity? Is that 5% to 15%?

No. :rolleyes:

jca

EndaHonesty wrote: »

Exactly?!

You'll have 6,000 to 6,500 euro equity? Is that 5% to 15%?

No. :rolleyes:

Are you being deliberately obtuse? The idea of pcp is to balance the deposit against the monthly payments and research what 3 year old models of the car you intend buying are getting on carzone etc. DO NOT fall for the low monthly payments/ high deposit/ high deprecating car trap or there will be much gnashing of teeth on dealers forecourt in 3 years.

Lantus

jca wrote:

Exactly. I've entered a pcp deal on an Octavia, deposit is around 20% (my car+â‚¬500), monthly payments of â‚¬314 leaving a gmfv of â‚¬10,500. I reckon I'll have 6 to 6500 equity in three years time I'll probably have to put between 500 and 1000 into the deal to get another Octavia and keep the payments around the â‚¬300 mark. If I have to finance the gmfv it would still be manageable.

Equity is fixed and is typically in the 12 to 15% range based on most people's experiences including my own. So if your car was 25k expect to have 3000 to 3750 equity. This will be your deposit moving forward. If your initial purchase is based on this then your monthlys will be stable. At 20% deposit I would expect a slight rise excluding any car inflation.

If your on zero interest there is no advantage adding more to the deposit. Keep your cash.

Jobs OXO

Lantus wrote: »

Equity is fixed and is typically in the 12 to 15% range based on most people's experiences including my own. So if your car was 25k expect to have 3000 to 3750 equity. This will be your deposit moving forward. If your initial purchase is based on this then your monthlys will be stable. At 20% deposit I would expect a slight rise excluding any car inflation.

If your on zero interest there is no advantage adding more to the deposit. Keep your cash.

Equity is NOT NOT NOT fixed. It entirely depends on the future value of the car after 3 years and that can be impacted by many VARIABLES!!!

Lantus

Jobs OXO wrote:

Equity is NOT NOT NOT fixed. It entires depends on the future value of the car after 3 years and that can be impacted by many VARIABLES!!!

It's within a known range, the dealer is well away what he will be offering for that car in 3 years time with some slight adjustment for mileage and wear and tear. If 3 people buy the same car and three years later bring it back they will be getting there in abouts the same equity offer within a known range. In that sense it's a known quantity within fairly well fixed values, generally between 12 to 15% of the cars initial deposit. This is why people who place an initial deposit in the 20 to 30% range see their monthly payment rise moving into the second 3 year plan.

Yes you will have variations on this. There is the guy who did 3k a year mileage and the car is showroom new and the lad who did 100k over three years and had two minor crashes. But the vast majority do their 60k, normal wear and tear and sit in a stable and known equity range.

I've seen several trade ins on Octavia PCP plus mrs lantus car. The dealer doesn't need to get up, consult a book or even really look at the car. It's a well known variable.

You don't need to be scratching your head wondering what you'll get as equity in 3 years time. Because it's generally between 12 and 15%. Work on those figures and there will be no nasty surprises. If you get more then great!

vintagevrs

Lantus wrote: »

It's within a known range, the dealer is well away what he will be offering for that car in 3 years time with some slight adjustment for mileage and wear and tear. If 3 people buy the same car and three years later bring it back they will be getting there in abouts the same equity offer within a known range. In that sense it's a known quantity within fairly well fixed values, generally between 12 to 15% of the cars initial deposit. This is why people who place an initial deposit in the 20 to 30% range see their monthly payment rise moving into the second 3 year plan.

Yes you will have variations on this. There is the guy who did 3k a year mileage and the car is showroom new and the lad who did 100k over three years and had two minor crashes. But the vast majority do their 60k, normal wear and tear and sit in a stable and known equity range.

I've seen several trade ins on Octavia PCP plus mrs lantus car. The dealer doesn't need to get up, consult a book or even really look at the car. It's a well known variable.

You don't need to be scratching your head wondering what you'll get as equity in 3 years time. Because it's generally between 12 and 15%. Work on those figures and there will be no nasty surprises. If you get more then great!

Can you PM me the lotto there too please?

People trading in now the same car will get the same equity because the GFMV was the same and no surprise that the a car today is worth the same as another that is the same age etc.

No one knows how the used car market will behave over three years so saying equity is fixed is wrong. The arse could fall out of used car values and every three year old car could be in negative equity. Nobody knows what the next three years will bring, so to tell people that the equity is fixed when entering a large finance agreement is wrong.

Jobs OXO

Lantus wrote: »

It's within a known range, the dealer is well away what he will be offering for that car in 3 years time with some slight adjustment for mileage and wear and tear. If 3 people buy the same car and three years later bring it back they will be getting there in abouts the same equity offer within a known range. In that sense it's a known quantity within fairly well fixed values, generally between 12 to 15% of the cars initial deposit. This is why people who place an initial deposit in the 20 to 30% range see their monthly payment rise moving into the second 3 year plan.

Yes you will have variations on this. There is the guy who did 3k a year mileage and the car is showroom new and the lad who did 100k over three years and had two minor crashes. But the vast majority do their 60k, normal wear and tear and sit in a stable and known equity range.

I've seen several trade ins on Octavia PCP plus mrs lantus car. The dealer doesn't need to get up, consult a book or even really look at the car. It's a well known variable.

You don't need to be scratching your head wondering what you'll get as equity in 3 years time. Because it's generally between 12 and 15%. Work on those figures and there will be no nasty surprises. If you get more then great!

"Within a known range" is not fixed. No one knows what the price of 2nd cars will be in 3 years. Demand factors such and state of Irish economy and Supply factors such as Sterling rates are completely unknown. You are talking out of your ass.

mickdw

I wouldnt rely on getting an assumed percentage. Things can change but barring a big economic upset, stuff like passats golfs and octavias should achieve the guts of 15 percent with correct mileage and in good condition provided that one isnt returning an old model.
There are bmw 5 series going back right now that are producing little to no equity due to new model being out. Imagine having traded in a 15k car you owned outright 3 years ago to get a 2014 5 series with reasonable monthly and now going back in and needing to throw 15k cash at it to get same monthly. Its happening every day.
Im looking at the figures on a bmw 330e myself. They have gfv at 21k. Considering it will be an old model in 3 years, i can see zero equity in it. Fortunately, there are government grants and discount meaning the max cash deposit from me is small so it could be a runner all the while knowing deposit will be lost at end.

Leprechaun77

The only thing that is known and guaranteed is that there will be no negative equity in the car after three years. The rest is an educated guess. If they are so confident of this 'equity' being there, why don't they add a clause in the contract to this effect? The risk, as usual, is borne on the consumer.

The basic economics of this does not add up to me. There are some people who go in eyes wide open and understand the agreement they are signing up to, but the truth is there are a huge proportion (including dealer staff) who don't understand the full implication and risks inherent in these deals.

The supply and demand of vehicles over the next number of years will be quite different than before and this must have an effect on used car prices going forward. There are so many external factors that will affect these deals also. Interest rates are at an all time low so the cost of borrowing is artificially low on these deals at present. It would not be surprising if some of these 0% interest deals were back to 10-15% at the rollover point in three years, which immediately increases the repayments.

Undoubtedly, the manufacturers and their finance arms will re-jig these deals as time goes on to keep the plates spinning. As an aside, I believe some of these PCP deals are actually quite good for certain customers, but this myth of 'guaranteed' equity being peddled (verbally!!) concerns me.

vintagevrs

Why can there not be negative equity in the car? If the arse falls out of 2nd hand values it is quite possible that the value of the car will be less than the GFMV, especially with some brands keeping the GFMV relatively high like BMW.

I get that the customer can walk away here and is not responsible, but the car is still in negative equity and will be a loss for the finance company.

jelutong

What effect would a couple of kerbed alloys,stone chips etc have on the value of the car when it comes to trade in time I wonder? Sizeable I would say.

All in all

vintagevrs wrote: »

Why can there not be negative equity in the car? If the arse falls out of 2nd hand values it is quite possible that the value of the car will be less than the GFMV, especially with some brands keeping the GFMV relatively high like BMW.

I get that the customer can walk away here and is not responsible, but the car is still in negative equity and will be a loss for the finance company.

As you say the GFMV is guaranteed, but you may start to see dealers become very concerned with the condition of car, service record, etc. and penalties will be imposed, if you want to trade up or return the car.

jca

jelutong wrote: »

What effect would a couple of kerbed alloys,stone chips etc have on the value of the car when it comes to trade in time I wonder? Sizeable I would say.

As it would with any trade in not just PCP. If your intention is to trade up in 3 years time it would be in your interest to look after the car during those 3 years.

Lantus

Technically it's not fixed (possibly a poor word use in my part) but it's a small range subject to normal market operation. I have stated many times that market conditions can vary, Nissan leaf 20kwh battery models for example. So you cannot guarantee anything re equity but you can make reasonable assumptions. A 12 to 15% deposit is a reasonable assumption to match to future equity for the next deal.

The core point of equity re deposit is really that those who invest a large deposit will likely see the biggest uplift in monthlys in their second deal all things being equal.

I'm very happy with my knowledge of PCP and all its many pitfalls as I prepare to enter my fourth deal. Thank you.

jca

Lantus wrote: »

Technically it's not fixed (possibly a poor word use in my part) but it's a small range subject to normal market operation. I have stated many times that market conditions can vary, Nissan leaf 20kwh battery models for example. So you cannot guarantee anything re equity but you can make reasonable assumptions. A 12 to 15% deposit is a reasonable assumption to match to future equity for the next deal.

The core point of equity re deposit is really that those who invest a large deposit will likely see the biggest uplift in monthlys in their second deal all things being equal.

I'm very happy with my knowledge of PCP and all its many pitfalls as I prepare to enter my fourth deal. Thank you.

That's why you need to pick your car very carefully. I wouldn't dream of doing PCP on a Nissan Leaf as technology in electric vehicles is changing so rapidly you could easily be bitten very badly unless your intention is to pay off the outstanding amount after 3 years. There are many other cars I wouldn't dream of doing PCP on but I won't name them as I'll get eaten alive here..

PCeeeee

Leprechaun77 wrote: »

The only thing that is known and guaranteed is that there will be no negative equity in the car after three years. The rest is an educated guess. If they are so confident of this 'equity' being there, why don't they add a clause in the contract to this effect? The risk, as usual, is borne on the consumer.

The basic economics of this does not add up to me. There are some people who go in eyes wide open and understand the agreement they are signing up to, but the truth is there are a huge proportion (including dealer staff) who don't understand the full implication and risks inherent in these deals.

The supply and demand of vehicles over the next number of years will be quite different than before and this must have an effect on used car prices going forward. There are so many external factors that will affect these deals also. Interest rates are at an all time low so the cost of borrowing is artificially low on these deals at present. It would not be surprising if some of these 0% interest deals were back to 10-15% at the rollover point in three years, which immediately increases the repayments.

Undoubtedly, the manufacturers and their finance arms will re-jig these deals as time goes on to keep the plates spinning. As an aside, I believe some of these PCP deals are actually quite good for certain customers, but this myth of 'guaranteed' equity being peddled (verbally!!) concerns me.

This.

ELM327

What's at risk is your deposit. You are playing your deposit, and risking that amount only.
If your car depreciates to 0 at the end of 3 years all you lose is your deposit. The dealer loses the rest.

Leprechaun77

ELM327 wrote: »

What's at risk is your deposit. You are playing your deposit, and risking that amount only.
If your car depreciates to 0 at the end of 3 years all you lose is your deposit. The dealer loses the rest.

Whilst this is true somewhat, the deposit is effectively only reducing the amount needed to be financed. The higher the deposit, the lower the payment.

The issue at hand, I believe, is that this product is being sold as a rollover product to the general public. They are being sold as 'new car every 3 years' and the risks involved in this process are not only down to deposit lost.

The issue revolves around the huge potential risk that monthly repayments will increase, and the associated risks are not understood and outlined properly to the general consumer. It is not even the case of losing your deposit and having to start again in a worst case scenario. Even IF the conservative figure of 12-15% equity does come to fruition after three years, what if the equivalent car has increased in price over the three year period, or the artificially low interest rates increase. This alone can increase payments significantly. This product really needs to be regulated and a process put in place to inform and protect the average buyer. It is quite apparent that the majority of people taking these plans out are not fully aware of the potential risks involved.

DaveyDave

All in all wrote: »

As you say the GFMV is guaranteed, but you may start to see dealers become very concerned with the condition of car, service record, etc. and penalties will be imposed, if you want to trade up or return the car.

jca wrote: »

As it would with any trade in not just PCP. If your intention is to trade up in 3 years time it would be in your interest to look after the car during those 3 years.

I'm interested in this kind of damage too. Stone chips are inevitable, surely you can't be massively penalized if there's a few in the course of 3 years? With regards to the kerbing, some light scuffs can be expected. Does anyone have experience in handing back a car with some light wear and tear? You can't expect everyone to bring it back in showroom condition after 3 years.

If you hand the car back with some light cosmetic damage here and there surely you could still expect to be above the GFMV? If you keep the car in good condition it will be worth a few grand above the GFMV.

mickdw

Its an open market so dealer cannot start to take to piss re minor wear and teat or you can go down the road to some other brand dealer.
You could get screwed alright in the case of handing back the car but realistically that is not a good option for many reasons anyway.

ECO_Mental

Right I just rolled over and I think I got a good deal, I posted here a week or two ago saying that I was a bit disappointed that my monthly had gone from €445 to €526 for my Highline Passat but I have just sealed the deal for €480 boom:p

My background is 151 Highline Passat estate 2.0l TDI 150bhp one of the first in the new shape, paid around the €38,000 and I came in with a deposit of €8000 (well they gave me that for an 8 year old smax with 190k km and a clutch and pressure plate that was about to blow:p) so it was around 20% deposit with an interest rate if 1.9%.

So I do around 2000km a month but at the time the VW lads said that if you are going again it shouldn't be a problem the difference between 60k priced car and some thing coming in at 70 shoulnt be that much and sure we can always talk.

So 2.5 very happy motoring years later (its a great car that highline passat) I was coming up to 56k so I said I may as well pop in and have a chat to see since I was coming near the limit. So he priced it all up for me and the settlement was around 18500 and he was going to give me 25K so keep at the same payment I would have to put €3000 towards the new one or else pay €526... which is a big increase and the misuses blew a fuse.

Reason was he said the new Passat estate is just over €40k nearly 2k+ increase with my spec. Anyway to cut a long story short since I expressed my interest VW began bombarding me with letters and emails etc with offers

So between the gig and the reals i get

€1000 deposit bonus
€500 equipment bonus
Free road tax for one year
and 0% finance

Also they have a tech offer for €499 that give you loads of stuff. so added features my old highline doesn't have are

LED headlights with auto dim and high beam
LED running lights
SAT NAV
Keyless entry
Full digital speedo and rev counter (active display)
Lane warning and assist (actively stops you from drifting into the next lane)
Traffic sign recognition
rear cameras
Android and apple app connection thing
and a few other things

So I have just come out now and have my new car on order for with no deposit just straight swap...I dropped the metallic paint for solid not for cost reasons but it was differnt and looked good. all the rest were boring shades of grey (although this is grey urano grey)I have Black Oak Brown that is by far the nicest colour and you dont see many around.

Anyway excuse the rant but I think I got a good offer, considering I now dont have to worry about the mileage for the next couple of months

pm1977x

Nice...I think, although I don't get this bit:

So he priced it all up for me and the settlement was around 18500 and he was going to give me 25K so keep at the same payment I would have to put €3000 towards the new one or else pay €526

Also, how much is the free road tax worth?

PCeeeee

Thanks ECO, it's really good to hear other peoples experience in such detail.

ECO_Mental

pm1977x wrote: »

Nice...I think, although I don't get this bit:

So he priced it all up for me and the settlement was around 18500 and he was going to give me 25K so keep at the same payment I would have to put €3000 towards the new one or else pay €526

Also, how much is the free road tax worth?

The trade in for my car now is €25k (and a bit) and to settle the loan it would be €18500 so that give me a deposit of around €6500 -6700 to put towards the new car. If i went full term that 18500 would be my GFV of around 15-16000k sorry about the vague numbers here but obviously my trade in would be lower. (6 months older)

I pounced now because for

0% interest
Good offers the tech pack for €500 was great value
€1000 deposit contribution
€500 towards any options (basically the tech pack was free)
I was coming close to 60k and the car would need another service at my own expense to see me out until next Jan(I am now going to let VW take on that service
I aticipated I would need at least another two tires at about €300
Full sure they wouldnt have 0% fininace for the 181 cars as everyone want a new reg.

Road tax is €190 I think now not massive money for them but €190 I dont have to pay. It will be interesting in another three years though I might be coming into a face lift maybe and that could be interesting but I will keep an eye on it.

pm1977x

Oh right, thanks for explaining it to me - sounds like you got a great deal that suited you, fair play!

sillysocks

Any idea if you got those extra deal offers because you'd looked to trade in early or that you would have received them around this time anyway?