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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

ECO_Mental wrote: »

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

Sounds good.
Only downside is that next time you are going back with a 172 which will be priced as a 171 instead of having a 181 which will make a fair difference - still you can worry about that next time.

ECO_Mental

sillysocks wrote: »

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?

Those deals were there for orders on new 172 cars up until 30th june. So you have a week left...

ECO_Mental

mickdw wrote: »

Sounds good.
Only downside is that next time you are going back with a 172 which will be priced as a 171 instead of having a 181 which will make a fair difference - still you can worry about that next time.

I don't think so, well I'm hoping Not, the dealer will value the car based on the mileage being a 172 or a 181 shouldn't make that much a diff to a main dealer anyway.

jca

Has anyone here pulled out of the deal before starting it? I've given a 500 deposit but it looks like I'll have to pull out as a shift in the job is being closed down, there won't be any job losses so they say but I just don't want to take the risk of entering into a finance agreement when the car I have is paid for. I understand I'll probably lose the deposit but I'd suffer that, easier than trying to find a car payment every month. Bloody typical we manage to grind through the worst recession in history and then get the rug pulled out from under our feet, that's Ireland for ya!

Lantus

jca wrote:

Has anyone here pulled out of the deal before starting it? I've given a 500 deposit but it looks like I'll have to pull out as a shift in the job is being closed down, there won't be any job losses so they say but I just don't want to take the risk of entering into a finance agreement when the car I have is paid for. I understand I'll probably lose the deposit but I'd suffer that, easier than trying to find a car payment every month. Bloody typical we manage to grind through the worst recession in history and then get the rug pulled out from under our feet, that's Ireland for ya!

I've done several of these deals and 2 from scratch and I've never handed over anything until the day I walked in to collect the car? Possibly it's a very unique model with a lot of customisation? Even so, I don't know where you stand as you haven't signed anything yet. A good dealer would refund you.

grogi

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.

I never stop to wander who those people really are...

They own a car worth 30% of an expensive new car, that would be around 15k and want to replace it. Yet they cannot really afford the monthly...

Where did they get the car for the deposit in the first place? Sure, there will be few with inheritance, presents etc. But not 'too many' of them.

mickdw

Its like this. You might have a chap who could honestly afford a passat and has no issue paying for it and has now a 3 year old one to change.
He turns up at dealers and now sees that his passat will get him a large deposit on a new A6 worth 55k, a car 25k dearer than he typically bought. He gets it and drives it on a cheap enough monthly for 3 years. After 3 years, he will have alot less equity than he had in his previous passat paid for on hp. He is then looking at adding 10k into the deal to maintain his monthly on the next car.

Passat costs about 15k over 3 years.
An A6 is likely to cost significantly more and this has to be paid for and people are getting into these cars without realising the true cost as its pushed down the road for 3 years from first deal.

Casati

mickdw wrote: »

Its like this. You might have a chap who could honestly afford a passat and has no issue paying for it and has now a 3 year old one to change.
He turns up at dealers and now sees that his passat will get him a large deposit on a new A6 worth 55k, a car 25k dearer than he typically bought. He gets it and drives it on a cheap enough monthly for 3 years. After 3 years, he will have alot less equity than he had in his previous passat paid for on hp. He is then looking at adding 10k into the deal to maintain his monthly on the next car.

Passat costs about 15k over 3 years.
An A6 is likely to cost significantly more and this has to be paid for and people are getting into these cars without realising the true cost as its pushed down the road for 3 years from first deal.

I'd say most people get a shock when they see the cost the change after three years, and anybody regardless how they finance it, will have to stump up serious money to upgrade 3 year old A6 into a new one, I'd estimate it at 25k but it's possibly higher with the flood of imported Audi's now.

The poster with the Passat appears to have 8500 equity or over 20%. Not bad going especially when the new car increased by 2000

jca

Lantus wrote: »

I've done several of these deals and 2 from scratch and I've never handed over anything until the day I walked in to collect the car? Possibly it's a very unique model with a lot of customisation? Even so, I don't know where you stand as you haven't signed anything yet. A good dealer would refund you.

I'll talk to the dealer on Monday, the car isn't due to be built until week 34 with expected delivery on week 38. It's an Octavia elegance 1 litre petrol DSG, the only extras are sunset glass and enhanced interior lighting, will know more from the job too on Monday.

Plutonium Kun

Sorry if this has been asked before, but does anyone know if dealers are willing to offer discounts on new cars and give a PCP? In other words, if I go in, say I want car X, and ask for the best price on that car (I'm not doing a trade-in), and then ask for the current 0% PCP offer, will I be told to stuff it, or do they treat the finance side of the bargaining as separate from negotiating the base price?

mickdw

If they are advertising zero percent, at least from the likes of vw, those costs are being taken up by vw / importer so dealer margins should be unaffected so yes on a straight sale, i would be looking for good discount also.

Plutonium Kun

Thanks Mick, thats useful to know. This is the first time I've gone in for a new car - do you have any idea what sort of discount should I hope for on a Skoda with a list price of 22,000 euro?

ECO_Mental

Plutonium Kun wrote: »

Thanks Mick, thats useful to know. This is the first time I've gone in for a new car - do you have any idea what sort of discount should I hope for on a Skoda with a list price of 22,000 euro?

I dont think they will actually, new cars are bought and ordered through the auld computer straight to 'VW for example The price is what it is they can't alter the price of a new car. Now I could be wrong but what you need to look out for are the deals like vw are giving €1-2000 off deposits etc and other sweetners but they are offical manufacturer deals.

What you could look for getting deals off stuff the dealer can do for you, I got them to fit a tow bar for free.

Casati

ECO_Mental wrote: »

I dont think they will actually, new cars are bought and ordered through the auld computer straight to 'VW for example The price is what it is they can't alter the price of a new car. Now I could be wrong but what you need to look out for are the deals like vw are giving €1-2000 off deposits etc and other sweetners but they are offical manufacturer deals.

What you could look for getting deals off stuff the dealer can do for you, I got them to fit a tow bar for free.

What's the auld computer got to do with it?

It depends on the model and spec but you'd get at least 1200 off straight discount on a 22k Skoda and also get 0%

Plutonium Kun

Thanks for the replies, very useful.

useless

Interesting article in todays Sunday Times about PCP. Gave an example of a woman who's paid a 4k deposit (10%) and 488 pm for 36 months for a new A4, and is planning to give the car back after the 3 years are up... that works out at 599 a month for 3 years, or 21,568 in total, for the use of the car.

It seemed staggeringly expensive to me, but then looking at the alternative, say a credit union loan for 36k (assuming the customer has the 4k in cash to put into the deal) at 7.9% for 3 years, that's 1126 a month, or 44536 over the period, and you own outright an A4 worth about 23k at the end of the 3 years (very unscientific quick Carzone search says 141 A4s are about that price; Im assuming the 40k A4 is a pretty basic spec one). Sell the car for 23k to make a fair comparison- total cost to use the car over 3 years is 21,536.

The PCP it & hand it back option is pretty much exactly the same, but you dont have to take the risk on the future value of the car after the three years. On the other hand, with PCP you dont own it, with the CU loan you own it day 1 and can sell it if you need to.
Call me stupid but I didn't expect to see the numbers work out so close- I thought the buy it outright option would be preferable.
Would be interesting to look at this on higher value cars which risk depreciating quickly- just treat the PCP as a Personal Contract Hire or Personal Lease, paying a small deposit and giving the car back at the end of the PCP... probably depends on the PCP rate vs the CU rate.

Lantus

Giving the car back is the least desirable option. Does she not need a car anymore? It's a massive monthly she pays and will continue to pay until the term ends so ability to pay is not in question it seems. Why not downsize? Or buy outright and sell it and hopefully make a bit of money. I can't find the article so no context. Seems odd though.

DaveyDave

You might not own the car on PCP but you do own the 8-9% of APR you're not paying on loans and will be driving a top of the line car

People are too caught up on 'owning' a car. Does not owning the car really bother any of you? The argument I always see is that you can sell your own car in financial troubles but realistically how often does anyone on PCP not have their finances in order? You need proof of income, a full time permanent job AND proof of savings for a period of time. I know I'd rather drive a top of the line 172 that I can spec to my liking rather than a poverty spec €6,000 car that I'd get otherwise.

I understand people want to own cars but even PCP you can keep the car so you don't need to worry about the mileage or damaging the car because it will be yours?

I'm going straight into PCP for my first car. Like most people I don't have 30k cash to buy a car outright but unlike all my young adult friends I'm not getting a loan to get a car because I don't want to waste money on APR. If not owning a car means I'm driving a brand new top of the line Golf rather than a 6-8 year old poverty spec one then so be it. I'm happy with that.

jca

DaveyDave wrote: »

You might not own the car on PCP but you do own the 8-9% of APR you're not paying on loans and will be driving a top of the line car

People are too caught up on 'owning' a car. Does not owning the car really bother any of you? The argument I always see is that you can sell your own car in financial troubles but realistically how often does anyone on PCP not have their finances in order? You need proof of income, a full time permanent job AND proof of savings for a period of time. I know I'd rather drive a top of the line 172 that I can spec to my liking rather than a poverty spec €6,000 car that I'd get otherwise.

I understand people want to own cars but even PCP you can keep the car so you don't need to worry about the mileage or damaging the car because it will be yours?

I'm going straight into PCP for my first car. Like most people I don't have 30k cash to buy a car outright but unlike all my young adult friends I'm not getting a loan to get a car because I don't want to waste money on APR. If not owning a car means I'm driving a brand new top of the line Golf rather than a 6-8 year old poverty spec one then so be it. I'm happy with that.

I agree, people trot this out every time, ah shur you'll never own your car on pcp I'd rather buy it with a credit union loan at least I own it,,, eh no you don't, did the loan just disappear as soon as you drove the car out of the dealers? What Apr are you paying on a credit union loan? Most can't answer that either.

grogi

Deleted User wrote: »

Yeah I agree the traditional finance is the way to go because even though the monthly payments are a lot higher it's the true amount you'll have to pay over the three years.

Why? PCP will turn out cheaper than any other type of financing and gives you additional flexibility.

Just be prudent, know what happens at the end of the contract and prepare for it over the time of it.

ShadowHearth

grogi wrote: »

Deleted User wrote: »

Yeah I agree the traditional finance is the way to go because even though the monthly payments are a lot higher it's the true amount you'll have to pay over the three years.

Why? PCP will turn out cheaper than any other type of financing and gives you additional flexibility.

Just be prudent, know what happens at the end of the contract and prepare for it over the time of it.

Spot on.

Pcp is cheapest way to get in to new car. Way lower apr then hp and you get scrapage or trade in bonus. As you said you get flexibility after 3 years.

On one of those radio talk shows they had pcp topic. It was pretty much same approach as they always did with modified and sports car scene. A lot of scare tactics and how dodgy it is.
If you have common sense, can actually read, good with your finances ( not living from pay check to pay check ), then pcp is a great thing to take advantage off.

Just my personal opinion, but if a person takes on pcp, he needs to have a mindset of buying out car in the end of 3 years and not the mindset off "Ah sure, ill just take a new one in 3 years".
You got 3 years to plan out your exit strategy. Start a separate account where you putting away a few quid each week for the next 3 years. When day comes in you will walk in to dealership checking if they got a tasty deal for you or salesman just trying to screw you as he is hoping that you dont have that money to pay off car. If you will say salesman: nah, I its not good enough deal, ill just pay off the rest of the car. I am pretty sure they will try to do better. And most important thing is that you wont be stressing out when day comes as you will get yourself covered.

acronym Chilli

DaveyDave wrote: »

You might not own the car on PCP but you do own the 8-9% of APR you're not paying on loans and will be driving a top of the line car

People are too caught up on 'owning' a car. Does not owning the car really bother any of you? The argument I always see is that you can sell your own car in financial troubles but realistically how often does anyone on PCP not have their finances in order? You need proof of income, a full time permanent job AND proof of savings for a period of time. I know I'd rather drive a top of the line 172 that I can spec to my liking rather than a poverty spec €6,000 car that I'd get otherwise.

I understand people want to own cars but even PCP you can keep the car so you don't need to worry about the mileage or damaging the car because it will be yours?

I'm going straight into PCP for my first car. Like most people I don't have 30k cash to buy a car outright but unlike all my young adult friends I'm not getting a loan to get a car because I don't want to waste money on APR. If not owning a car means I'm driving a brand new top of the line Golf rather than a 6-8 year old poverty spec one then so be it. I'm happy with that.

I really don't see how PCP can make the difference for you between driving an 8 y.o. poverty spec versus a 172 top of the line unit.

Agree that owning the car can be a red-herring. Really the only potential "gotcha" I see is the balloon payment. And that moreso for someone who starts on PCP using a trade-in towards the deposit, and has a loose mental model that they'll use the new car in the same way in 3 years. That of course doesn't work because they don't own the car at that stage.

Note, APR also can be a red-herring. Key thing is the total cost of ownership.

DaveyDave

acronym Chilli wrote: »

I really don't see how PCP can make the difference for you between driving an 8 y.o. poverty spec versus a 172 top of the line unit.

Agree that owning the car can be a red-herring. Really the only potential "gotcha" I see is the balloon payment. And that moreso for someone who starts on PCP using a trade-in towards the deposit, and has a loose mental model that they'll use the new car in the same way in 3 years. That of course doesn't work because they don't own the car at that stage.

Note, APR also can be a red-herring. Key thing is the total cost of ownership.

I know it's a strange situation but I need a car soon as I just moved out. It was either get something second hand with the cash I have or use it as a deposit. I don't want to get a loan due to the cost of credit being high. Due to my job I need something reliable and I also love cars and the biggest issue with older cars I have is the interior. Bland, dated and no kit in them.

So it was either throw cash down now or use it as a deposit to finance. Money isn't an issue, I could have kept saving and got a better second hand car but I need one soon. I know you can get nice second hand cars for that money but as it's my first car I wanted it to be cheap enough to run. €190 tax and gets 50-60MPG. I don't need a diesel and I want an automatic that pretty much leaves poverty spec, ex taxi Prius for €9-10k. No chance.

I wouldn't be running a new top of the line car if it wasn't for PCP and because it's my first car I'll definitely be trading up in 2-3 years to a faster engine and don't need to worry about trying to shift an even older second hand car.

acronym Chilli

DaveyDave wrote: »

I know it's a strange situation but I need a car soon as I just moved out. It was either get something second hand with the cash I have or use it as a deposit. I don't want to get a loan due to the cost of credit being high. Due to my job I need something reliable and I also love cars and the biggest issue with older cars I have is the interior. Bland, dated and no kit in them.

So it was either throw cash down now or use it as a deposit to finance. Money isn't an issue, I could have kept saving and got a better second hand car but I need one soon. I know you can get nice second hand cars for that money but as it's my first car I wanted it to be cheap enough to run. €190 tax and gets 50-60MPG. I don't need a diesel and I want an automatic that pretty much leaves poverty spec, ex taxi Prius for €9-10k. No chance.

I wouldn't be running a new top of the line car if it wasn't for PCP and because it's my first car I'll definitely be trading up in 2-3 years to a faster engine and don't need to worry about trying to shift an even older second hand car.

The deal seems to work well for you so, as they say, well wear!

The one bit I'd be interested to clarify is what you mean by "I don't want to get a loan due to the cost of credit being high." In a sense, there is credit to be paid for no matter how you finance, it just gets paid for in different ways, and the price gets attached to different items (e.g. I could offer you something for price €X with 0% APR, or offer you the same thing for a discounted price of €(0.9)X but with y% APR; we can set the numbers up so the NPV is the same either way (event the payment schedule the same), however from a marketing point of view the two may play quite differently with buyers). Also, you will need to save some money towards the balloon payment, although if you've got good earnings growth ahead that might be less important and you could instead let your repayment grow when you change next.

All that said, the same thing can have different prices in the market, including credit. Could be that the PCP available to you is the best overall price to achieve the vehicle you want.

jacksie66

This post has been deleted.

Atlantic Dawn

jacksie66 wrote: »

What's the chance of getting pcp finance if your credit history ain't the best from a few stupid decisions during the boom..

PCP's are not regulated by the Central Bank so pretty much anything goes.

JustLen

jacksie66 wrote: »

What's the chance of getting pcp finance if your credit history ain't the best from a few stupid decisions during the boom..

A never ending cycle.

GavMan

Atlantic Dawn wrote: »

PCP's are not regulated by the Central Bank so pretty much anything goes.

They are indeed supervised by the Central Bank for conduct of business purposes

GavMan

jacksie66 wrote: »

What's the chance of getting pcp finance if your credit history ain't the best from a few stupid decisions during the boom..

I got approval from several banks on the spot with no documents so I'd say you're grand. No way are they checking credit histories

grogi

GavMan wrote: »

I got approval from several banks on the spot with no documents so I'd say you're grand. No way are they checking credit histories

Did you give your PPS? Check of the credit rating takes couple of seconds...