nav[aria-label="Primary Navigation"] { padding: 0; & ul { list-style: none; width: 100%; display: flex; flex-direction: row; justify-content: start; align-items: start; gap: 30px; padding: 0; & li { margin: 0; } & ul li { list-style: none; } } }

Child Item

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.

Find more posts tagged with

Quick Links

Comments

mickdw

They cannot penalise you anymore than is reasonable if you are trading in for a new car as you are in an open market so if you think you are getting screwed, go to next dealer.
Handing the car back and walking away could leave you alittle snookered if there is damage as it will need to be paid for. My advice would be not to enter into a pcp if there is any possibility that you would have to walk away at the end as that is throwing money away.

ShadowHearth

https://www.irishtimes.com/business/personal-finance/buying-a-172-car-with-a-personal-contract-plan-read-this-1.3148532?mode=amp

I am pretty sure their writers go on boards.ie, get half arsed info and then do an article with messed up information. No wonder people are so confused about pcp.

youcancallmeal

ShadowHearth wrote: »

https://www.irishtimes.com/business/personal-finance/buying-a-172-car-with-a-personal-contract-plan-read-this-1.3148532?mode=amp

I am pretty sure their writers go on boards.ie, get half arsed info and then do an article with messed up information. No wonder people are so confused about pcp.

Seen a lot of these lately. Same old story warning people to have an appropriate end game plan if the value of their trade in doesn't allow them to go onto a new PCP deal in 3 years time.

Another factor is the cost of financing. You may well have acquired the initial car on a 0 per cent deal; but three years later that deal is gone and you’re now being charged 6 per cent on the rollover car purchase, which can change the sums significantly and require you to fund more of the deal through your own pocket.

But surely 0% finance for 3 years and then 6% for another 3 years is still going to be cheaper than going to a credit union for a loan in the first place and buying the car outright?

ShadowHearth

youcancallmeal wrote: »

Seen a lot of these lately. Same old story warning people to have an appropriate end game plan if the value of their trade in doesn't allow them to go onto a new PCP deal in 3 years time.

But surely 0% finance for 3 years and then 6% for another 3 years is still going to be cheaper than going to a credit union for a loan in the first place and buying the car outright?

Its good there are finally trying to inform people, but the way they do it is a mess. The examples they give are just stupid.
They missing the point that final balloon will be same no matter what deposit and repayments you will do. They don't explain properly how to manage thpse two and find a golden spot.
Minimum guarantee value is just completely weird by their explanation. 26k car will have 20k minimum value after 3 years?!

Instead of explaining properly ins and outs, they are going for scare tactics and click bait articles. This thread is the best information source for pcp at this point. Media is useless.

spuddy

ShadowHearth wrote: »

https://www.irishtimes.com/business/personal-finance/buying-a-172-car-with-a-personal-contract-plan-read-this-1.3148532?mode=amp

I am pretty sure their writers go on boards.ie, get half arsed info and then do an article with messed up information. No wonder people are so confused about pcp.

The thing which jumped out at me in the article was the lack of regulation surrounding PCP. Now where have seen something similar before

GavMan

A “good” PCP deal

Purchase price: €26,495

Deposit: €9,000

Monthly repayments: €278.42

Guaranteed minimum future value: €11,023

Trade-in price after three years: €20,000

Equity to bring to new PCP deal: €8,977

Hilarious. Show me a car with those residuals in that price bracket and I will buy it right now

Also, removing that bogus trade in price, thats a terrible PCP deal for the buyer. Lets be kind and assume its worth 16000. Customer needs to 4 grand to make his payments

DaveyDave

Anyone have any recommendations for GAP insurance? VW is €400 for a €20-30k car, I think that's return to invoice. I need to research the options more as I can't remember them well. I hear it's more expensive to get it through the dealer?

acronym Chilli

GavMan wrote: »

Hilarious. Show me a car with those residuals in that price bracket and I will buy it right now

Also, removing that bogus trade in price, thats a terrible PCP deal for the buyer. Lets be kind and assume its worth 16000. Customer needs to 4 grand to make his payments

I think they more or less put numbers together (picked a residual) so that the money left at the end was enough to "roll it over".

I think that'll be unlikely for most people/cars. The result is you either put more cash in at the end to close the difference, or you increase your monthly repayment, or you trade-down in car (hard to do since most are on PCP because they like to drive a new car); or some combination of all 3.

I suspect that the car companies have a rough idea that the additional amount needed to go in is somewhere in the range of money people might have saved up somewhere (holiday fund, rainy day fund etc.,); and that they'll also be prepared to go up on the monthly repayment ("we're already paying €260 a month, sure €330 isn't so bad, we'll have a brand new car"... if you were paying €260 last month to drive a 3 year old car, paying just €70 more next month to have the latest&greatest version isn't such a bitter pill). Could close a gap of €6k with €3k of savings (past earnings) and €3k of increased repayment (future earnings).

Almost nobody will go onto PCP and on top of the monthly repayment start a regular savings account to save up the (projected) deposit-shortfall. I don't think that PCP is dishonestly sold, per-se, however I'm rather confident that there's some very nice pricing-psychology baked into it (there are books and books on pricing techniques and structures).

Finally: all the talk of "walking away" being "throwing money away". If the value of the car is greater than GFMV, do you get the additional cash back? (seem to recall you do, but don't know detail, given you can take your PCP car to another garage/make to do deal there (while of course clearing your old finance with original dealer), should be possible). If you do, then you're not leaving it behind.
How you might lose out is if you have a car that you value higher than market value. This discrepancy could be entirely rational. e.g. say you've run up high miles, and you know they're all motorway miles, really careful driving, etc., but it's hard to convince a counter-party and T&Cs of the PCP are anyway imposing a specific penalty. You'd put one value on the car due to the asymmetry in information alone which might be higher than market. Or car might have a defect (damaged body-panel) that you aren't bothered by but that makes the car "rough" and a hard sell, etc.,

Finally, changing car for new more often will (almost certainly) cost more than holding car for longer. Basic economics and physics see to that. Same fundamental underpinning as how it's generally better for CO2 to drive older car another year than build a new car that's a bit more fuel efficient. If it doesn't look like that, there's almost certainly something wrong or concealed in the calculation, or it's not clear who's paying that premium.

joe40

I was always wary of Pcp deals but recently purchased a brand new volkswagen golf on 0% pcp and I think it was a reasonable deal. A 4300 euro deposit with 36 payments of 314 and then final payment of 10300 euro. If I went into a garage today to buy a 3 year old golf and only wanted to finance 10300 euro, I'm pretty sure I would need a 5000 euro deposit. Even if I finance the balance at the end of the three years over another 3 years at 6.5 %apr (credit union rate) the total interest would be less than a 5 year hp or loan from new.
Is there anything im missing?

mickdw

No. It looks good. You should get something similar to your deposit back in equity at end should you want to get another new car. Also as you say, buying out the car is a reasonable option too and going zero interest pcp for 3 years even if followed by reasonably high interest loan for the reaminder is still likely the cheapest way out.
The zero percent is the key though.

Lantus

Not bad. That's a 16.5% deposit. If you rolled over you'd probably see some slight uplift with monthlys all things being equal. If your going to keep the car could you save a little to one side? Say 50 to 100eu a month?

This would give you 1800 to 3600 after 3 years and would take a nice chunk out of the outstanding amount and further reduce your exposure to interest making the car even cheaper.

I think all PCP owners should be saving some money so after 3 to 8 years they have a viable exit strategy if needed.

joe40

Yeah that was my thinking, try not to have the equity you bring to the deal disappear along with the repayments, obviously future markets can change (diesel car may be very unattractive in 5 years time) but that will affect any car purchases

joe40

On a separate note I find it hard to work out how to purchase a car for under 300 euro pm, that will still perform approx 18000 miles a year. My wife will drive the golf with pcp. My own car is a 2011 avensis which I bought second hand. 2.5 years left of finance of 315 pm. Currently 106000 miles on the clock.
So in 2020 I will have a 9 year old car with approx 150,000 miles. Time to change, maybe
3 to 4000 trade so I will still need to come up with 15000 for a decent family car second hand car so back into repayments of 300 euro plus a month. So if a pcp deal can keep me in a new car with good warranty, is that not a better option.

Lantus

joe40 wrote:

On a separate note I find it hard to work out how to purchase a car for under 300 euro pm, that will still perform approx 18000 miles a year. My wife will drive the golf with pcp. My own car is a 2011 avensis which I bought second hand. 2.5 years left of finance of 315 pm. Currently 106000 miles on the clock. So in 2020 I will have a 9 year old car with approx 150,000 miles. Time to change, maybe 3 to 4000 trade so I will still need to come up with 15000 for a decent family car second hand car so back into repayments of 300 euro plus a month. So if a pcp deal can keep me in a new car with good warranty, is that not a better option.

Your right to look at all the options. Spreadsheet those figures because only then can you make honest comparisons. Factor in tax, repairs, fuel and everything else.

Cars all depreciate and lose value over time so at every stage you have a progressively cheaper car but with more miles and less lifespan.

I'd like to see the discriminatory insurance scam that arbitrarily blocks 15 year old vehicles removed on a side note.

Casati

joe40 wrote: »

I was always wary of Pcp deals but recently purchased a brand new volkswagen golf on 0% pcp and I think it was a reasonable deal. A 4300 euro deposit with 36 payments of 314 and then final payment of 10300 euro. If I went into a garage today to buy a 3 year old golf and only wanted to finance 10300 euro, I'm pretty sure I would need a 5000 euro deposit. Even if I finance the balance at the end of the three years over another 3 years at 6.5 %apr (credit union rate) the total interest would be less than a 5 year hp or loan from new.
Is there anything im missing?

What model Golf was that?

Toyotafanboi

Had to be a highline if he got 0%.

joe40

No it was a golf allstar, 172 reg. I think mid spec definitely not the highline

Toyotafanboi

I thought it was 3.9% APR for that. Did you do a deal on a pre facelift after the facelift came out?

bazz26

I thought the allstar was a Mk7 special edition and not carried over to the Mk7.5.

Toyotafanboi

It was, I'm just wondering were they offering any left overs at 0% to shift them?

bazz26

Probably I'd say.

Edit: Looks like some are:
http://www.carsireland.ie/detail.php?ad_id=1702238&r=s.php%3Fm%3D93%26o%3D812%26r%3D2017%26pp%3D50%26g%3D0

joe40

Yeah I think that what it was. The car is mark 7 not 7.5

Casati

joe40 wrote: »

Yeah I think that what it was. The car is mark 7 not 7.5

Looks like a great deal as you got a really high spec car and must have got a discount off full retail too boot. I can't see you having less than 4300 to put into a new one in years unless you do massive miles or wreck that car

sheff the ref

Does PCP apply for Electric Cars. I see the Government are offering €5000 of a grant for electric cars priced over €20,000

acronym Chilli

sheff the ref wrote: »

Does PCP apply for Electric Cars. I see the Government are offering €5000 of a grant for electric cars priced over €20,000

No reason why it shouldn't, but very few sold anyway, so won't have much going on

spuddy

Competition authority are set to investigate the PCP market according to RTE. Maybe we have learnt something after all.

grogi

spuddy wrote: »

Competition authority are set to investigate the PCP market according to RTE. Maybe we have learnt something after all.

What is there to learn? It's simply a brilliant social engineering combined with market dried up by the recession...

Atlantic Dawn

spuddy wrote: »

Competition authority are set to investigate the PCP market according to RTE. Maybe we have learnt something after all.

"I don't know what a PCP is" ads might be on the way

...

https://www.youtube.com/watch?v=l74083zafAM

jca

spuddy wrote: »

Competition authority are set to investigate the PCP market according to RTE. Maybe we have learnt something after all.

Before we know it we'll have another tribunal on our hands.

sheff the ref

This Volkswagen Jetta is only two and a half years old and seems to be well priced. Highly unlikely that it would have been possible to enter a new PCP deal if trading if this is the sale price after the Garage get their cut

http://www.carzone.ie/used-cars/volkswagen/jetta/used-2015-151-volkswagen-jetta-2-0-td-kerry-fpa-6275272045318280329