PCP finance.

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 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.

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

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.

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.

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 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.

Had to be a highline if he got 0%.

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

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

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

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

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

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 ...

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