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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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dil999

mickdw wrote: »

Whats all this uk stuff. This is Ireland.
So you dont believe your passat will be worth more than 1300 above gfv at 3 years old? Do you do huge mileage or do you destroy your cars?
Im talking trade in offer against a new vw, not price within the trade!
Trading early might seem like a good idea but alot of people dont realise that they are after throwing their deposit away over 2 years instead of 3 years by going back early. It can make sense if there is good equity over and above amount owed being offered or if your model is soon to be obsolete but in the case of little equity being available, trading in early is lunacy.

The comparative in the UK market for that type for car would be similar.

Its very simple stuff. I borrowed an amount of money over 36 Months at 6% interest. I paid it off in 28 months and transferred to a 0% loan, saving myself €600 in interest. I didn't throw anything away. All this equity stuff is complete nonsense. PCP is a loan. You borrow money. You pay it back. If you pay it back early you save on the interest.

BTW, here's the specifics of the residual of the Mondeo after 28 months. The car was 31.1K list, discounted to 27K. I got 15K against a final figure of 13.5K ( there was an extra payment made before the final deal) so that is a residual of 55% over 28 Months. the final payment was 50%. so I got 5% over "GMFV". If you think you will get any more, you are delusional.

Cyrus

dil999 wrote: »

so I got 5% over "GMFV". If you think you will get any more, you are delusional.

Just on a mondeo or in general

dil999

Cyrus wrote: »

Just on a mondeo or in general

on that class of car, Mondeo, Passat, Avensis etc.

jca

dil999 wrote: »

on that class of car, Mondeo, Passat, Avensis etc.

Mondeo would suffer the highest depreciation in that class.

dil999

jca wrote: »

Mondeo would suffer the highest depreciation in that class.

Not the case. Ford offer much higher discounts on the list prices, so the residuals seem lower as a % of list, but are more or less the same as a % of actual selling price. Have a look at the UK Volkswagen fleet comparison I posted earlier. The % residuals are lower than Ireland, but the comparisons between models are the same.

mickdw

There lies the snag in your argument.
You say that mondeo fairs ok in terms of depreciation when judged against discounted sale price. Fair enough. The mondeo gfv is then a crazy high percentage of actual sale price. That is why you have no equity.

maidhc

Cyrus wrote: »

I wouldn’t want to drive an avensis for 15 years personally

Who said it’s cheap ? Anyone that thinks buying a new car is cheap is mad

But your argument isn’t against pcp it’s against buying new cars and the frivolity of it (in your mind )

No one should have drive a 15 yo Avensis, my only point is many arguments for buying a new car (reliability, tyres, warranty) are spurious.

We have two new cars and my wife's one is on finance (because it made sense at 0% of 60% over 24 mths...), they both were bought this year and replaced my 17 yo merc and her 11 yo Astra. I also run a 03 landcruiser and 92 merc so I have a broad view on things.

My complaint is that pcp is sold in a manner that to my mind obscures the true cost of buying a car. You can clearly see the costs and gave done your sums, but many don't.

Lantus

Mrs lantus got 13% equity in trade for 171 skoda I think back in Jan. Less than I'd hoped but the rapid has a lower residual compared to the Octavia.

Lantus

maidhc wrote:

Incidentally the cheapest way to run a car I think is to buy new or very fresh for cash, maintain it well, and run it into retirement.

It's an ideal scenario. Family, long daily commute and the associated stresses of running a car that may break down or needs more regular maintenance can take its toll though. The needs of each person varies. And not everyone is a great driver that looks after cars.

Some can be well worn in short order and cared for not a bit. Kids wreck cars generally.

dil999

mickdw wrote: »

There lies the snag in your argument.
You say that mondeo fairs ok in terms of depreciation when judged against discounted sale price. Fair enough. The mondeo gfv is then a crazy high percentage of actual sale price. That is why you have no equity.

No its 40% of actual selling price, exactly the same as all the others. actual selling price was 27000, GMFV (after 36 months) was 10800.

I don't know what you are trying to convince yourself of. I know exactly the figures, I have spend the last month researching this in great detail. I have compared the PCP across a number of different models in this class. I have spoken to people in the trade, and I have examined every resource available on trade value.

The bottom line is that PCP is a loan for a car. You pay a % up front. you pay off the remainder to 40% of the value of the vehicle over then next 3 years and then pay off the 40% in month 37, or hand the car back.

The so called "equity" in the car is an aside. In this class of car at the moment you will get around 4% to 5% over 40% as the trade value.

Here is another way to look at it. according to beepbeep.ie my old car is worth 20600 retail. work it backwards. €20600-15000 is €5600. VAT is 23% of that. Thats €1288. Preparation / warranty etc is probably about €1000, so dealers gross profit is €3312. that's a 22% margin. There is no main dealer operating at margins less than that.

mickdw

my mistake. i saw you final figure of 13.5k and mistook it as you gfv at 36 months which would have been 50 percent of actual sale price and 43 percent of retail as assumed this yo be the gfv ehen in fact it appear it was the outstanding amount at 28 months.
I thought you had taken a deal where gfv was 50 percent at end of term. That would automatically result in zero equity.
Im not trying to convince myself of anything. i dont have a pcp or a any car finance at the minute but i also have been keeping a keen eye on the vw audi side of things as they are into second wave of pcp deals now as they are selling them big time since 2014.
people are seeing 4.5k equity on highline passats going back at end of term. of course some of that is discount etc but thats common to all car sales.
People who bought golfs and passats with 15 percent deposits are working out pretty good.

GavMan

Lantus wrote: »

Mrs lantus got 13% equity in trade for 171 skoda I think back in Jan. Less than I'd hoped but the rapid has a lower residual compared to the Octavia.

If you only put down 10-15% the first time round then 13% equity is really good. She would have more or less rolled over into the new car for no money down and similar repayments... Perfect situation :cool:

Casati

GavMan wrote: »

If you only put down 10-15% the first time round then 13% equity is really good. She would have more or less rolled over into the new car for no money down and similar repayments... Perfect situation :cool:

It doesn't matter the % you put down, gmv is usually 40% for Skoda's. Having 13% isn't bad depending on if the retail price of the new car went up but it's lower than I'd be expecting with an Octavia or Superb

Casati

GavMan wrote: »

If you only put down 10-15% the first time round then 13% equity is really good. She would have more or less rolled over into the new car for no money down and similar repayments... Perfect situation :cool:

Lantus

Deposit does matter for monthly payments into next deal!!!!

She was on 17 to 19 if I recall for initial deposit as they ran an offer for a free 1k voucher. So a little above the ideal scenario but we had no idea at the time how deposit would affect future monthlys in next deal.

There was a price increase in the new car.

The difference in the monthly could be accounted for by car inflation and the equity being less than the initial deposit.

The rapid isn't quite as desirable as the Octavia otherwise I'm sure we would of got more in equity. They more or less said this at the time.

Overall the increase was ok and manageable and not much (a cheap car is still cheap even when it goes up in price). You can easily see though how if you'd of dropped the max 30% deposit you'd be in brown trouser territory unless you fully understood what was going to happen.

Shan_14

PCP Q:

I'm one year into my PCP. Is there a way of restructuring the finance now into a Hire Purchase Agreement or am I stuck to the initial agreement?

Thanks in advance!

dil999

mickdw wrote: »

my mistake. i saw you final figure of 13.5k and mistook it as you gfv at 36 months which would have been 50 percent of actual sale price and 43 percent of retail as assumed this yo be the gfv ehen in fact it appear it was the outstanding amount at 28 months.
I thought you had taken a deal where gfv was 50 percent at end of term. That would automatically result in zero equity.
Im not trying to convince myself of anything. i dont have a pcp or a any car finance at the minute but i also have been keeping a keen eye on the vw audi side of things as they are into second wave of pcp deals now as they are selling them big time since 2014.
people are seeing 4.5k equity on highline passats going back at end of term. of course some of that is discount etc but thats common to all car sales.
People who bought golfs and passats with 15 percent deposits are working out pretty good.

If thats the case I am laughing. Unfortunately the garages go out of their way to confuse their discount with the trade in. I'll post again in 3 years and let you know how I get on.:)

dil999

Shan_14 wrote: »

PCP Q:

I'm one year into my PCP. Is there a way of restructuring the finance now into a Hire Purchase Agreement or am I stuck to the initial agreement?

Thanks in advance!

You will get charged for restructuring. The PCP is a Hire Purchase arrangement. Do you intend to pay of early, or are you trying to spread the payments over a longer term?

Shan_14

Thanks for reply. I suppose to spread the payments over 4/5 years and to own the car outright at the end. What is the penalty/charge?

artheb

Shan_14 wrote: »

Thanks for reply. I suppose to spread the payments over 4/5 years and to own the car outright at the end. What is the penalty/charge?

I suggest to ring the financing bank which would give you the most accurate info.

Cyrus

Shan_14 wrote: »

Thanks for reply. I suppose to spread the payments over 4/5 years and to own the car outright at the end. What is the penalty/charge?

surely you just save a bit extra every month so that when you get to the end of year 3 you have a chunk to pay off the GMFV and then finance the remainder over 12-24 months.

blingrhino

Advice please !

Looking at buying a 161 7 series at 70k.
i have my own car worth 30k as trade in (paid in full)

Should i A, Borrow 40k as loan

B, Go the pcp route with approx deposit of 15k (and get 15k back
from the dealer and pcp the rest)

C. Use some cash (8k) and borrow less

i would like to keep my monthly payments around the €500 mark.

carsfan2

blingrhino wrote: »

Advice please !

Looking at buying a 161 7 series at 70k.
i have my own car worth 30k as trade in (paid in full)

Should i A, Borrow 40k as loan

B, Go the pcp route with approx deposit of 15k (and get 15k back
from the dealer and pcp the rest)

C. Use some cash (8k) and borrow less

i would like to keep my monthly payments around the €500 mark.

Can you pcp a second hand bmw?

Cyrus

blingrhino wrote: »

Advice please !

Looking at buying a 161 7 series at 70k.
i have my own car worth 30k as trade in (paid in full)

Should i A, Borrow 40k as loan

B, Go the pcp route with approx deposit of 15k (and get 15k back
from the dealer and pcp the rest)

C. Use some cash (8k) and borrow less

i would like to keep my monthly payments around the €500 mark.

well option A doesnt work unless you want a 7 year loan, even at 0 interest 500 per month wont pay back 40k unless its a very long loan.

Option B with a 15k deposit on PCP will be closer to 1,000a month depending on the interest rate

If you put more money into the deposit to lower the monthly and you want to change after 3 years you will probably have to come up with some extra deposit.

bazz26

I think main dealers are PCPing second hand ones upto a certain age but you will pay a handsome APR on it from them.

dil999

Cyrus wrote: »

surely you just save a bit extra every month so that when you get to the end of year 3 you have a chunk to pay off the GMFV and then finance the remainder over 12-24 months.

Some of the finance companies will even finance the remainder over 3 years. this is probably the best way to go, rather than trying to restructure. I don't know what the restructuring charge would be.

dil999

Lantus wrote: »

Deposit does matter for monthly payments into next deal!!!!

She was on 17 to 19 if I recall for initial deposit as they ran an offer for a free 1k voucher. So a little above the ideal scenario but we had no idea at the time how deposit would affect future monthlys in next deal.

There was a price increase in the new car.

The difference in the monthly could be accounted for by car inflation and the equity being less than the initial deposit.

The rapid isn't quite as desirable as the Octavia otherwise I'm sure we would of got more in equity. They more or less said this at the time.

Overall the increase was ok and manageable and not much (a cheap car is still cheap even when it goes up in price). You can easily see though how if you'd of dropped the max 30% deposit you'd be in brown trouser territory unless you fully understood what was going to happen.

Nothing you do in a current loan can have any impact on the repayments on a loan you have not taken out yet.

Shane732

carsfan2 wrote: »

Can you pcp a second hand bmw?

Yes you can - but only over a maximum of 36 months I think.

maidhc

blingrhino wrote: »

Advice please !

Looking at buying a 161 7 series at 70k.
i have my own car worth 30k as trade in (paid in full)

Should i A, Borrow 40k as loan

B, Go the pcp route with approx deposit of 15k (and get 15k back
from the dealer and pcp the rest)

C. Use some cash (8k) and borrow less

i would like to keep my monthly payments around the €500 mark.

Given the rate that car will depreciate I'd wish you luck in paying €500 pm.

A 40k loan over 5 years is about 800pm from my memory. A 7 year old 7 series is a luxobarge worth very small money.

dil999

maidhc wrote: »

Given the rate that car will depreciate I'd wish you luck in paying €500 pm.

A 40k loan over 5 years is about 800pm from my memory. A 7 year old 7 series is a luxobarge worth very small money.

a PCP with 15K deposit over 3 years will cost you 958 per month 5.9% 7.5K interest (based on 40% GMFV)
a HP over 5 years for 40K will cost you 769 at 5.9% - 6.1K interest.