PCP finance.

dil999 · 21-10-2017 06:27PM

maidhc wrote: »

Buying a car *is* a financial decision. Second biggest one after a house. Why is it stupid advice to buy a car from savings? Given that you are earning 0% on it in the bank, it is cheap money. If you don't have ample reserves after buying a car, then sure, you shouldn't do it.

I'm not against hp or pcp per se, just how people are using it. It isn't all sustainable. Hp is obviously much more transparent and a far better product imo. Leasing also has its uses, more in a commercial context though.

I would also suggest buying a new tv every two years would be pretty idiotic. iPhones obviously tend not to last as long, so different factors apply.

If you had any knowledge of regulatory matters (I do...) a great deal of time is spent trying to protect people, not from themselves, but from savvy sales people.

Putting money into a pension fund is a financial decision, buying shares is a financial decision, investing in a rental property is a financial decision. Buying a car is not.

A car may be the most expensive product you purchase after a house, but it is not a financial decision. Its a purchasing decision. You buy a car because you need one, then you pay as much as you want to or can afford. Its no different than buying a pair of shoes except for the price.

Cash reserves are worth far more that the return they receive from the bank. Liquidity is critical if you ever lose your job.

If you have 30K in the bank and a 2 year old car on PCP outside, you are in a lot better situation that if you have a 2 year old car, now worth 18K, outside and no savings in the bank

HP and PCP are very similar products. in fact PCP is a basically Hire Purchase product with a different payment schedule. It has the added advantage that you can hand back the car after 3 years if you don't like it.

I think the comment that "I would also suggest buying a new tv every two years would be pretty idiotic" perhaps sums it up. I would suggest that if someone wants to buy a new TV every 2 years to get the latest technology & innovations, then, good on them and I hope they enjoy it.

acronym Chilli · 21-10-2017 07:02PM

I may get to respond to other points, but...

dil999 wrote: »

I didn't, I argued that the cost of driving a car from day 1 to 365 of driving a car is approximately the same as from day 366 to 731. 'Value' is a subjective concept and is not, on its own, a financial term and is meaningless as such

This, this is where you show the gap.
You're muddling words like value, cost, price, finance.
You've said it costs the same to drive a car from day 1 to 365 as from 366 to 731, and for the 365 afterwards. That's ridiculous.
So why would anyone ever drive a car for the third year when they could have a brand new car for that year instead?

Value is not meaningless. It's based on the price you'll pay for something.

dil999 · 21-10-2017 07:41PM

acronym Chilli wrote: »

I may get to respond to other points, but...

This, this is where you show the gap.
You're muddling words like value, cost, price, finance.
You've said it costs the same to drive a car from day 1 to 365 as from 366 to 731, and for the 365 afterwards. That's ridiculous.
So why would anyone ever drive a car for the third year when they could have a brand new car for that year instead?

Value is not meaningless. It's based on the price you'll pay for something.

Your last comment suggests that you don't have a financial background. Value in terms of finance tends to be an agreed realisable amount. the Value of an asset in terms of accounting is what you could potentially sell that asset for.

Value in terms of a purchase transaction is not a financial concept. In that context, it is a subjective importance. What may be of value to you may not be of value to someone else.
Price is an agreed amount based on what the purchaser wants to pay and the seller whats to sell at. Value doesn't enter into it. You might value your 10 year old BMW 320 at 12K, but that is never going to be the price.

Rather than responding to my other points, go out and have a few pints and relax. You will feel a lot better for it.

acronym Chilli · 21-10-2017 08:12PM

dil999 wrote: »

Your last comment suggests that you don't have a financial background. Value in terms of finance tends to be an agreed realisable amount. the Value of an asset in terms of accounting is what you could potentially sell that asset for.

Value in terms of a purchase transaction is not a financial concept. In that context, it is a subjective importance. What may be of value to you may not be of value to someone else.
Price is an agreed amount based on what the purchaser wants to pay and the seller whats to sell at. Value doesn't enter into it. You might value your 10 year old BMW 320 at 12K, but that is never going to be the price.

Rather than responding to my other points, go out and have a few pints and relax. You will feel a lot better for it.

Lol

(Edit: A good laugh does deserve a thanks!)

jca · 21-10-2017 09:22PM

Every thread ends the same way on this site, pity as I liked this thread.

ftm2008 · 22-10-2017 05:08PM

Does anyone know the apr when Eco grants are used on the VW.. in particular the Skoda and Seats.. it is 0% or eco grant.

bazz26 · 22-10-2017 05:27PM

ftm2008 wrote: »

Does anyone know the apr when Eco grants are used on the VW.. in particular the Skoda and Seats.. it is 0% or eco grant.

http://www.joeduffy.ie/volkswagen/new-car-offers/eco-grant/

Looks like 4.9% APR.

Lantus · 22-10-2017 09:08PM

ftm2008 wrote:

Does anyone know the apr when Eco grants are used on the VW.. in particular the Skoda and Seats.. it is 0% or eco grant.

Looks like these vehicles will all be scrapped based on t&C's. When you trade in.

Presumably the value of older diesels for ten years or older is now sufficiently poor? A private sale may be slightly more beneficial in some cases?

ftm2008 · 22-10-2017 10:13PM

Lantus wrote: »

Looks like these vehicles will all be scrapped based on t&C's. When you trade in.

Presumably the value of older diesels for ten years or older is now sufficiently poor? A private sale may be slightly more beneficial in some cases?

Probably in cases ,, seems when you dig into the scrappage deals , econ grants or whatever there called, they just make it back using a higher apr which means we pay it back over the life of the deal

twin_beacon · 24-10-2017 01:22PM

dil999 wrote: »

PCP is a loan. No different from a bank loan or a hire purchase agreement. A dangerous tool????

PCP, IS a hire purchase agreement, which is very different to a car loan as you don't own the car during the period of finance with a hire purchase.

If you can't afford a new car without a PCP deal, then I would reconsider as any change to your current financial situation means you may not be able to afford PCP either and you could lose your car, and the money you paid on the car. Or even a change in job may mean that you may go over the mileage limits.

The overall winner of a PCP deal is the person that fully intends on keeping the car after the 3 year deal, as they get a lower interest rate for the first 3 years.

commited · 24-10-2017 02:25PM

twin_beacon wrote: »

PCP, IS a hire purchase agreement, which is very different to a car loan as you don't own the car during the period of finance with a hire purchase.

If you can't afford a new car without a PCP deal, then I would reconsider as any change to your current financial situation means you may not be able to afford PCP either and you could lose your car, and the money you paid on the car. Or even a change in job may mean that you may go over the mileage limits.

The overall winner of a PCP deal is the person that fully intends on keeping the car after the 3 year deal, as they get a lower interest rate for the first 3 years.

Absolutely. I think the other element is that people enter into PCP arrangements assuming that they will be able to change to a new car every 3 years and continue a monthly payment. The issue arises when the GFMV is near/equal to the market value = little to no equity to carry forward into a new deal. Realistically, this is where it can be dangerous to someone without the means to finance a car traditionally.

dil999 · 24-10-2017 02:39PM

twin_beacon wrote: »

PCP, IS a hire purchase agreement, which is very different to a car loan as you don't own the car during the period of finance with a hire purchase.

If you can't afford a new car without a PCP deal, then I would reconsider as any change to your current financial situation means you may not be able to afford PCP either and you could lose your car, and the money you paid on the car. Or even a change in job may mean that you may go over the mileage limits.

The overall winner of a PCP deal is the person that fully intends on keeping the car after the 3 year deal, as they get a lower interest rate for the first 3 years.

Yes you are correct in that a loan gives you 'ownership'. In practical terms that's pretty irrelevant.

You are in a better position with a pcp if your financial situation changes because:
1: you still have your savings.
2: you can hand back the car to repay the finance. If less than half has been repaid you will have to pay the difference between what is owed and the current price of the car, maybe 5% of the car price at worst
If you have paid more than half you just hand back the car.

PCP is not a competition. There are no 'winners' or losers. Interest is paid on the total outstanding finance over the 3 years. So while you might get a nominally lower rate. The actual interest in €s you pay will be the same as for a 5 year hp at twice the interest rate.

The increase in mileage is generally not a problem. 5000 km over the agreement will cost you €400 - an extra months payment. And only applies if you hand back the car.

If you can afford the payments you can afford the car. Irrespective of what financial instrument us use to fund it.

twin_beacon · 24-10-2017 03:13PM

dil999 wrote: »

Yes you are correct in that a loan gives you 'ownership'. In practical terms that's pretty irrelevant.

You are in a better position with a pcp if your financial situation changes because:
1: you still have your savings.
2: you can hand back the car to repay the finance. If less than half has been repaid you will have to pay the difference between what is owed and the current price of the car, maybe 5% of the car price at worst
If you have paid more than half you just hand back the car.

What do you mean by you still have your savings?
If you have a car loan and cant make the repayments, you can just sell the car to cover off the remainder of the loan, and keep the balance.

jca · 24-10-2017 03:19PM

This thread should really be archived at this stage, it's just going round and round in circles. I'm unfollowing it.

dil999 · 24-10-2017 05:12PM

twin_beacon wrote: »

What do you mean by you still have your savings?
If you have a car loan and cant make the repayments, you can just sell the car to cover off the remainder of the loan, and keep the balance.

Re the savings reference, read back on the previous 100 or so posts.

How easy is it to sell a car? It could take months. You also probably won't clear the loan.

jca is correct. This thread is definitely going round in circles. The same questions are being asked again and again.

DaveyDave · 24-10-2017 05:46PM

Got another letter from VW today stating the date and amount of my first payment, followed by 35 payments then a final payment.

Looks like they do automatically take the final payment but of course I'll be in well before then test driving and snooping around for a trade-in.

26000 Elephants · 24-10-2017 06:51PM

dil999 wrote: »

Re the savings reference, read back on the previous 100 or so posts.

But why would someone on PCP still have savings, while someone with a loan would not?

Savings are, at best, a very spurious pillar to your argument.

acronym Chilli · 24-10-2017 07:31PM

26000 Elephants wrote: »

But why would someone on PCP still have savings, while someone with a loan would not?

Savings are, at best, a very spurious pillar to your argument.

I think the main argument is that you haven't ploughed them into the cash purchase of a car.

I don't see the connection in the traditional car loan scenario though.

If you've a car loan, then you should still have your savings. In fact, you might have all your savings since you wouldn't be obliged to pay the upfront deposit, could finance the entire amount.

dil999 · 24-10-2017 07:41PM

26000 Elephants wrote: »

But why would someone on PCP still have savings, while someone with a loan would not?

Savings are, at best, a very spurious pillar to your argument.

Articulate but inaccurate.

twin_beacon posted
"If you can't afford a new car without a PCP deal, then I would reconsider as any change to your current financial situation....."

If not using PCP (or HP), the only other ways to purchase a new car is a bank/credit unit loan or cash i.e. savings

Hence i mentioned savings, because if you didn't use PCP and used savings to purchase your car, then you would have no savings in reserve in case of "any change to your current financial situation"

batman1 · 24-10-2017 07:49PM

Very few people/families will pay cash for a car, save an older one. The majority of people finance the cost through loans or whatever other finance product. In my case, I have paid around 480 a month for a car loan over the last 5 years at 10% interest as we wanted a reliable car for my wife who does night work, up mountain roads etc. Don't want any breakdowns if possible.
The car is now 6 years old and will need approx 1000 spent on it in 2018 between timing belt, tyres, nct etc.
In our case it's a no brainer to get a new car for another 5 years at 0% for 3 and maybe a bit more for the further 2 or close to it, with a reasonable trade in still in the current car.
Even after the 3 years if I save the difference between the new payment and what I have Bern paying then it will also be grand.

The scaremongering about losing jobs and not having a car is just nonsense.
90% of new cars are financed through Pcp and why not. Once you know what you're getting into then grand. Idiots will always be duped, same goes for loans and credit cards.

How many fancy jeeps and cars do you see of 06/07 where people got extra on the mortgage for a car and now they're stuck with them, paying them off over 40 years or whatever.

dil999 · 24-10-2017 07:56PM

acronym Chilli wrote: »

I think the main argument is that you haven't ploughed them into the cash purchase of a car.

I don't see the connection in the traditional car loan scenario though.

If you've a car loan, then you should still have your savings. In fact, you might have all your savings since you wouldn't be obliged to pay the upfront deposit, could finance the entire amount.

There wasn't a connection. Perhaps the post was not particularly well crafted and a little difficult to understand.

The first point only related to purchasing using cash
The second point was that it's easier to terminate a PCP as you can hand the car back quickly with minimal financial penalty. To terminate a loan you have to get cash to pay it off. That requires you to sell the car in the market, which will take time and it probably won't realise it full value (yes I said value

)

I have nothing against car loans btw except the 8% to 10% interest rates.

dil999 · 24-10-2017 07:59PM

batman1 wrote: »

How many fancy jeeps and cars do you see of 06/07 where people got extra on the mortgage for a car and now they're stuck with them, paying them off over 40 years or whatever.

Excellent point.

acronym Chilli · 24-10-2017 08:41PM

batman1 wrote: »

How many fancy jeeps and cars do you see of 06/07 where people got extra on the mortgage for a car and now they're stuck with them, paying them off over 40 years or whatever.

Once you're happy to borrow to buy a vehicle there's little reason not to put it in your mortgage really.

People doing that in 06/07 were probably on trackers, which while not 0% were and are very cheap credit. Plus, because the credit is separated from the car purchase you go to the dealer as a cash buyer.

To say you're paying it over 40 years is a misunderstanding. No reason you couldn't up the mortgage payment for a few years to effectively pay it (the car "bit") sooner.

mickdw · 24-10-2017 08:53PM

Yes you could pay extra car money into the mortgage at the rate you would normally pay for a car and it could work very cheap money. The reality is rather different for most. They took car money with mortgage, fell on harder times in recession and if lucky managed to keep the mortgage up to date. Paying in extra would be a fantasy for most. Now 10 years later they are still paying for that car and it needs to be replaced meaning they will end up paying for increased mortgage and now new car loan too.
The reality in alot of cases was that they could never afford the new car 10 years ago.

acronym Chilli · 24-10-2017 09:04PM

Fully agree.
But then we're back to the critiquemany level at PCP.
It's really a critique of imprudent use of credit in general

maidhc · 24-10-2017 09:07PM

mickdw wrote: »

Yes you could pay extra car money into the mortgage at the rate you would normally pay for a car and it could work very cheap money. The reality is rather different for most. They took car money with mortgage, fell on harder times in recession and if lucky managed to keep the mortgage up to date. Paying in extra would be a fantasy for most. Now 10 years later they are still paying for that car and it needs to be replaced meaning they will end up paying for increased mortgage and now new car loan too.
The reality in alot of cases was that they could never afford the new car 10 years ago.

The only thing is they got 10 years transport out of that car. Try not paying a pcp and see how long you will be left with the car.

People are buying fancy cars that are, all things being equal, outside their price range now as well. Referencing my earlier point, a "proper" hp package is far more reflective of the actual cost of buying a car.

I think this thread is serving a useful purpose if all it does is makes people think before barrelling into a garage!

twin_beacon · 24-10-2017 09:10PM

dil999 wrote: »

Articulate but inaccurate.

twin_beacon posted
"If you can't afford a new car without a PCP deal, then I would reconsider as any change to your current financial situation....."

If not using PCP (or HP), the only other ways to purchase a new car is a bank/credit unit loan or cash i.e. savings

Hence i mentioned savings, because if you didn't use PCP and used savings to purchase your car, then you would have no savings in reserve in case of "any change to your current financial situation"

You are making assumptions, and took my points up wrong.
Very few people buy a brand new car totally from their savings. However, IF you have that much disposable cash at the ready, by all means do it as you have no finance costs. I'm not suggesting that anybody clears out their savings, to buy a car, and leave them in financial difficulty as a result.

If not using PCP/HP, the alternative is not just a loan OR savings. My last car (bought second hand, but thats irreverent) was a combination of trade in, few grand from the savings (of course I didn't clear it out) and a small loan to cover the remainder. The car before that was paid for via trade in and a loan.

With a PCP deal, you basically pay 60% of the value of a car over 3 years. My point being, if you can't afford to finance that car over a 5 year period, with a car loan, then you should reconsider, as the monthly repayments should be roughly the same.
If you enter into a PCP deal for a car worth lets say for 35k, then and when your 3 years are up, you trade in, and get the same car again, by the end of year 2 on your second car, you have basically paid out a little over 35k, depending on the APR.

You asked earlier how easy is to sell a car? Depends on the car, however its impossible to sell if you are on PCP, as its not actually your car.

PCP is great for some people, but you are implying its the best way for everybody to buy new car, which it isn't.

dil999 · 24-10-2017 10:01PM

twin_beacon wrote: »

You are making assumptions, and took my points up wrong.
Very few people buy a brand new car totally from their savings. However, IF you have that much disposable cash at the ready, by all means do it as you have no finance costs. I'm not suggesting that anybody clears out their savings, to buy a car, and leave them in financial difficulty as a result.

If not using PCP/HP, the alternative is not just a loan OR savings. My last car (bought second hand, but thats irreverent) was a combination of trade in, few grand from the savings (of course I didn't clear it out) and a small loan to cover the remainder. The car before that was paid for via trade in and a loan.

With a PCP deal, you basically pay 60% of the value of a car over 3 years. My point being, if you can't afford to finance that car over a 5 year period, with a car loan, then you should reconsider, as the monthly repayments should be roughly the same.
If you enter into a PCP deal for a car worth lets say for 35k, then and when your 3 years are up, you trade in, and get the same car again, by the end of year 2 on your second car, you have basically paid out a little over 35k, depending on the APR.

You asked earlier how easy is to sell a car? Depends on the car, however its impossible to sell if you are on PCP, as its not actually your car.

PCP is great for some people, but you are implying its the best way for everybody to buy new car, which it isn't.

Just to clarify. PCP is not a way to 'buy a new car'. Its a way to finance the purchase.

I am not implying anything. I am categorically saying it. PCP is by far the best way to fund a new car. For anybody.

- It's cheap, generally the lowest interest rates of any finance option. 0% in many cases.

- You get a predictable value back after 3 years if you decide to change. So you minimise the depreciation risk. Even high mileage users can benefit. 30,000 miles over the agreed limit only knocks €2400 of the GMFV

- You get the same dealer discount as a cash purchaser even with a trade in.

- The half-rule protects you in that if you have paid over half the loan amount, you can hand back the car and the loan is settled. In fact if you haven't paid back half, you can still return the car and you are only liable for the difference in what you paid and half the loan amount.

- You can use a trade in.

- You can use part cash

- You can sell the car, It requires some more logistics around paying off the remaining amount before finalising the sale. But its very doable, and probably not much more effort than trying to sell any new to 3 year old car privately. Also selling the car is an unlikely scenario, it's an new to 3 year old car. The finance only runs for 3 years and you have a trade in option and hand back option.

- You can purchase the car outright at anytime if you wish. You can finance the GMFV through cash or a loan

No other finance structure offers you all these benefits. Not one single point has been made in the 180 odd pages of posts here (many informed, many uninformed) that has even gone close to making me change my opinion on it.

Your example is correct if you want to change your 35K car every 2 to 3 years it will cost you approx 20% of the price of the car. 7K per year. 35K every 5 years is spot on. That's a function of the price of the car and the depreciation rate of the car. Its completely independent of the method you use to finance. Cash, Personal loan, PCP its all the same. Like purchasing any thing if you agree to pay more than you can afford then you can get in trouble. Be that using too much cash, or financing something by paying a higher monthly payment than you can afford.

I really think this thread has been done to death at this stage

26000 Elephants · 24-10-2017 10:46PM

dil999 wrote: »

- You get a predictable value back after 3 years if you decide to change. So you minimise the depreciation risk. Even high mileage users can benefit. 30,000 miles over the agreed limit only knocks €2400 of the GMFV

Predictable value back? Extra miles knocks €2400 of the GMFV?

I'm not sure you are understanding that correctly.

the GMFV is what you owe, your mileage wont change it. It will effect the market value of your car, as will several other factors, hence "predictable value" is inaccurate.

Jobs OXO · 24-10-2017 11:23PM

dil999 wrote: »

Just to clarify. PCP is not a way to 'buy a new car'. Its a way to finance the purchase.

I am not implying anything. I am categorically saying it. PCP is by far the best way to fund a new car. For anybody.

- It's cheap, generally the lowest interest rates of any finance option. 0% in many cases.

- You get a predictable value back after 3 years if you decide to change. So you minimise the depreciation risk. Even high mileage users can benefit. 30,000 miles over the agreed limit only knocks €2400 of the GMFV

- You get the same dealer discount as a cash purchaser even with a trade in.

- The half-rule protects you in that if you have paid over half the loan amount, you can hand back the car and the loan is settled. In fact if you haven't paid back half, you can still return the car and you are only liable for the difference in what you paid and half the loan amount.

- You can use a trade in.

- You can use part cash

- You can sell the car, It requires some more logistics around paying off the remaining amount before finalising the sale. But its very doable, and probably not much more effort than trying to sell any new to 3 year old car privately. Also selling the car is an unlikely scenario, it's an new to 3 year old car. The finance only runs for 3 years and you have a trade in option and hand back option.

- You can purchase the car outright at anytime if you wish. You can finance the GMFV through cash or a loan

No other finance structure offers you all these benefits. Not one single point has been made in the 180 odd pages of posts here (many informed, many uninformed) that has even gone close to making me change my opinion on it.

Your example is correct if you want to change your 35K car every 2 to 3 years it will cost you approx 20% of the price of the car. 7K per year. 35K every 5 years is spot on. That's a function of the price of the car and the depreciation rate of the car. Its completely independent of the method you use to finance. Cash, Personal loan, PCP its all the same. Like purchasing any thing if you agree to pay more than you can afford then you can get in trouble. Be that using too much cash, or financing something by paying a higher monthly payment than you can afford.

I really think this thread has been done to death at this stage

Eh what? Do you know what GMFV is and how it works? It's set. You don't "knock anything off" it. It's GUARANTEED !!!! It's was the 'G' stands for.....

PCP finance.

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