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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

26000 Elephants wrote: »

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.

I understand it perfectly. I don't think you do. At any stage you owe the remainder of the loan.

The GMFV (Guaranteed Minimum Future Value) only comes into play if you decide to hand back the car. You get a Guaranteed Value when you hand back the car. The finance is structured so that the GMFV is the same as the outstanding loan amount after 36 Months, assuming you are within mileage limits. So handing back the car pays off the loan. You are effectively selling the car back to the finance company for the GMFV and that pays off the loan

If you exceed the mileage limits the GMFV drops by 0.08c per mile. For 30,000 miles over the agreed figure, the GMFV is reduced by €2400K. ('Extra miles knocks €2400 of the GMFV') so the finance company is effectively giving you less for the car. You need an additional €2400 to clear the finance. Since most people have a good idea of their mileage, they can reasonably predict the value of the car. Hence, 'Predictable value back'

The problem with this thread is that PCP is a a reasonably complex financial arrangement. Some of the poster here have a really good understanding of it. Unfortunately many have bits of knowledge they picked up from dealer websites and pub conversations. They then come on the thread here and post stuff that's completely off the mark. They then tell people who actually know what they are talking about that they are wrong. A perfect example is:

26000 Elephants wrote: »

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.

Job OXO, please read above. You are incorrect. If you had you ever actually done a PCP you would have a better understanding of it. Its called Guaranteed, hence the G. Its not actually Guaranteed. Also, no need to shout.

dil999

I originally posted here to give some help and info from my own experience for people deciding to purchase using PCP. I think (hope) I have posted some helpful information and it can all be found back in the thread. There are alo a lot of good and educated posts from other users such as acronym Chilli, DaveyDave, Mickdw. maidhc (we dont agree on the benefits of PCP but he makes an educated argument), Casati, Zachariah Disgusting Beginner, Lantus. jca, bazz26 and more.

Here are a few links that are worth a look to help you get an understanding of financing you car purchase:

The Competition and Consumer Protection Commission have an excellent section on their website. I posted it a couple of times before:
https://www.ccpc.ie/consumers/money/loans/paying-for-your-car/

Very good PCP and HP calculators:
http://www.wisercarbuyer.com/pcp-calculator.html
http://www.wisercarbuyer.com/hp-calculator.html

A few points from my personal experience: (Particularly if you are planning to change every 3 years)
- Research and understand PCP before you sign up;
- know your mileage and if you exceed the agreed amount, know by how much it will reduce the GMFV
- PCPs don't roll over. you pay one off and then sign up for a whole new one.
- Assume you are not going to get any equity in your trade-in (you likely will, but treat it as a bonus);
- Pay the minimum deposit (you will have to come up with it every 3 years);
- Get the lowest interest rate. (You pay interest on the total outstanding amount);
- Make sure you can afford the payments;
- Proactively finalise the PCP deal. the default position is that the final payment will automatically be taken from you account.
- Enjoy your car.

I am all posted out on this one

Jobs OXO

dil999 wrote: »

I originally posted here to give some help and info from my own experience for people deciding to purchase using PCP. I think (hope) I have posted some helpful information and it can all be found back in the thread. There are alo a lot of good and educated posts from other users such as acronym Chilli, DaveyDave, Mickdw. maidhc (we dont agree on the benefits of PCP but he makes an educated argument), Casati, Zachariah Disgusting Beginner, Lantus. jca, bazz26 and more.

Here are a few links that are worth a look to help you get an understanding of financing you car purchase:

The Competition and Consumer Protection Commission have an excellent section on their website. I posted it a couple of times before:
https://www.ccpc.ie/consumers/money/loans/paying-for-your-car/

Very good PCP and HP calculators:
http://www.wisercarbuyer.com/pcp-calculator.html
http://www.wisercarbuyer.com/hp-calculator.html

A few points from my personal experience: (Particularly if you are planning to change every 3 years)
- Research and understand PCP before you sign up;
- know your mileage and if you exceed the agreed amount, know by how much it will reduce the GMFV
- PCPs don't roll over. you pay one off and then sign up for a whole new one.
- Assume you are not going to get any equity in your trade-in (you likely will, but treat it as a bonus);
- Pay the minimum deposit (you will have to come up with it every 3 years);
- Get the lowest interest rate. (You pay interest on the total outstanding amount);
- Make sure you can afford the payments;
- Proactively finalise the PCP deal. the default position is that the final payment will automatically be taken from you account.
- Enjoy your car.

I am all posted out on this one

You are misinformed on this point.

"- know your mileage and if you exceed the agreed amount, know by how much it will reduce the GMFV"

If your GMFV is €10k and you exceed milage by 20000kms you will still pay €10k if you chose to buy out the car at the end of term it's still €10k. NO IMPACT !

dil999

Jobs OXO wrote: »

You are misinformed on this point.

"- know your mileage and if you exceed the agreed amount, know by how much it will reduce the GMFV"

If your GMFV is €10k and you exceed milage by 20000kms you will still pay €10k if you chose to buy out the car at the end of term it's still €10k. NO IMPACT !

Sorry I had to post again. Carefully read my post from last night it clearly explains GMFV

http://www.boards.ie/vbulletin/showpost.php?p=105074445&postcount=2284

GMFV is NOT the amount you pay at the end. the amount you pay at the end is the outstanding loan value. If you understand the difference you will go a long way to understanding PCP.

You have a total misunderstanding of the concept of PCP. Your posts are not helping anyone and just serve to confuse people looking for proper information.

Definitely all posted out.

Jobs OXO

dil999 wrote: »

Sorry I had to post again. Carefully read my post from last night it clearly explains GMFV

http://www.boards.ie/vbulletin/showpost.php?p=105074445&postcount=2284

GMFV is NOT the amount you pay at the end. the amount you pay at the end is the outstanding loan value. If you understand the difference you will go a long way to understanding PCP.

You have a total misunderstanding of the concept of PCP. Your posts are not helping anyone and just serve to confuse people looking for proper information.

Definitely all posted out.

Nope you are completely wrong. I understand PCP very well. I'm afraid Its you that has a total misunderstanding of the concept of PCP. Your posts are not helping anyone and just serve to confuse people looking for proper information.

EndaHonesty

I have a Skoda Octavia VRS on PCP.

The mileage on the PCP is 36,000 kms over 3 years.

I'm 2 years in and have 83,000 kms on the car already.

The GMFV is just under 14,000 euro.

That is how much I owe them on the final payment.

That figure does NOT change.
No matter what mileage is on the car.

The mileage affects the actual value of the car NOT the GMFV.

Jobs OXO

EndaHonesty wrote: »

I have a Skoda Octavia VRS on PCP.

The mileage on the PCP is 36,000 kms over 3 years.

I'm 2 years in and have 83,000 kms on the car already.

The GMFV is just under 14,000 euro.

That is how much I owe them on the final payment.

That figure does NOT change.
No matter what mileage is on the car.

The mileage affects the actual value of the car NOT the GMFV.

Correct.

_Brian

EndaHonesty wrote: »

I have a Skoda Octavia VRS on PCP.

The mileage on the PCP is 36,000 kms over 3 years.

I'm 2 years in and have 83,000 kms on the car already.

The GMFV is just under 14,000 euro.

That is how much I owe them on the final payment.

That figure does NOT change.
No matter what mileage is on the car.

The mileage affects the actual value of the car NOT the GMFV.

So where is the penalty of exceeding the mileage, because I’m sure you will be penalised.
If they guaranteed that with 36k on it it would be worth €14k, do you expect to be allowed the same with nearly 100k on the clock ??

Are people splitting hairs on terminology here, saying it will be worth €14k but I’ll have to give €3k as a penalty, so it's really only worth €11k, but I’m sticking to the €14k figure because tue penalty is seperate.

batman1

This is getting silly now....

Here's my tuppence worth.

Buy a car for 30k. Pay deposit and commence monthly payments.
GMFV is say, 10k. This is known from day 1 and will remain 10k.

Scenario 1.
You decide after 3 years you want to keep the car. You pay the GMFV of 10k (hasn't changed) and drive away.

Scenario 2.
You decide to trade in for a new one. The dealer values your 3 year old car at 15k. You take the 15k, pay off the GMFV of 10k (hasn't changed) and use the remaining 5k towards the deposit on your next car.

Scenario 3.
You decide to hand back the car.
The dealer checks the agreed mileage. If you haven't gone over then you hand the car back to pay off the GMFV of 10k (still hasn't changed) and walk home.

If you have gone over the mileage then he will calculate what extra money you owe to based on the agreed rate, lets say 2k. You then hand the car back to pay the GMFV of 10k (still hasn't changed), but you now owe him an extra 2 k because you went over the agreed mileage limit on your contract.

So, in summary, the GMFV doesn't change. Only the value of the car changes based on the mileage, condition etc. This in turn affects either the equity when trading up, or an extra payment for mileage when handing it back.

EndaHonesty

_Brian wrote: »

So where is the penalty of exceeding the mileage, because I’m sure you will be penalised.
If they guaranteed that with 36k on it it would be worth €14k, do you expect to be allowed the same with nearly 100k on the clock ??

Are people splitting hairs on terminology here, saying it will be worth €14k but I’ll have to give €3k as a penalty, so it's really only worth €11k, but I’m sticking to the €14k figure because tue penalty is seperate.

From VW Bank

What are my options for my PCP final payment?
1. Part exchange your vehicle for a brand new Volkswagen,Audi, Skoda or Seat at one of our dealerships.

2. Keep your current vehicle- Simply pay the final instalment plus the option to purchase fee and the car is yours. Alternatively talk to your Volkswagen Bank Ireland customer care representative about options to extend your current finance agreement.

3. Return your vehicle to your dealer.

* options 1 and 2 are subject to underwriting approval at Volkswagen Bank Ireland.

* option 3 is subject to being within mileage limits and that the car is in acceptable return condition as outlined in your vehicle return option agreement. Once you have returned the vehicle to your dealer's premises and made all payments under your Hire Purchase Agreement, excluding final payment, we will offset your vehicle's GFV from the final payment, and you will no longer be liable for any further payments, provided always that the GFV covers the final payment entirely. Where the GFV does not cover the final HP payment entirely as a result of excess mileage and / or damage over the acceptable return standards, you will have to clear the residual amount on your account balance. For further details please see your vehicle return option agreement.

The mileage limits are included as a protection to cover themselves for extreme scenarios.

In reality the GMFV is set low enough to mean the actual value of the car is always higher than the GMFV.

twin_beacon

EndaHonesty wrote: »

I have a Skoda Octavia VRS on PCP.

The mileage on the PCP is 36,000 kms over 3 years.

I'm 2 years in and have 83,000 kms on the car already.

The GMFV is just under 14,000 euro.

That is how much I owe them on the final payment.

That figure does NOT change.
No matter what mileage is on the car.

The mileage affects the actual value of the car NOT the GMFV.

Exactly. your GMFV is the outstanding balance you owe if you decide to keep the car. If you paid 60% of the price of the care over the 3 year PCP deal, then your GMFV is the remaining 40%. Doesn't matter if there is 10kms on the clock, or 100kms, the GMFV is fixed.

The GMFV is NOT the trade in price that you will be offered for your car if you decide to get another car on PCP. That is based on the current market value of your trade in. Of course then the mileage is taken into account, same as any other trade in deal. My sister in law first PCP deal ended last jan, she got the same make and model again on PCP, however, she had to pay more than she expected, as the the value of her trade in was lower than she thought. Poor sterling and an influx of UK cars into the Irish market of the year and similar mileage being a factor.

Lots of people seem to think that if they get a new car again at the end of their first PCP term that the GMFV is what they will be allowed as a trade in. This is not the case at all.

Jobs OXO

batman1 wrote: »

This is getting silly now....

Here's my tuppence worth.

Buy a car for 30k. Pay deposit and commence monthly payments.
GMFV is say, 10k. This is known from day 1 and will remain 10k.

Scenario 1.
You decide after 3 years you want to keep the car. You pay the GMFV of 10k (hasn't changed) and drive away.

Scenario 2.
You decide to trade in for a new one. The dealer values your 3 year old car at 15k. You take the 15k, pay off the GMFV of 10k (hasn't changed) and use the remaining 5k towards the deposit on your next car.

Scenario 3.
You decide to hand back the car.
The dealer checks the agreed mileage. If you haven't gone over then you hand the car back to pay off the GMFV of 10k (still hasn't changed) and walk home.

If you have gone over the mileage then he will calculate what extra money you owe to based on the agreed rate, lets say 2k. You then hand the car back to pay the GMFV of 10k (still hasn't changed), but you now owe him an extra 2 k because you went over the agreed mileage limit on your contract.

So, in summary, the GMFV doesn't change. Only the value of the car changes based on the mileage, condition etc. This in turn affects either the equity when trading up, or an extra payment for mileage when handing it back.

Also correct.

MentalMario

I've just been approved for 20k+ worth of PCP finance without even being asked for a payslip. That's insane by the finance company.

I'm strongly in the if you can afford it, pcp is the way to go camp.

arleitiss

MentalMario wrote: »

I've just been approved for 20k+ worth of PCP finance without even being asked for a payslip. That's insane by the finance company.

I'm strongly in the if you can afford it, pcp is the way to go camp.

Was it your first application ever?
Did they ask for references from work etc..?

or just literally bank statement and proof of address?

MentalMario

arleitiss wrote: »

Was it your first application ever?
Did they ask for references from work etc..?

or just literally bank statement and proof of address?

First pcp app, yeah.

They asked for no documentation. No work references. Not even proof of address. Crazy practice by them.

mickdw

What car company / bank is that with?
To be honest, it's not so crazy if you have a clear history and putting up a good deposit. They really couldn't lose.

sillysocks

MentalMario wrote: »

First pcp app, yeah.

They asked for no documentation. No work references. Not even proof of address. Crazy practice by them.

I had the same experience buying my car which was 35k. And I had only been in my current job less than 6 months. Couldn't believe how I got the finance with no work or bank statements. Just verbally told the salesman my salary and he told the finance company. And to be honest my salary wouldn't have been amazing compared with the price of the car (my husband was helping with repayments but applied for finance in my own name)

who_ru

I was approved for pcp last week without any requirement to prove or verify earnings.

I was asked if I had a mortgage but that was as much as they asked, didn’t ask what % of monthly earnings go toward mortgage or any other loans.

They didn’t go into too much detail regarding mileage allowance. I was just asked to bring picture ID and recent bill plus bank account details when collecting the car. All very unusual I have to say.

arleitiss

I am paying close attention to this thread every day as I am planning to apply for PCP in February/March.
I have about 1k income left for savings/spending (after rent, bills, food, petrol and extra) and never applied for any loans or anything.

Looking to apply for about 30-35k range car PCP finance too but I am afraid that they will check my employment history and tell me to go take a hike.

I graduated in 2015 then worked for 2 years until 2017 June, then was jobless for 2 months and started working in August again so by February it will be like a little under 6 months at the job (it's permanent contract but I am on 11 month probation even though there is 0 chance to lose job) but I have a feeling they will use that to refuse me the finance.

Jobs OXO

arleitiss wrote: »

I am paying close attention to this thread every day as I am planning to apply for PCP in February/March.
I have about 1k income left for savings/spending (after rent, bills, food, petrol and extra) and never applied for any loans or anything.

Looking to apply for about 30-35k range car PCP finance too but I am afraid that they will check my employment history and tell me to go take a hike.

I graduated in 2015 then worked for 2 years until 2017 June, then was jobless for 2 months and started working in August again so by February it will be like a little under 6 months at the job (it's permanent contract but I am on 11 month probation even though there is 0 chance to lose job) but I have a feeling they will use that to refuse me the finance.

For your own benefit you should be refused. You seem to be all over the gaff financially from your posting history.

If you do get PCP fair chance you will be one of those handing back the car after 3 years essentially making a loss.

arleitiss

Jobs OXO wrote: »

For your own benefit you should be refused. You seem to be all over the gaff financially from your posting history.

If you do get PCP fair chance you will be one of those handing back the car after 3 years essentially making a loss.

No, I would prefer to keep upgrading every 3 years or buy it out.
But it's fine anyway, if I get refused - I will just re-apply in summer when I am off probation.

colm_mcm

Now, this is a terrible article, but it shows the thought process of someone who doesn't fully understand how finance works, despite having all the facts to hand

https://www.motoringresearch.com/car-news/opinion/suzuki-jimny-finance/

Toyotafanboi

Thread cleaned.

dil999 and Jobs OXO please take some time away from this thread and consider your posting style before returning.

Plenty of boards users turn to this thread for good advice, please avoid muddying the waters and going for for tat with one another in future.

[Deleted User]

colm_mcm wrote: »

Now, this is a terrible article, but it shows the thought process of someone who doesn't fully understand how finance works, despite having all the facts to hand

https://www.motoringresearch.com/car-news/opinion/suzuki-jimny-finance/

I dunno, summarises PCP nicely IMO ......

The deposit. ..........The bigger the deposit, the less you’ll have to pay each month.

The monthly payment. You’re essentially paying off the car’s depreciation here – not its value...........

The balloon payment. Also referred to as the ‘guaranteed future value’, this is how much the finance company thinks the car will be worth when the PCP is up.

CIP4

Out of curiosity what happens if your trade in is worth more than the 30% maximum deposit lets just say by 5K. Will there garage just give you back the excess and let you go ahead with a PCP deal with a 30% deposit ? But if they do does this put you in a bad position in terms of trade in value as in will they deliberately offer you less because they don't want to give you back money. As I know in the past garages in general don't want to give you back money but maybe in this scenario its different.

colm_mcm

They treat the equity as a deposit essentially, so going into deal 2 with €5k equity over the GMFV would be like putting down €5k day 1.

So if the second car is the same price as the first, you put down €5k day one,and the interest rate is the same - your payments should be the same.

colm_mcm

Augeo wrote: »

I dunno, summarises PCP nicely IMO ......

The deposit. ..........The bigger the deposit, the less you’ll have to pay each month.

The monthly payment. You’re essentially paying off the car’s depreciation here – not its value...........

The balloon payment. Also referred to as the ‘guaranteed future value’, this is how much the finance company thinks the car will be worth when the PCP is up.

It summarises it, but it shows how easily you can be led. He's still looking at spending big money on a bad car, only he's essentially financing it for a lot longer. If he's happy with a jimmy then great, but there's a reason banks don't give out 7 year finance.

[Deleted User]

colm_mcm wrote: »

It summarises it, but it shows how easily you can be led. He's still looking at spending big money on a bad car, only he's essentially financing it for a lot longer. If he's happy with a jimmy then great, but there's a reason banks don't give out 7 year finance.

I don't see where he is?

"What would I do after four years? Hand back the Jimny with nothing to show for my cash? Not a chance. By then, Suzuki reckons it’d be worth a meagre £4,372. So, if I divide that figure over the 48 months I’ll have ‘owned’ the Jimny so far, it works out at just £91.08 per month. If I stick that money into a savings account each month, after four years I’ll be able to buy my Jimny outright. And by that point, Suzuki will have replaced the Jimny and mine will be well into future classic status. It’s practically an investment."

He's on about a 4 year PCP and tucking away 1/48th of the balloon payment every month so he'll have it set aside when it's due.

The bad car bit is irrelevant IMO, nothing to do with PCP.

Toyotafanboi

CIP4 wrote: »

Out of curiosity what happens if your trade in is worth more than the 30% maximum deposit lets just say by 5K. Will there garage just give you back the excess and let you go ahead with a PCP deal with a 30% deposit ? But if they do does this put you in a bad position in terms of trade in value as in will they deliberately offer you less because they don't want to give you back money. As I know in the past garages in general don't want to give you back money but maybe in this scenario its different.

If you're entering our first PCP using a trade in worth more than the max deposit, the dealer will write you a check for the difference between max deposit and the value of your car.

You're probably right that if you are just on the threshold of being worth more than max deposit then you will probably get offered slightly less than the car is worth to avid the hassle of refunding the difference.

CIP4

colm_mcm wrote: »

They treat the equity as a deposit essentially, so going into deal 2 with €5k equity over the GMFV would be like putting down €5k day 1.

So if the second car is the same price as the first, you put down €5k day one,and the interest rate is the same - your payments should be the same.

I meant if you were entering your first PCP deal and owned your trade in and it was worth 15k for example and the car you were looking at had maximum deposit of 10k bringing it to 30% what would they do with the difference but tfb has answered it anyway.