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

bazz26

PCP monthly payments are usually fixed from day one afaik. 500 x 36 = 18000. Did he put a deposit on the car, what interest rate is he paying? Sounds to me like he just got regular hire purchase finance.

boardsuser1

Can someone explain something to me on PCP please?

A buddy of mine is getting a brand new Corolla today.

He said it is on PCP and he is paying €500 a month on a €24k car, is that normal or how does it work?

3 years is all i know the term is.

According to the dealer he can pay extra on top of this to clear it faster and looks at me with 20 heads when i mention:

Balloon payment
GMFV
Mileage

Am i right or wrong or is he just plain silly?

Lantus

There is no evidence to support the idea that everyone is buying more expensive cars than they can afford. The popularity of mainstream brands is the same. If every 2nd car on the road was a 5 series I'd be a little worried. That's not the case. Clearly some people have overstretched which I imagine has always happened. Most folks would budget fairly carefully for such a large purchase. Some marques like BMW have less than ideal PCP structures in place. Some have higher interest rates.

But, there is a good range of cars where the low interest and longer time period make it a cheaper purchase overall by several thousand euros overall. A lot of these people like me will keep the car and buy outright after 3 years.

mickdw

spuddy wrote: »

We both know the reality is that many people simply won't do their homework. More fool them, and all that, but as our own very recent history has shown, more fool all of us, in the end. While it's fine to say they're separate topics, in practice, people make decisions based on the monthly repayment, a repayment which is being made artificially low on new cars with PCPs, and of course also coming with a big cost to the consumer in the form of depreciation.

More and more ads are advertising the car's monthly PCP repayment, rather than it's OTR price. It's masking the actual cost to the consumer, and is a step backwards for transparency.

Im not disagreeing with any of that. My only disagreement relates to saying that pcp is more expensive when clearly due to widespread low pcp interest rates, it is cheap finance when proper comparison is undertaken.

spuddy

mickdw wrote: »

People buying expensive cars they cannot afford is a whole other argument. Is buying an expensive car you cannot afford more costly that buying a cheaper used car. Yes it is regardless of how you pay for it.
I fully agree with you that people are going in and buying cars they otherwise couldnt afford. That still doesnt equate to pcp being more expensive that other finance.
Ive long argued that people should check to see if they can afford the car with 15 percent deposit on pcp. If not they are looking at pain at end.
People need to be responsible. If you are signing a finance form, you should damn well know what its about and have a sure fire escape plan at end.
People sometimes miss that a quoted interest rate on pcp will cost more than the same quoted rate on hp - again people should do the calcs and see what the interest costs are but zero percent finance is the key to pcp being an excellent product if you can afford the car.

We both know the reality is that many people simply won't do their homework. More fool them, and all that, but as our own very recent history has shown, more fool all of us, in the end. While it's fine to say they're separate topics, in practice, people make decisions based on the monthly repayment, a repayment which is being made artificially low on new cars with PCPs, and of course also coming with a big cost to the consumer in the form of depreciation.

More and more ads are advertising the car's monthly PCP repayment, rather than it's OTR price. It's masking the actual cost to the consumer, and is a step backwards for transparency.

mickdw

spuddy wrote: »

That you're accepting there's truth to the argument speaks for itself. It's the elephant in the room. People are buying new cars on PCPs as the repayment (in their first PCP) is the same as a loan/HP on a second hand one. I'm all for personal choice & responsibility, as long as people are armed with all the facts. As you've alluded to, there's a lack of awareness about the true total cost of running a new car, and PCPs are actively contributing towards people buying these.

People buying expensive cars they cannot afford is a whole other argument. Is buying an expensive car you cannot afford more costly that buying a cheaper used car. Yes it is regardless of how you pay for it.
I fully agree with you that people are going in and buying cars they otherwise couldnt afford. That still doesnt equate to pcp being more expensive that other finance.
Ive long argued that people should check to see if they can afford the car with 15 percent deposit on pcp. If not they are looking at pain at end.
People need to be responsible. If you are signing a finance form, you should damn well know what its about and have a sure fire escape plan at end.
People sometimes miss that a quoted interest rate on pcp will cost more than the same quoted rate on hp - again people should do the calcs and see what the interest costs are but zero percent finance is the key to pcp being an excellent product if you can afford the car.

Mickiemcfist

spuddy wrote: »

That you're accepting there's truth to the argument speaks for itself. It's the elephant in the room. People are buying new cars on PCPs as the repayment (in their first PCP) is the same as a loan/HP on a second hand one. I'm all for personal choice & responsibility, as long as people are armed with all the facts. As you've alluded to, there's a lack of awareness about the true total cost of running a new car, and PCPs are actively contributing towards people buying these.

Surely a level of personal responsibility has to be taken. We're less than 3 years out of a lax consumer credit driven recession. A car salesman sells cars for a living, they're not personal financial advisors.

*i say this as someone who hates 99% of Car salesmen, but people have to be responsible for their own actions. Particularly a transaction this large.

spuddy

Lantus wrote: »

If rates go up then they will for all products so normal loans will be affected equally as well.

Today rates for PCPs are typically lower than for other forms of finance. Why is this the case? It's clearly an incentive and it's more likely that PCP rates will fall in line with other forms of finance in the coming years, than all products going being equally affected.

spuddy

mickdw wrote: »

This argument is flawed. What you are saying is that buying a new car every 3 years is more costly than buying a cheaper used car every 3 years. That is obviously correct and while i understand you are referring to pcp allowing some people to buy a more expensive car than they otherwise might, that is down to individual stupidity and not relevant to cost of pcp versus hp. I also realise this scenario effects a good number of buyers....

That you're accepting there's truth to the argument speaks for itself. It's the elephant in the room. People are buying new cars on PCPs as the repayment (in their first PCP) is the same as a loan/HP on a second hand one. I'm all for personal choice & responsibility, as long as people are armed with all the facts. As you've alluded to, there's a lack of awareness about the true total cost of running a new car, and PCPs are actively contributing towards people buying these.

Lantus

spuddy wrote:

I'm highlighting the essential differences between the different types of finance, so people walk into this with their eyes open. PCPs are being incentivised by the manufacturers, but there's no guarantee that these rates will be lower in the years to come.

If rates go up then they will for all products so normal loans will be affected equally as well.

Cyrus

spuddy wrote: »

I'm highlighting the essential differences between the different types of finance, so people walk into this with their eyes open. PCPs are being incentivised by the manufacturers, but there's no guarantee that these rates will be lower in the years to come.

they are fixed when you take it out so not sure what point you are making?

spuddy

Casati wrote: »

You are ignoring the extremely low interest rates you can get with pcp

I'm highlighting the essential differences between the different types of finance, so people walk into this with their eyes open. PCPs are being incentivised by the manufacturers, but there's no guarantee that these rates will be lower in the years to come.

Lantus

If you buy the car then nothing.

If you trade up it can effect your equity in the same way any trade in would.

If you hand the car back the lender applies the contract penalty clause if applicable.

_Brian

What are the typical mileage allowances and penalties for exceeding.

mickdw

spuddy wrote: »

For the average punter who needs finance & replaces their car every 3-5 years, PCP is more expensive:
The biggest running cost of any car, depreciation. PCP allows people to buy a newer car than they would otherwise be able to afford, which in turn costs them more in depreciation.

As the capital is not repaid, but interest is charged on the GMFV amount, the total cost of financing the car is higher than with a traditional loan (all other things, interest rate, term length etc, being equal).

As long as you're made aware of this, it's fine, but those selling PCPs need to do more to explain the above to Joe Soap.

This argument is flawed. What you are saying is that buying a new car every 3 years is more costly than buying a cheaper used car every 3 years. That is obviously correct and while i understand you are referring to pcp allowing some people to buy a more expensive car than they otherwise might, that is down to individual stupidity and not relevant to cost of pcp versus hp. I also realise this scenario effects a good number of buyers.
But if we take a like for like scenario, a new golf on hp v a new golf on pcp, the car on pcp currently wins hands down due to the very low interest rate available. All else will be equal.
I have not bought this way myself but I have not heard any evidence to suggest that pricing or discounts are different when availing of vw pcp versus using other finance.

Lantus

spuddy wrote:

For the average punter who needs finance & replaces their car every 3-5 years, PCP is more expensive: The biggest running cost of any car, depreciation. PCP allows people to buy a newer car than they would otherwise be able to afford, which in turn costs them more in depreciation.As the capital is not repaid, but interest is charged on the GMFV amount, the total cost of financing the car is higher than with a traditional loan (all other things, interest rate, term length etc, being equal). As long as you're made aware of this, it's fine, but those selling PCPs need to do more to explain the above to Joe Soap.

Except not true. Just compared an Octavia bought on a normal loan over 4 years and PCP. If 20% deposit in each case then you pay 440 a month for 4 years on hp. 2200 interest paid.

You pay 275 a month on PCP at zero interest. If you save the difference you can almost pay off the gmfv at the end bar a few grand.

So a significant saving for pcp and you still own the car after 4 years. Of course if you can afford over 2k in interest then you should of course pay it.

That's no say all such deals would be as good but generally PCP interest is very competitive and it's easy to Chech the numbers as I've just done.

ELM327

Casati wrote: »

You are ignoring the extremely low interest rates you can get with pcp

On the full value (incl GFMV) in most instances.

Casati

spuddy wrote: »

For the average punter who needs finance & replaces their car every 3-5 years, PCP is more expensive:
The biggest running cost of any car, depreciation. PCP allows people to buy a newer car than they would otherwise be able to afford, which in turn costs them more in depreciation.

As the capital is not repaid, but interest is charged on the GMFV amount, the total cost of financing the car is higher than with a traditional loan (all other things, interest rate, term length etc, being equal).

As long as you're made aware of this, it's fine, but those selling PCPs need to do more to explain the above to Joe Soap.

You are ignoring the extremely low interest rates you can get with pcp

ELM327

spuddy wrote: »

For the average punter who needs finance & replaces their car every 3-5 years, PCP is more expensive:
The biggest running cost of any car, depreciation. PCP allows people to buy a newer car than they would otherwise be able to afford, which in turn costs them more in depreciation.

As the capital is not repaid, but interest is charged on the GMFV amount, the total cost of financing the car is higher than with a traditional loan (all other things, interest rate, term length etc, being equal).

As long as you're made aware of this, it's fine, but those selling PCPs need to do more to explain the above to Joe Soap.

And this is the issue I outlined earlier with the lack of regulation.

spuddy

blackmark wrote: »

People are quick to make a mess of pcp and highlight all the negatives when in reality at the end of 3 years regardless of pcp or hire purchase etc you still have paid the same figure in all 3 circumstances. Cars don’t depreciate more just because it’s a pcp deal.

It’s all about convenience and affordability over the term for yourself do you a want to pay a lump sum at the start, have low monthly repayments and have a lump sum at the end...

For the average punter who needs finance & replaces their car every 3-5 years, PCP is more expensive:

The biggest running cost of any car, depreciation. PCP allows people to buy a newer car than they would otherwise be able to afford, which in turn costs them more in depreciation.
As the capital is not repaid, but interest is charged on the GMFV amount, the total cost of financing the car is higher than with a traditional loan (all other things, interest rate, term length etc, being equal).

As long as you're made aware of this, it's fine, but those selling PCPs need to do more to explain the above to Joe Soap.

mickdw

blackmark wrote: »

People are quick to make a mess of pcp and highlight all the negatives when in reality at the end of 3 years regardless of pcp or hire purchase etc you still have paid the same figure in all 3 circumstances. Cars don’t depreciate more just because it’s a pcp deal.

It’s all about convenience and affordability over the term for yourself do you a want to pay a lump sum at the start, have low monthly repayments and have a lump sum at the end..... pcp sounds good then or do you want a steady loan for the 3 years with no lump sum either side then pcp isn’t the choice for you either way the car will still cost the same at the end, will still depreciate as the market moves and you will have formed over the same amount regardless of which deal you went for (obv interest rates are different but in general)

Yes nothing at all wrong with pcp other than it allows foolish people to perhaps get into more expensive car than they could otherwise afford.....for one term and leaving in a mess at the end.
On the other hand if someone can clearly afford a golf for example, buying it on a zero percent pcp is the only way to do it.

blackmark

People are quick to make a mess of pcp and highlight all the negatives when in reality at the end of 3 years regardless of pcp or hire purchase etc you still have paid the same figure in all 3 circumstances. Cars don’t depreciate more just because it’s a pcp deal.

It’s all about convenience and affordability over the term for yourself do you a want to pay a lump sum at the start, have low monthly repayments and have a lump sum at the end..... pcp sounds good then or do you want a steady loan for the 3 years with no lump sum either side then pcp isn’t the choice for you either way the car will still cost the same at the end, will still depreciate as the market moves and you will have formed over the same amount regardless of which deal you went for (obv interest rates are different but in general)

ELM327

vintagevrs wrote: »

That's not true. You can pay it off anytime you like.

It is true.

Additionally you can request a settlement figure from the finance company.
To say flippantly, that you can pay it off any time you like, is misleading.
You can - just not by increasing your monthly lease payment.

vintagevrs

ELM327 wrote: »

PCP is not a loan it's a lease agreement
You can't pay it off sooner.

.

That's not true. You can pay it off anytime you like.

Jacovs

Thanks for the reply. Did some further digging and got the same information.
Currently saving more than enough into a credit union account for the balloon in 3 years. Be nice to have all the options available at end of PCP.

ELM327

PCP is not a loan it's a lease agreement
You can't pay it off sooner.

Best - if you have spare cash - to save the 50 a month and put it in a savings account to contribute the balloon payment.

Jacovs

Might have been asked before.
Is it possible to pay off extra lump sums or even 50 a month?
Just looking on the online banking and the pcp loan is just listed as another account that you can transfer money to like you would between your own accounts.
Instead of saving the extra money every month towards the final payment at the end of pcp, just pay it off the loan every month and reduce the capital and thereby the interest you are paying?

bazz26

Yep and they will be telling that Brexit, weak sterling, etc is the cause of poor trade-in values. The second hand car market is a mess at the moment.

Cyrus

Casati wrote: »

Yes they will shaft you in the same way that they will on any trade-in, mo difference if it’s pcp or not. If you handing back a car that is worth less than than the gmfv’ then they might starting looking for scratches etc

exactly:p

Casati

Cyrus wrote: »

not my experience, i have traded 2 cars in now and entered new PCPs with no issues, both around 24-26 months into a 36month pcp,

i moved marques the last time from audi to mercedes

Yes they will shaft you in the same way that they will on any trade-in, mo difference if it’s pcp or not. If you handing back a car that is worth less than than the gmfv’ then they might starting looking for scratches etc