PCP finance.

mickdw · 17-01-2018 01:34PM

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.

spuddy · 18-01-2018 12:02PM

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.

ELM327 · 18-01-2018 12:14PM

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.

Casati · 18-01-2018 12:26PM

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 · 18-01-2018 12:28PM

Casati wrote: »

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

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

Lantus · 18-01-2018 12:33PM

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.

mickdw · 18-01-2018 12:41PM

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.

_Brian · 18-01-2018 12:42PM

What are the typical mileage allowances and penalties for exceeding.

Lantus · 18-01-2018 01:00PM

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.

spuddy · 18-01-2018 01:32PM

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.

Cyrus · 18-01-2018 01:34PM

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?

Lantus · 18-01-2018 01:40PM

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.

spuddy · 18-01-2018 02:29PM

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.

spuddy · 18-01-2018 02:35PM

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.

Mickiemcfist · 18-01-2018 02:39PM

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.

mickdw · 18-01-2018 02:50PM

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.

spuddy · 18-01-2018 03:57PM

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 · 18-01-2018 04:05PM

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.

Lantus · 18-01-2018 08:02PM

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.

boardsuser1 · 20-01-2018 03:14PM

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?

bazz26 · 20-01-2018 03:21PM

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.

MarkN · 20-01-2018 03:21PM

Cork Truck Driver wrote: »

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?

Well for starters, €500 PM seems odd for that price of car. Did he have any deposit at all?! 36 payments on that is €18,000 so another 6k potentially left (not sure if a deposit was given) plus cost of credit and document fees etc

Any chance it’s just HP with a decent deposit on his part?

Something not right anyway IMO with his story or yours.

boardsuser1 · 20-01-2018 03:26PM

MarkN wrote: »

Well for starters, €500 PM seems odd for that price of car. Did he have any deposit at all?! 36 payments on that is €18,000 so another 6k potentially left (not sure if a deposit was given) plus cost of credit and document fees etc

Any chance it’s just HP with a decent deposit on his part?

Something not right anyway IMO with his story or yours.

I'm purely relaying what he said.

He traded in a 2008 Corolla against it and he specifically stated PCP and a 3 year term.

boardsuser1 · 20-01-2018 03:27PM

bazz26 wrote: »

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.

He might well be mixing the 2 up, i'll ask him again there

boardsuser1 · 20-01-2018 03:56PM

He confused himself apparently.

€495 a month over 5 years on hire purchase.

That's the end of the PCP discussion.

vintagevrs · 20-01-2018 04:42PM

Cork Truck Driver wrote: »

That's the end of the PCP discussion.

Haha I doubt it, this thread is never ending

retweet · 20-01-2018 04:46PM

Bit of a stupid question and might differ from dealer to dealer but when do you pay the deposit? When you order the car or when the car is delivered?

If it was the latter, I could give a bigger deposit while waiting the few weeks.

DaveyDave · 20-01-2018 04:55PM

retweet wrote: »

Bit of a stupid question and might differ from dealer to dealer but when do you pay the deposit? When you order the car or when the car is delivered?

If it was the latter, I could give a bigger deposit while waiting the few weeks.

For VW, it was €1,000 to place an order and the remaining due on collection.

boardsuser1 · 20-01-2018 10:54PM

vintagevrs wrote: »

Haha I doubt it, this thread is never ending

In my own case of course :pac:

Not the topic itself

Rusky rusky · 21-01-2018 12:44AM

DaveyDave wrote: »

For VW, it was €1,000 to place an order and the remaining due on collection.

I only paid 500 in November. Actually, in 2015 I also paid 500

PCP finance.

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