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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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lcstress2012

Hi all I have a 171 Ford Fiesta on pcp. I’m going to go again when the three years is up for another car. Was thinking a vw golf. Can I use the gmfv to put towards the next car? Thanks

ELM327

lcstress2012 wrote: »

Hi all I have a 171 Ford Fiesta on pcp. I’m going to go again when the three years is up for another car. Was thinking a vw golf. Can I use the gmfv to put towards the next car? Thanks

The GFMV is the amount you still owe on the car? How can you use your outstanding liability to pay for something?

Jacovs

lcstress2012 wrote: »

Hi all I have a 171 Ford Fiesta on pcp. I’m going to go again when the three years is up for another car. Was thinking a vw golf. Can I use the gmfv to put towards the next car? Thanks

If your car is worth more than the gfmv then only that amount can be used towards a deposit for the next car.

Mickiemcfist

I wonder will there be "Were you mis-sold PCP?" ads in a few years similar to the PPI issue a few years back. There's a lot of people on PCP who don't know what they're at.

bazz26

ELM327 wrote: »

The GFMV is the amount you still owe on the car? How can you use your outstanding liability to pay for something?

It's a scary thought how many people are out there who don't fully understand the repayment structure of their loans.

carsfan2

lcstress2012 wrote: »

Hi all I have a 171 Ford Fiesta on pcp. I’m going to go again when the three years is up for another car. Was thinking a vw golf. Can I use the gmfv to put towards the next car? Thanks

I actually hope that is someone trolling because otherwise it’s frightening.

Lantus

lcstress2012 wrote:

Hi all I have a 171 Ford Fiesta on pcp. Iâ€™m going to go again when the three years is up for another car. Was thinking a vw golf. Can I use the gmfv to put towards the next car? Thanks

So the gmfv is the outstanding debt on the car your not paying off but parking for 3 years. Ideally this is low enough so that the market value is greater.

For example if the gmfv is 7k and the market value 11k after 3 years then you have 4k minus dealer profit, so let's say 2k of equity to play with. This will be your deposit moving into a new pcp deal.

A golf is quite a bit more so you would probably need extra cash deposit to reach 10% min deposit level.

You can trade in at any time but 2 years is typically the earliest.

Lantus

lcstress2012 wrote:

Hi all I have a 171 Ford Fiesta on pcp. Iâ€™m going to go again when the three years is up for another car. Was thinking a vw golf. Can I use the gmfv to put towards the next car? Thanks

Marcusm

bazz26 wrote: »

It's a scary thought how many people are out there who don't fully understand the repayment structure of their loans.

That would be in excess of 80% of the population scrolls all types of finance, not just PCP.

GusGus

So returning to Ireland and I am on the hunt for a new car . I haven’t settled in whst I’ll get yet but I know given my past history I’ll probably want to change after a year . I’m just wondering am I crazy to consider PCP for this purchase ?

I have about 10k as a deposit and no trade in. I was looking at a golf ( New) coming in at 37k. They advised me to lower my deposit as they had 0% apr . This seemed to make sense .

I am just wondering how much I will owe in 12 months time ?
Am I right to say the following : I’ll owe 24 x monthly payments plus the agreed GFMV?

Example : GFMV is 14.5 k and 24 x 450 =10800

So will I owe : 25.3 k in a years time?

Is this the right way to try and understand pcp if I was to change in a year ?

mickdw

you are correct. What in fact would happen is that you would request a settlement figure from vw bank when you intend to sell however seeing as its a zero interest deal, that figure should be exactly as you figure.
The main question then is what the golf will be worth after 1 year. I would be of the opinion that by changing at year 1, you will basically have burn your deposit which those figures suggest to be circa 7k and would have to come up with deposit again for next car.

Westwood

You're not parking anything for 3 years, you're paying interest on the GMFV every month for the 3 years and then you have to find it and pay it again or go again, that's the real scam of PCP.

Lantus

Westwood wrote: »

You're not parking anything for 3 years, you're paying interest on the GMFV every month for the 3 years and then you have to find it and pay it again or go again, that's the real scam of PCP.

If you pay intetest yes but its a structural part of the product, not a scam.

Metallic paint, expensive extras, fuel efficiency claims (esp hybrids) and the concept of quality in expensive brands which doesn't bear reality should feature more highly as potential scams.

Wildly Boaring

Lantus wrote: »

If you pay intetest yes but its a structural part of the product, not a scam.

Metallic paint, expensive extras, fuel efficiency claims (esp hybrids) and the concept of quality in expensive brands which doesn't bear reality should feature more highly as potential scams.

Agreed but lot of idiots out there easily parted from their cash. Just see the monthly as achievable and a 191 on driveway.

Going PCP myself right now. But getting 1.9% off VW bank. Have the cash with my deposit but may need it in next 3 years. Prepared to pay VW that 1.9% to keep my cash liquid.

And yep I could get 0% but as you stated, I'd have to get no end of extras at a fairly decent uplift. Love leather seats etc in a secondhand. Must be a serious margin on them for manufacturers

mickdw

Pcp would be a better consumer product if instead of the 3 advertised scenarios at end of 3 years, there was a 4th. That would be to automatically move over to payment plan to clear the gfv over x number of years. I know many people do raise finance to do this but it involves negotiating a new interest rate on a new deal and may even have different criteria re loan approval.
If it was included as an option day one, people would see that they are in fact getting into a 6 or 7 year deal to pay off the car - that is why the monthly is low.
This wouldn't suit the trade however as customers then wouldn't be forced to come back in at 3 year stage.
They would also have to include interest and do their discounting in some other way.

So a 30k car on Pcp might be advertised as 9000 deposit and 250 per month for 3 years.

The real truth is 9000 deposit plus 250 per month for 7 years to own the car.

It might be a wake up call to people taking out Pcp with gfv over 20k. There could be 5 years extra payments after 3 year term to clear these amounts at a reasonable monthly meaning paying for car over 8 years in total.

ofcork

Pcp probably suits some rather than hp or bank/credit union loan with low interest I paid my final payment off my car loan on hp this week at apr of 12.6%.

Wildly Boaring

mickdw wrote: »

Pcp would be a better consumer product if instead of the 3 advertised scenarios at end of 3 years, there was a 4th. That would be to automatically move over to payment plan to clear the gfv over x number of years. I know many people do raise finance to do this but it involves negotiating a new interest rate on a new deal and may even have different criteria re loan approval.
If it was included as an option day one, people would see that they are in fact getting into a 6 or 7 year deal to pay off the car - that is why the monthly is low.
This wouldn't suit the trade however as customers then wouldn't be forced to come back in at 3 year stage.
They would also have to include interest and do their discounting in some other way.

So a 30k car on Pcp might be advertised as 9000 deposit and 250 per month for 3 years.

The real truth is 9000 deposit plus 250 per month for 7 years to own the car.

It might be a wake up call to people taking out Pcp with gfv over 20k. There could be 5 years extra payments after 3 year term to clear these amounts at a reasonable monthly meaning paying for car over 8 years in total.

PCP suits the manufacturer a lot better as is though.

They love that you get used to the monthly repayments and that you will come back after 3 years and see what you'll do.

Most go in at this point hoping to have as much deposit as possible to keep up similar payments.

Probably will myself. In my opinion I've a nice low final payment.

Would need legislation to force the above. But think it's a decent idea

XsApollo

Well I bought a 162 seat Ibiza on pcp 0% finance with 10% deposit in August 16
Got a call there that I could hand back the car in January and get the equivelant 191 new model for an extra 5 euro a month on top of what I am paying now.
No cash needed.
I thought that was a pretty good deal.
Didn’t take it.
But thought it was a good deal if I was interested.

ofcork

So you do not have the pay the gfv?

XsApollo

?
I’m saying that I could get a new car and just continue on without putting any cash towards the new one.

wonski

Pretty sure there was an increase (significant) in balloon payment at the end of the term as just 60 euro a year would be to good to be true.

The devil is in details, but some would just look at the monthly payment rather than the bigger picture.

ofcork

This confuses me about pcp as all dealer ads say the gfv is payable if you renew or retain the vehicle.

XsApollo

How could you increase the balloon payment on an Ibiza ?
They would be losing money If people just started handing them back .

ofcork

Dealers would never lose.

XsApollo

How would they not lose ?
If they increased the Baloon payment on a 18k car to say 9-10k , 3 year old Ibiza’s arnt worth more than that.
Too tight a margin to be doing that.

ofcork

The customer would have paid deposit and repayments with interest and dealer could sell car.

XsApollo

Ok well I dunno if you understand ? You were asking earlier if I had to pay gfmv?
It all depends on the deal.
But if they were offering 0% finance with a baloon payment of 9-10k on a car that cost 18k they wouldn’t be making much money.
Because you pay what you paid and hand it back.
A 3 year old Ibiza isn’t worth much more than that.

I will ring them back and ask them for the finer details.
But I can’t imagine the baloon on an Ibiza increasing significantly as it doesn’t make sense.

Edit just reading again.

Sure they got the first sale but they are now lumbered with a car owing them what it’s worth.
They will have to warranty and do whatever else.

bazz26

It's in the best interest of the manufacturer to have a low GFV so that customers have a healthy amount of equity in the car after 3 years and then use that equity as a deposit on another car/PCP deal.

The only ones who didn't do this was BMW who placed a high GFV but low monthly payments on their cars in order to attract customers. That's all great when bringing in new customers to the brand but returning customers after 3 years were finding themselves with little or no equity because the trade-in values they were getting in most cases left them with no equity for another car. It meant they either had to stump up a hefty deposit or their monthly payments increased substantially making buying another BMW unattractive. It basically encouraged returning customers to go to rival brands who gave better PCP deals.

As for the idea of giving better payment terms on the GFV beyond the 3 year deal. That will never happen as manufactures don't want you to every own the car but rather roll you over to another PCP deal after 3 years. If you do intend to buy the car out from the start then the best you can do is get the best PCP deal you can find and then repay the remaining GFV using a standard repayment loan. It can still work out cheaper than borrowing all the money up front and repaying it through HP or personal loan over a longer term.

Wildly Boaring

XsApollo wrote: »

Ok well I dunno if you understand ? You were asking earlier if I had to pay gfmv?
It all depends on the deal.
But if they were offering 0% finance with a baloon payment of 9-10k on a car that cost 18k they wouldn’t be making much money.
Because you pay what you paid and hand it back.
A 3 year old Ibiza isn’t worth much more than that.

I will ring them back and ask them for the finer details.
But I can’t imagine the baloon on an Ibiza increasing significantly as it doesn’t make sense.

Edit just reading again.

Sure they got the first sale but they are now lumbered with a car owing them what it’s worth.
They will have to warranty and do whatever else.

Your balloon is unlikely to go up.

It's just that the deposit plus the repayments to date are well ahead of the gfmv.

Also they may have a lot if enquires for small cars a couple years old or little projected stock of same

They get in your car and sell to cover your outstanding finance.
2 wins - you're tied in for another 3 years min including that sale number - another customer happy on the secondhand car who could easily come looking for similar in 2 or 3 years plus that sale number.

ddarcy

XsApollo wrote: »

Ok well I dunno if you understand ? You were asking earlier if I had to pay gfmv?
It all depends on the deal.
But if they were offering 0% finance with a baloon payment of 9-10k on a car that cost 18k they wouldn’t be making much money.
Because you pay what you paid and hand it back.
A 3 year old Ibiza isn’t worth much more than that.

I will ring them back and ask them for the finer details.
But I can’t imagine the baloon on an Ibiza increasing significantly as it doesn’t make sense.

Edit just reading again.

Sure they got the first sale but they are now lumbered with a car owing them what it’s worth.
They will have to warranty and do whatever else.

I think you’re getting the same numbers as the banks typically try to ensure that you have equity of 15-20% of a new similar car. So the Ibiza is a bit more now, so my guess is that the equity is the reason for the similar payment. If you took the offer you probably would be having an increase in deposit from the old car.

I would be very worried if you were given a gmfv of >35%. I don’t think they are raising the balloon payment for you.

But in general if you like the car then just buy it out. I think most people don’t forward plan with PCP and can get stuck in a trap because they get manipulated into thinking that I can have a new car with cheaper payments than keeping the old car and having slightly higher payments to pay it off in a couple of years (then have no repayments).

Like I got a Polo this year, but I’m putting away an extra 200 a month to buy it out in the end. I planned on this and ensured it would work with my budget. Even if something occurs and I need to take out a loan to payoff the balloon payment, I should have a significant amount of the final balloon payment on hand, so I won’t get crippled by the interest rate. If this comes to pass I calculated that I would only pay VW bank about 400 in interest. Whereas if I did HP I would be looking at 4000 in interest.