VW ID.4

Padraig Mor wrote: »

There seems to be a bit of misunderstanding over how PCP works (or should work). A standard* PCP plan absolutely should give you equity at the end - i.e. the car is worth more than the GMFV. The ideal is that this equity is approximately equal to the deposit you put in first day, with the intention being that you use this equity as the deposit for your next PCP without sticking more cash in. At the correct deposit level, and all else being equal, this will mean you move from old car to new car at the same repayments per month, and without putting in extra cash. The ultimate aim is that you treat your car like your mobile phone - pay a certain amount each month, and upgrade every three years.

There's two critical elements to this - the deposit and the GMFV.

Put in too much deposit and your monthly repayments will be very low - but will increase substantially on the next car as the equity remains the same, or you'll need to fork out more deposit to get the same repayments. Cue unhappy driver moaning at the salesman. You'll notice that most PCPs don't allow a deposit great than ~30% - this is the reason. I understand from a celebrated Boards VW dealer than VW have identified ~15% as being the 'best' deposit level to move smoothly from one PCP to the next.

GMFV needs to be right too**. Making the GMFV high means lower repayments - but little or no equity at the end. Cue unhappy driver moaning that he's got to put more cash in to get the same repayments on his next PCP, or have higher repayments. GMFV percentage varies from brand to brand, but 30 - 40% seems to be the general level expected to have a smooth transition from plan to plan without too many shocks. I recall BMW in particular being criticised for running ~45% GMFVs which pulled in buyers with low monthly repayments, but they got ****ed at the other end as they had SFA equity and needed to pay out another deposit. In contrast, Mercedes didn't go that easy route and instead went with higher payments and lower GMFVs, but their buyers were stepping into new cars without having to fork out big cash deposits.

Of course, GMFV is crystal ball territory really - maybe the car will be worth more than the GMFV, or maybe it'll be an AIDS car that no one wants and gives you nothing in your pocket.

As examples, here's my cars for the last while - going into my third PCP now.

PCP 1.
152 Nissan Leaf. ~€26k or so (don't recall exactly).
~€5k deposit (€4k scrappage and €1k cash, or something like that anyway).
~€10k GMFV.
Trade in ~€11,100 so €1100 equity***. Poor enough (but actually better than it was looking earlier when I considered getting out under the half rule as it looked like no equity - thankfully EVs started becoming more popular in ~2018 and value went up).

PCP 2.
182 Nissan Leaf. €34200.
€5600 deposit, comprising €1100 equity and €4500 cash - because of poor equity I've had to stump up more money and I'm not happy.
€13800 GMFV (it was actually ~€12000, but I settled it early so had to pay more, but would have paid that difference in repayments anyway had I went to the end).
Sold privately for €20,500 so €6700 equity - now we're talking!

PCP 3.
211 ID4. €41000.
€6700 deposit, all from Leaf equity and no extra cash thrown in - I'm a happy camper!
€19000 GMFV - strong, very strong, may lead to equity issues at the end but we'll see.

In the end, the combination of high equity from the second Leaf, and fairly high GMFV means I walked out of the Leaf and into the more expensive VW, and my monthly repayments are actually going down! Let's hope they're in demand in three years and there's a decent enough deposit to move easily again.

* Several manufacturers are now doing a new version of PCP (including VW, who are calling it the ID Plan for their EVs) - tends to be called Subscribe and Drive or similar. Aimed primarily at younger people who don't have a deposit - so no or very little cash thrown down, and higher monthly repayments. High GMFV so no / little equity.

** Keep a close eye on dealer figures! Some brands (including VW) have GMFV values fixed by their brand. Some brands who use AIB / BOI financing allow dealers flexibility to change GMFVs, which can be very misleading if you're not aware of it. We bought a Peugeot 5008 for my wife last July and found that some dealers would 'undercut' the monthly repayments given by another dealer.......but increased the GMFV which cancelled out the difference, or even meant it cost more overall (i.e. you paid a similar amount overall, but owed more at the end = less equity). Always ask for the GMFV because they often won't tell you, over the phone at least.

*** that was a trade in price. I actually shook hands on a private sale which would have netted me another €1500, but the bloody car developed a fault literally two hours later FFS! I refused to sell it to him even though he still wanted it as it was at work and I wouldn't complete unless I was 100% the car was solid.