Best way out of a PCP

I lost around 30% or more on 2 of the cars I got on PCP, the last one I handed back because I was being offered less than 50% of the value of the car from those who actually gave me figures.

Think of the balloon as the stick to beat you into signing another PCP contract, the dealer can and often does fiddle the numbers to keep the Monthly payments as low as they can which they know is all people care about because they have a monthly budget. The low monthly payments are the carrot that people keep chasing making them sign new contracts to avoid the big stick which will beat them eventually.

Think of PCP like this, pay more per month, lower balloon, pay less PM higher balloon. If you want to get another car in 3 years pay as little PM as you can, if you don't want to face refinancing the balloon at up to 10% pay as much in the 3 years so the balloon is low as possible, if you want to keep loosing money on cars pay as little pm keep the balloon high and sign another contract and loose more money.

What people should do is to go to the bank and ask what a bank loan would cost over 3 years for 40K and it will be around 1200 a month which is way less attractive and affordable for most people to waste on a car. In fact you can do it online, why do people get PCP instead of bank loan ? because they want to fool themselves into thinking they can afford a car.

After 3 years they need to find out whether the 20 K balloon for example @10% interest is attractive.

Remember, poor people ask how much deposit and how much per month, if that's how people buy cars then they just can't afford it and shouldn't do it unless it's for a small loan, maybe 10-15 K max. Spending savings ? bad idea on a depreciating asset. Put it into home improvements or invest. Not the car manufacturers pockets, the Government , the dealer and the finance company.

Well your not going to find any sources like that for the Irish market. Irish and UK depreciation is the same, only our cars come with a higher initial price tag. I don’t know what your struggling to understand. The majority of cars loose 50% in the first 3 years of ownership. Most of the depreciation happens in year 1, then year 2, and then year 3. Do you think that cars depreciate a lot less than this due to Covid, Brexit, and all the other factors at play over the past couple of years?

A €100k car here will depreciate to €50k

Same car in UK £60k to £30k

Both 50%

PCP is just a means of financing a car and a very simple to understand one at that, there's no big scam.

If someone can't wrap their head around how it works then they have bigger problems

I wasn’t responding to you. Go ask the poster who quoted it to find you some examples. I’m not searching the web for you

I bought a one year old ex-demo car last year at 27% below list price.

I think it was about 7-8 years ago that I started to realise just how expensive new cars were becoming - a simple Ford focus for something like close to 30k- it’s well into the 30ks now for something pretty modest

I never bought brand new cars simply because of both initial price and massive depreciation - I don’t criticise those who buy new because hey, I’ve benefited from that with my secondhand purchases .
But today I just don’t understand either the new or secondhand market, for EVs especially - many secondhand EVs have crappy enough range to begin but are still pretty expensive for what they are. But also I’m not seeing 50% depreciated 3 year old cars for sale in dealers - I see 30% depreciated or 35% but not 50% - people trading in are obviously getting screwed on value and the dealers are then keeping the prices artificially high to the next buyers - there’s profit and then there’s super normal profit - I feel dealers are making super Normal profits on secondhand cars

That is insane if your figures are correct. Theres even a few of them on Donedeal for €12k😂

https://www.donedeal.ie/view/37403466

I don’t think you are taking the thread off topic - I think you’ve actually nailed the state of the market and I know it first hand myself- I recently sold a 16 year old car for essentially what I wanted to get for it - 1375- it’s now asking over twice the price-3k - still unsold nearly 2 months on - but the point being it will ultimately go for likely 1.5 times the price I sold it for (I knew there was additional market equity in it but was willing to let it go cheaper for some key reasons ) but even for very undesirable cars (which it was), there’s a market.

If this is the bottom of the market, which it is- it’s no wonder mad prices are being asked for secondhand 3 year old ex PCPs- I’d happily buy a decent low milage 3yr old EV for 50% of original value - but they’re few and far between

No, The half rule applies to HP and I think bank loan too, it's not unique to PCP.

I don't mind people choosing PCP but I'd say a decent rule to go by would be this....if you genuinely can't afford to HP the car, don't PCP it and buy something else.

I HP'd my current car over 48 months at 0% with no deposit, but I cam handle the monthly payments no problem and I'll own it. The monthly payments are actually 3 times the PCP monthly rate they widely advertise, although that does have a deposit built in and an almost 50% GMFV, which is actually too high in my opinion, it just allows a great advertising campaign.

I wonder what the numbers of people buying their car outright after PCP is, I know a friend of mine did recently on a Skoda Kamiq and he is just keeping it, but I'd imagine it's a low number.

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"I don't mind people choosing PCP but I'd say a decent rule to go by would be this....if you genuinely can't afford to HP the car, don't PCP it and buy something else."

Just because someone can afford the monthly payments doesn't mean they can afford the car, there's a clear difference, being able to afford the car means one doesn't need finance.

Monthly payments means the person hasn't the money and technically shouldn't get into debt especially for a depreciating asset. The money is far better spent on home improvements and investments or just save it.

The problem is that most people are choosing PCP on expensive cars because it's too expensive on HP even if you add it up over 5 years chances are it's more than many people's PCP repayments with 10% deposit.

I used PTSB as example, 40K car, 10% deposit, 36K total 5 years 738.59 Euros @8.5%, Cost of credit a whopping 8,315 Euros. Mental. Don't know where you got 0% on HP.

PCP on a 40K car with 10% deposit would cost maybe 450-480 Pm depending on the agreed Kms, if doing very little it could be even less but the balloon would be far higher.

I believe PCP is one of the reasons cars cost so much now because a lot of people today don't look at the total cost of the car only the deposit and monthly payments and PCP offers the lowest of that only over 3 years which encourages people to go for another PCP for lower payments and to avoid the balloon.

I think when people get out car loans they should only be able to borrow a percentage of the total sum of their bank account.

I got 0% HP from my dealership, VW Finance. 48 months on 100% of the car which was the max period allowed. My father just did the same 0% with Kia/Bank of Ireland but they needed a 40% deposit to get 0% which he gave.

Using 8.5% rates to exaggerate a point isn't really representative when nearly all dealers have much better rates. I've never paid 8.5% nor would I.

Don't think there'll be too many in agreement that if you can't buy the car outright without finance over 3 or 4 years you can't afford it. I'm paying the car finance, mortgage, bills, putting money in a pension, providing for family, keeping some savings going. I can definitely afford the car. No nasty balloon payment in the future either.

That said, once people can genuinely have an ability to buy the car outright at the end of the pcp and not get stuck in a loop if they want to get off the merry go round then it's a viable way to purchase.

the only way it is attractive to roll into another one is if the ballon is low. It actually needs to be weighted far in favour of the dealer side (if you handed it back).

What the buyer needs to keep rolling is enough value in the car to pay the ballon and pay the deposit for ward for the next one.

I recently went EV and PCP (even though I could easily have paid the car stright off, but rate of 1 percent is free money). Balloon is only 11k so should be plenty of equity to roll if I wanted (though I will be easily doubling the quoted mileage so will cross that bridge when it comes).