Renault 5

There's a big difference between getting a mortgage than spending money on a depreciating asset such as a car.

Not being able to afford the car is certainly not laughable, while most people don't have 30-40 K in cash to spend on a car PCP has allowed people to buy cars at a much higher price tag than the would have normally via traditional finance.

There's people walking away from a 15 K 2nd hand car that they can afford for a 40+ K car on PCP, that is the definition of madness.

PCP means say 500 a month over 3 years vs 1200 a month via traditional finance, this has meant people are spending far more on cars and many getting a car every 3 years because they're caught in the debt cycle.

"At the end of the day if you couldn't afford PCP you wouldn't be approved for it"

This is nonsense and poor advice, if you were held to the same standard when purchasing car finance , especially PCP as you are a mortgage these days , very few people would be given finance, the financial instaurations have been allowed to throw money away at people for cars and it's not being controlled. Because someone can afford the monthly payments does not mean they can afford the car because PCP is designed to make people forget the balloon at the end which has to be refinanced, pcp means you do not pay the full cost of the car which is why the repayments are cheap, go to bank and see what it costs over 3 years with regular finance and most people would be getting far cheaper cars.

"PCP has allowed people to buy cars at a much higher price tag than they would have normally via traditional finance… that is the definition of madness.”

• Lower monthly costs let buyers access safer, more reliable or more efficient cars. This is an advantage."

An advantage, sure, for the finance companies and the car dealers + of course the manufacturers ! All it does is put a bigger dent in the finances of people who in reality shouldn't be approved for PCP and in my opinion should only be allowed PCP provided their income vs spending are at the right level.

"Lower monthly costs only exist because of the big balloon payment at the end, this still does not mean people should be spending more money on more expensive cars, it's foolish and irresponsible. We can always justify buying what we don't need.

• Renewal every three years is an option, not a requirement. Drivers who prefer to keep a car long‑term can pay the balloon (or refinance it) and continue driving a paid‑off vehicle. PCP simply enables choice of term. In a way PCP can just be an option for longer finance terms than a HP.

Yes, it's true but the problem is that the cheap monthly payments are still making people buy much more expensive new cars than the older good 2nd hand car at a fraction of the cost. Many people will choose not to pay the balloon and continue for another 3 years and another because of the cheaper monthly payments and get caught in a loop, the real never never and end up paying much more, but this is this is exactly what PCP was designed to do , keep people hooked and it works.

Over three years, total cash outflow on PCP (payments + balloon if you buy) is comparable to HP. The difference is timing: PCP delays a large chunk of cost to the end, which can be an advantage if you want to allocate cash elsewhere (e.g. investments, home improvement, emergencies).
PCP isn’t inherently “madness” — it’s simply a structured way to match car‑ownership costs to a driver’s cash‑flow preferences. Yes, it requires discipline to plan for the balloon payment, but for many people it’s a better fit than paying every penny of depreciation upfront. If you: Understand the final balloon and plan how to settle or refinance it. Only stretch payments to what you can truly sustain, Compare total cost over term (not just monthly).
PCP loans have been around a long time now. There has been constant predictions of the entire segment collapsing and flooding the market with surrendered car. It has yet to happen and survived a number of financial crises. Yes PCP allows certain buyers to access cars that would otherwise be out of reach, that is the purpose of all financial products. PCP is basically a HP over 6 years when you break it down with a choice at 3 years. The invention of the mortgage, credit card, overdraft etc I am sure met similar criticism in the past.

Your figures are a little misleading also. I am looking here at a quote on a R5. Total cost 32k. HP = 10k down, 665euro a month over 3 years. PCP is 10k down, 14k final payment, 300 a month over 3 years. Total cost of the HP is 2045 euro over 3. Total cost of the PCP is 3100 euro over 3 years. So if the benefit of having 300 extra euro a month is worth the extra 30 euro a month to you PCP is your man. If the worst happens on a PCP you refinance 14k for a 3 years old R5…which seems reasonable value (and buy your own logic a more prudent financial move). I just sold a 8 year old i3 for fairly close enough to that. In your senario above, the 15k car they are walking away from and they could afford was the 40k car they bought 3 years ago, the fact there is 10k deposit shows a certain fiscal responsibility and or ability to build equity. Hell a second hand car could cost you 3k in maintenance and repairs alone over 3 years.

For all we know the OP is due a massive inheritance in a few years, he gets a massive bonus in work annually but monthly is low, He is heavily invested in a fixed term saving scheme and is cash flow poor but with massive investments. He might be a junior doctor/lawyer/ tradesman on a fixed career trajectory and will have double his income in 3 years but underpaid now. We dont know. There is a tendency in these discussions to assume that all people considering PCP are gullible "poors", buying cars they cannot afford with money lent out by predatory irresponsible banks. This is very simplistic and conceited way of approaching the problem. Sorry for long post.

That deposit is very high, the usual amount is 10% which would be around 3200 Euro, PCP is usually designed to get people in ( hooked ) via low deposit, low monthly payment and big balloon, a lower balloon means the manufacturer is predicting high depreciation and passing on more of the risk to the buyer, in other words, the buyer is paying more of the calculated depreciation and if you look at those figures it's probably for low enough mileage at the end of the contract. So the buyer is paying more for the car over the 3 years.

The problem is again, PCP is allowing people to choose much more expensive cars than they can afford, if it were not for PCP people would be spending much less and not getting into so much debt.

We can start a new thread on PCP but I think we should knock it on the head for now here, but we can agree to disagree.

Your PCP figures are a bit confusing, might be due to tiredness but I had to go to the Renault site.

RRP = 30,995 Euro

Deposit 10,400 Euro

GFMV 14,798

Cost of credit, ( interest ) is 3,159 ( Ok, I get where you got 3100 from now )

Monthly payment 36 x 249

So over the 3 years the cost is 10,400 + 36 x 249 a month = 19,364 + the GFMV ( Balloon ) = 34,162

Hire Purchase

10 K deposit

36x 635 PM

Total cost is 32,860

So, Hire Purchase is actually cheaper due to lower interest saving 1,302 Euro but the reality is that 249 a month is far more attractive than 635 a month, making it much more affordable to those who actually can't afford 635 a month and it's not a wise way to spend money if that is the situation of many which I assume it is considering PCP is so hugely popular, and the buyer won't be thinking about the 14,798 balloon at the end.

Of course one can always tweak the deposit to minimise the amount going in which is the most common thing on PCP, this will just make the monthly payments more.

By the way , all this is only for 10,000 Kms which is very low mileage and people need to be cautions and not put down lower Kms than they're doing.

The Deposit, term and mileage can be adjusted on the Renault site, put in 30,000 Kms a year and the monthly payment jumps to 350 a month and the balloon to 11,900 because you're paying for higher depreciation due to higher mileage.

On Hire Purchase people know exactly what's what at the end and they can still use the half rule if things aren't working out.

We can start a new thread on PCP because I know this is going to p1ss people off but it might give people something to think about.

"Not a fan of all these assistance systems at all"

You and me both but this is the E.U again, instead of enforcing driving laws, people on phones and controlling in car entertainment , TFT screens they introduce laws to make manufacturers make cars "smarter" which often makes them loose concentration behind the wheel when they know they have lane keep assist and adaptive cruise, they think they can take out the tablet and phone for a spot of Netflix or Youtube and think the car will keep them safe, this is what happens when we have over regulation. What we need is proper detection and bans for using such tech while driving and make the driving test stricter especially Irish test and enforce Motorway driving and night time driving as part of the test.

Proper detection of infotainment use and phone use and applying automatic 6 month bans, if we had all this there'd be no need for more tech to "keep us safe"