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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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sunnysoutheast

Deleted User wrote: »

So If my GFV is calculated as being 11,500 in 3 years with 75,000 Kms and I have 120,000 Kms could the garage turn around and say "that's 3,600 Euro's you owe us" ?

Sure I get it that the garage could say, I'll give you 13,000 Trade in, but how likely are they to do this ?

I remember BMW saying they would charge for every single Km over on the I3 leading me to believe that I'd have a bill at the end or they would deduct this from the GFV ?

I know if I keep the car then the mileage doesn't matter but for instance if I wanted to buy the car and had more miles does this come out of the GFV meaning I would have less balloon to pay at the end ?

No the balloon payment is fixed at the start of the agreement. The easiest way to think of it is that a proportion of the loan you use to buy the car is on interest-only terms until the end of the agreement. You can then settle the outstanding amount by handing the car back (where the excess mileage charges may apply) or by paying the balloon amount via cash, loan or trade-in(where the excess mileage charges are irrelevant). With the first option any equity in the vehicle above the MFV is lost, with the latter it is yours.

Some years ago I took out a 3 year PCP on a Golf as the monthly payments were good but it had a low mileage limit of 10k miles. After 2 1/2 years it was at >70k and I traded it for a Passat. I simply paid the early settlement amount to the finance company and that was it.

I thought with these new-fangled electric vehicles that there wasn't an option to buy the car as they wanted them back to scrap them, not sure though. A friend of ours is looking at an i3 so I'll ask him!

[Deleted User]

Limerick man wrote: »

That's only if you want to hand it back and walk away.

If your GFV is €10,000 euro with 60,000kms well then after three years if you want to hand the car back to the bank and walk away you can do so once the car is in good condition and road legal.

If your GFV is €10,000 and you have 70,000kms on it, with 8 cent per km excess and you want to hand the car back and walk away you will owe the bank €800 to do so (10,000x.08).

If your GFV is €10,000 and you have 120,000kms on it, but you can get €14,000 euro on a trade in, then the GFV and mileage limit is irrelevant and the €10,000 euro becomes an outstanding amount like any other loan. So you know have €4,000 equity in the vehicle. (€14,000 trade in less €10,000 GFV).

If your GFV is €10,000 and you have 200,000kms on the car and you want to keep it, then you just write a cheque to the financial institution for €10,000 and you keep the car.

If your GFV is €10,000 and you have 200,000kms on the car and you get a trade in value of €8000, well then you're just €2,000 in negative equity which you can just pass on to the next loan.

The SIMPLE rule is the "Bank" do not want the car back. They want you to either pay it off/refinance it and keep it or trade it in and go again. Pretty much 100% of people do either of the latter two.

So If my GFV is calculated as being 11,500 in 3 years with 75,000 Kms and I have 120,000 Kms could the garage turn around and say "that's 3,600 Euro's you owe us" ?

Sure I get it that the garage could say, I'll give you 13,000 Trade in, but how likely are they to do this ?

I remember BMW saying they would charge for every single Km over on the I3 leading me to believe that I'd have a bill at the end or they would deduct this from the GFV ?

I know if I keep the car then the mileage doesn't matter but for instance if I wanted to buy the car and had more miles does this come out of the GFV meaning I would have less balloon to pay at the end ?

L-M

That's only if you want to hand it back and walk away.

If your GFV is €10,000 euro with 60,000kms well then after three years if you want to hand the car back to the bank and walk away you can do so once the car is in good condition and road legal.

If your GFV is €10,000 and you have 70,000kms on it, with 8 cent per km excess and you want to hand the car back and walk away you will owe the bank €800 to do so (10,000x.08).

If your GFV is €10,000 and you have 120,000kms on it, but you can get €14,000 euro on a trade in, then the GFV and mileage limit is irrelevant and the €10,000 euro becomes an outstanding amount like any other loan. So you know have €4,000 equity in the vehicle. (€14,000 trade in less €10,000 GFV).

If your GFV is €10,000 and you have 200,000kms on the car and you want to keep it, then you just write a cheque to the financial institution for €10,000 and you keep the car.

If your GFV is €10,000 and you have 200,000kms on the car and you get a trade in value of €8000, well then you're just €2,000 in negative equity which you can just pass on to the next loan.

The SIMPLE rule is the "Bank" do not want the car back. They want you to either pay it off/refinance it and keep it or trade it in and go again. Pretty much 100% of people do either of the latter two.

[Deleted User]

Limerick man wrote: »

Even if you trade it in after the 3 years and you have over 60kms on it, as long as the trade in is greater than the GFV you're not going to lose money.

They're very conservative, usually never over 40% of RRP. Look at any car 3 years old with 120,000kms on it and it's not going to be less than 40%.

Not sure I understand this.

for instance, if I got a GFV of 11,500 Euro's with 75,000 Kms after 3 years and it's 8 cent per Km over then technically they can charge me this or it comes out of the GFV ?

L-M

Deleted User wrote: »

You can also flog the car if you think mileage is going to be a problem, say if after 2.5 years you thought you were going to have 15K over the limit you can upgrade to a new car and pay towards that rather than paying say 1500-2K towards excess mileage. Or as micks_address said above, if you intend keeping it, it doesn't matter.

Even if you trade it in after the 3 years and you have over 60kms on it, as long as the trade in is greater than the GFV you're not going to lose money.

They're very conservative, usually never over 40% of RRP. Look at any car 3 years old with 120,000kms on it and it's not going to be less than 40%.

[Deleted User]

You can also flog the car if you think mileage is going to be a problem, say if after 2.5 years you thought you were going to have 15K over the limit you can upgrade to a new car and pay towards that rather than paying say 1500-2K towards excess mileage. Or as micks_address said above, if you intend keeping it, it doesn't matter.

micks_address

Just a note on the mileage caps.. if you intend to keep the car at the end of the 3 years then they are not really an issue.. its only if you want hand back the car that you need to pay the excess amount

[Deleted User]

You won't haggle on price either because margins are very tight on the Leaf. The Leaf is sold at a loss to Nissan Motor Co. The genius's decided to lock themselves into a ridiculous contract with NEC who provide the battery cells.

Best you could do is try get the portable EVSE known as the "Granny cable" thrown in, or a few quid off the cost. That allows you to charge from a normal household socket via an extension lead. It could be quiet handy.

kitten_77

Kenny Logins wrote: »

I don't think you'd be haggling with the dealers on a rate, only price. Rate is set by the finance co. Increasing your deposit will reduce the total interest.

thanks for your reply

Kenny Logins

I don't think you'd be haggling with the dealers on a rate, only price. Rate is set by the finance co. Increasing your deposit will reduce the total interest.

kitten_77

hello, in the market for a new car. Thinking of going down the PCP route.

One quick question; has anyone successfully haggled down the interest rate with dealers? The dealer I'm speaking to has two rates depending on the model of car (3.9% or 4.9%). They have provided a rationale for the difference, to do with the final value of the car (ie GFV). Does that mean the rate is non-negotiable?

I'm a farmers daughter so am well able to haggle (!) but wanted to see whether or not this is a point on which the dealers can negotiate.

jlm29

mickdw wrote: »

100k per year. Are you joking?

Not joking, it was a typo! I meant 100k for the three year term

jjdonegal

jlm29 wrote: »

Does anybody know what mileage limits Hyundai have on their PCP? The brochures I can find online for the i40 mention the unlimited mileage warranty, but nothing about the limits applied to pcp... I presume they're similar enough to others, at approx 100k/yr?

Doesn't it normally fall into 15, 20, 25 or 30000km a year with varying monthly payments / GMFV depending on your choice?

I'm making a guess from what I think I have heard but really not sure to be honest.

mickdw

jlm29 wrote: »

Does anybody know what mileage limits Hyundai have on their PCP? The brochures I can find online for the i40 mention the unlimited mileage warranty, but nothing about the limits applied to pcp... I presume they're similar enough to others, at approx 100k/yr?

100k per year. Are you joking?

jlm29

Does anybody know what mileage limits Hyundai have on their PCP? The brochures I can find online for the i40 mention the unlimited mileage warranty, but nothing about the limits applied to pcp... I presume they're similar enough to others, at approx 100k/yr?

SJT1

FGR wrote: »

I'm sure it's been mentioned already but riddle me this.

Say you get a guaranteed future value which is extremely conservative (say €1000) when it turns out that your car, at pay up time, is really worth about €2000. Does that mean you have to pay a higher lump sum to keep the car or do you pay back a higher lump sum?

If you want to keep the car at the end of the contract you pay the GFV(€1000) which is agreed at the beginning of the contract, the value of your car(€2000) is irrelevant for this.

Kenny Logins

FGR wrote: »

I'm sure it's been mentioned already but riddle me this.

Say you get a guaranteed future value which is extremely conservative (say €1000) when it turns out that your car, at pay up time, is really worth about €2000. Does that mean you have to pay a higher lump sum to keep the car or do you pay back a higher lump sum?

The difference between what's owed and what it's worth is yours. You owe a fixed amount, generally just under 40% of the new price.

FGR

I'm sure it's been mentioned already but riddle me this.

Say you get a guaranteed future value which is extremely conservative (say €1000) when it turns out that your car, at pay up time, is really worth about €2000. Does that mean you have to pay a higher lump sum to keep the car or do you pay back a higher lump sum?

sheff the ref

True enough, and there is room to negotiate between different Skoda garages too but I dont think I will move right now.

The last time I bought a new car there was significant variation between about 6 or 7 main dealer garages that I priced.

R.O.R

sheff the ref wrote: »

Certainly, 0% finance in any mans language represents a significant saving on the cost of a car.

The repayments cost of on €14,000 over three years would come to almost €1000 at 4.5%

I'm pretty sure you only get 0% finance on the list price with no discount. At standard finance rates you should be able to negotiate at least 1000 off list price on practically anything, except a Dacia.

sheff the ref

Got a quote there on the Octavia Elegance 1.6 Diesel with leather seats.

Car on the road price: €29,227

30% Deposit value: €8768

3 year payments:
20,000km per year 0% finance - €275 per month.
30,000km per year with 3.9% finance - €300 per month
10 cent per Kilometre over the limit

Final Payment/Future guaranteed value: €10,538

Unfortunately I would not do less than 40,000km per year which is only 25,000 miles per year.

sheff the ref

mickdw wrote: »

If they are giving low rate or 0 percent finance, it's hard to argue against the pcp regardless.

Certainly, 0% finance in any mans language represents a significant saving on the cost of a car.

The repayments cost of on €14,000 over three years would come to almost €1000 at 4.5%

mickdw

If they are giving low rate or 0 percent finance, it's hard to argue against the pcp regardless.

sheff the ref

mickdw wrote: »

You seem to be assuming that at the end of each term that there will be enough equity to give a good deposit and therefore keep repayments the same going forward.
In general, the low repayments are based on 30 percent deposit. I'm not so sure that the trade in will be worth gfv and 30 percent of the cost of the next car given alot of the figures I see meaning toy would need to come up with a lump sum to enable your next car to have the same low repayments.
No doubt it would be useful to see how people are fairing at the end of term.

Rang a dealer there who had advertised the Skoda Octavia in the weekend papers. The first issue is that the mileage (Is it time to update our slang to kilometres) allowance is 20,000km.

My current car is almost 4 years old and I am on target to average an annual mileage of 40,000km. There is no point in pretending to myself that I will keep under the 20,000km limit, I wont, and I wont have any desire to. It just will not happen. That will have a definite impact on the future deposit though opting for a cheaper car next time is also an option I guess

mickdw

sheff the ref wrote: »

Certainly there is merit to PCP allright, if you wish to drive a new car every 3 years for significantly less than regular repayments. Bear in mind the PCP plan also has servicing built into the payment. To me without looking at the pitfalls, it is a better option than buying an immaculate second hand car because the payments are still significantly less. In fact it seems like a no brainer if you are the type that would like to upgrade regularly.

You seem to be assuming that at the end of each term that there will be enough equity to give a good deposit and therefore keep repayments the same going forward.
In general, the low repayments are based on 30 percent deposit. I'm not so sure that the trade in will be worth gfv and 30 percent of the cost of the next car given alot of the figures I see meaning toy would need to come up with a lump sum to enable your next car to have the same low repayments.
No doubt it would be useful to see how people are fairing at the end of term.

sheff the ref

Bpmull wrote: »

I do see your reasoning behind it alright. I don't know of anyone that would take out an 8.5 % credit union loan on a new car when almost all major manufacturers are doing sub 4% Hp finance with a few even doing sub 2%. But I see what you mean you are looking at high repayments even at the lower interest rates.

I suppose Pcp suits a lot of people with the 300 euro repayments it just means you will always be repaying them if you are going to stay taking out a new car. I just personally don't like the system but then I wouldn't be into talking out a 5 year Hp loan as a 5 year loan on a car is ridiculous IMO unless your the type that keeps a car for 10 years. I think if you can't afford to pay for a car over 3 years 4 at a Max then you really can't afford the car in the first place but that just my view on it. I suppose Pcp is the only way your going to drive around in a new car for sub 300 a month.

Certainly there is merit to PCP allright, if you wish to drive a new car every 3 years for significantly less than regular repayments. Bear in mind the PCP plan also has servicing built into the payment. To me without looking at the pitfalls, it is a better option than buying an immaculate second hand car because the payments are still significantly less. In fact it seems like a no brainer if you are the type that would like to upgrade regularly.

sheff the ref

There is a lot to be said for it allright. However the only thing is that with PCP finance, if you are applying for a mortgage, for assessment purposes, you are deemed to be down the full amount of the PCP sum including the final fixed sum. That is a disadvantage if applying for a mortgage but once the mortgage is secured, it is no longer an issue

Limerick man wrote: »

When you're trading the car in in three years you don't have to tell them you're on Pcp finance you just get a trade in alllowance as you usually would. There are very few cars that are going to be worth 35 percent of their value after 3 years. I think people are seriously over complicating something that is a relatively simple process.

Bpmull

sheff the ref wrote: »

To buy a car worth €25,000 on a credit union loan (8.5%) over three years would cost €785 per month on repayment. Even lowering the interest rate would still mean €700+ on a 3 year loan. A 4 year loan would mean monthly payments of €612. A 5 year loan would mean monthly payments of €509 and at the end of that 5 years, you own a car but it is a 5 year old car with high mileage. Deduct the deposit/trade in and you have lower repayments but you are still paying a good bit more.

I do see your reasoning behind it alright. I don't know of anyone that would take out an 8.5 % credit union loan on a new car when almost all major manufacturers are doing sub 4% Hp finance with a few even doing sub 2%. But I see what you mean you are looking at high repayments even at the lower interest rates.

I suppose Pcp suits a lot of people with the 300 euro repayments it just means you will always be repaying them if you are going to stay taking out a new car. I just personally don't like the system but then I wouldn't be into talking out a 5 year Hp loan as a 5 year loan on a car is ridiculous IMO unless your the type that keeps a car for 10 years. I think if you can't afford to pay for a car over 3 years 4 at a Max then you really can't afford the car in the first place but that just my view on it. I suppose Pcp is the only way your going to drive around in a new car for sub 300 a month.

sheff the ref

Obviously would like to discuss with someone who has been on a PCP to see how they fared after three years. However the clear advantage is as follows

To buy a car worth €25,000 on a credit union loan (8.5%) over three years would cost €785 per month on repayment. Even lowering the interest rate would still mean €700+ on a 3 year loan. A 4 year loan would mean monthly payments of €612. A 5 year loan would mean monthly payments of €509 and at the end of that 5 years, you own a car but it is a 5 year old car with high mileage. Deduct the deposit/trade in and you have lower repayments but you are still paying a good bit more.

Most of these PCP plans for a car of that price are generally in the €250 to €300 a month bracket. Assuming you meet terms and conditions, it is possible to refresh your car every three years without putting your hand in your pocket for anything other than continuous repayments.

Obviously it will cost money if you put up too much mileage, get scratches etc. but in theory it is easy to see why PCP is attractive at first glance

Bpmull wrote: »

I suppose if you are the type that likes a new car every 3 years rather than holding on to it for a few years extra. I still don't see how it works out any cheaper than Hp assuming you get Hp on a reasonable rate which most are when going with the manufacture finance deal.

L-M

When you're trading the car in in three years you don't have to tell them you're on Pcp finance you just get a trade in alllowance as you usually would. There are very few cars that are going to be worth 35 percent of their value after 3 years. I think people are seriously over complicating something that is a relatively simple process.