PCP finance.

vintagevrs · 06-02-2016 06:34PM

Digiman is right though.

He currently owns a car worth 35 to 40k.

If he goes pcp with a 15k deposit on a 50K car he is effectively taking out a loan for 35k at a very low rate compared to the bank. If the garage value his car at 35k he will get a cheque for 20k. 35k minus his deposit.

He will get his loan for his extension at the low rate.

Obviouslyhe needs to have money in three years to keep his options open.

zizou_ · 06-02-2016 07:23PM

vintagevrs wrote: »

Digiman is right though.

He currently owns a car worth 35 to 40k.

If he goes pcp with a 15k deposit on a 50K car he is effectively taking out a loan for 35k at a very low rate compared to the bank. If the garage value his car at 35k he will get a cheque for 20k. 35k minus his deposit.

He will get his loan for his extension at the low rate.

Obviouslyhe needs to have money in three years to keep his options open.

There's a lot for Digiman to consider because he's mixing his car financing with the house extension so we'll never work it out here.

Maybe it's the terminology we disagree on but a traditional loan/HP finance for 20k over 3 years will be repaid in full after the three years. In this case Digiman is getting the 20k at a low rate but he still has a liability after 3 years unless he hands his 55k car back.

I don't think you can decide if PCP is actually a good option in this scenario unless you decide where you will be at after 3 years.

06-02-2016 07:45PM

I'd just go with the lowish deposit, low monthly payments, keep the cash in case it's needed.

Senecio · 06-02-2016 09:01PM

I can't see any garage giving a cheque for the difference. Surely you'll have to sell it privately and that could be a challenge at that value.

Drummerboy08 · 06-02-2016 09:15PM

Senecio wrote: »

I can't see any garage giving a cheque for the difference. Surely you'll have to sell it privately and that could be a challenge at that value.

Everygarage will write a cheque for the balance. That's how it works.

vintagevrs · 06-02-2016 09:15PM

I know someone who did just that. If your trade in is greater than max deposit amount. Makes no odds to garage. They get paid by finance company.

JoeA3 · 06-02-2016 09:16PM

Senecio wrote: »

I can't see any garage giving a cheque for the difference. Surely you'll have to sell it privately and that could be a challenge at that value.

That's exactly what they'll do.

I bought a new VW on PCP last year. My trade in was fully paid for and worth approx 29k. However the max deposit I could give was 15k. So on collection day, the dealers wrote me a cheque for 14k and I drove away in my new wheels.

The key is, I need to be careful to stow away that 14k in order to ensure I've plenty to cover the balloon / GMFV in 2018...

jca · 06-02-2016 09:49PM

JoeA3 wrote: »

That's exactly what they'll do.

I bought a new VW on PCP last year. My trade in was fully paid for and worth approx 29k. However the max deposit I could give was 15k. So on collection day, the dealers wrote me a cheque for 14k and I drove away in my new wheels.

The key is, I need to be careful to stow away that 14k in order to ensure I've plenty to cover the balloon / GMFV in 2018...

How much was the new car? Why didn't you use the full 29k as a deposit and pay the remainder on traditional finance, at the end you'll own your car rather than trying to "sit" on 14k for 3 years.

Drummerboy08 · 06-02-2016 10:00PM

jca wrote: »

How much was the new car? Why didn't you use the full 29k as a deposit and pay the remainder on traditional finance, at the3 end you'll own your car rather than trying to "sit" on 14k for 3 years.

You'll pay a lot more in interest for a start. Like, 4k more over the course of a loan.

PCP the car on a low APR and put the funds for the GFV away into a locked account for 3 years.

Pay GFV in 3 years time, own car, have availed of a low APR rate, everyone is happy.

jca · 06-02-2016 10:11PM

Drummerboy08 wrote: »

You'll pay a lot more in interest for a start. Like, 4k more over the course of a loan.

PCP the car on a low APR and put the funds for the GFV away into a locked account for 3 years.

Pay GFV in 3 years time, own car, have availed of a low APR rate, everyone is happy.

That makes sense alright. I hope others entering into these pcp deals are as sensible. I can see a lot of unhappy people in 2018/19 when they think they can just stroll down to their dealer and pick their new car without putting their hand in their pocket. I think there will be a lot of higher interest refinancing deals being done instead.

JoeA3 · 06-02-2016 10:14PM

jca wrote: »

How much was the new car? Why didn't you use the full 29k as a deposit and pay the remainder on traditional finance, at the end you'll own your car rather than trying to "sit" on 14k for 3 years.

Because it would have cost more. I did all the numbers at the time. The 1.9% APR could not be beaten. I've locked the 14k away in a post office 3-year savings account where it'll earn a few quid in interest.
New car was approx €49k.

vintagevrs · 06-02-2016 10:18PM

There is a saving in the example above doing pcp as vw pcp rate is/was 1.9%, but it nowhere near 4k!

Max deposit was 15k so let's assume the car is 45k ish as max deposit is about a third. Borrowing 30k at 1.9% is not 4k cheaper than borrowing 16k at 5.9%.

Saving of approx 700 euro at a guess. Still a saving mind you and that excludes the benefit of having cash in your own account or working for you in some way.

JoeA3 · 06-02-2016 10:21PM

Yeah the saving was nowhere near 4K, but it was significant enough, near 1k or thereabouts anyway.

zizou_ · 06-02-2016 10:48PM

vintagevrs wrote: »

Max deposit was 15k so let's assume the car is 45k ish as max deposit is about a third. Borrowing 30k at 1.9% is not 4k cheaper than borrowing 16k at 5.9%.

Not sure if I've picked you up wrong but you're not borrowing 30k in this example. Under PCP the finance amount is 30k - GMFV @ 1.9%. This could explain the 4k difference mentioned above but it's like comparing apples and oranges.

JoeA3 · 06-02-2016 10:54PM

zizou_ wrote: »

Not sure if I've picked you up wrong but you're not borrowing 30k in this example. Under PCP the finance amount is 30k - GMFV @ 1.9%. This could explain the 4k difference mentioned above but it's like comparing apples and oranges.

You don't subtract the GMFV. That's part of the total overall borrowing. That lump on the end is just another loan repayment, albeit a big one.

For example... The loan repayment is agreed as follows:
36 * 400 + 1 * 14k.

zizou_ · 06-02-2016 11:37PM

JoeA3 wrote: »

You don't subtract the GMFV. That's part of the total overall borrowing. That lump on the end is just another loan repayment, albeit a big one.

For example... The loan repayment is agreed as follows:
36 * 400 + 1 * 14k.

Maybe i wasn't clear. The point i was making is that the interest rate is only charged on 30k - GMFV in that example.

If the GMFV is paid after 3 years it should be included in the overall cost of borrowing.

Senecio · 06-02-2016 11:41PM

JoeA3 wrote: »

That's exactly what they'll do.

I bought a new VW on PCP last year. My trade in was fully paid for and worth approx 29k. However the max deposit I could give was 15k. So on collection day, the dealers wrote me a cheque for 14k and I drove away in my new wheels.

The key is, I need to be careful to stow away that 14k in order to ensure I've plenty to cover the balloon / GMFV in 2018...

I learn something new every day. I really wouldn't have thought they would write a cheque for the difference.

vintagevrs · 06-02-2016 11:44PM

Iv read that about 4 times now and I still can't make any sense of what you just said. Your last two posts contradict themselves.

zizou_ · 06-02-2016 11:51PM

vintagevrs wrote: »

Iv read that about 4 times now and I still can't make any sense of what you just said. Your last two posts contradict themselves.

I presume you mean me

- my second post is edited now thanks. I may be wrong but at least I'm consistent!

vintagevrs · 07-02-2016 12:04AM

Still not making sense to me. However you pay interest on the balloon payment or gfv as it's known in pcp.

The finance is separate from the dealer even if it's all labeled under the same marque.

Buy a car for 30k. Pay 10k deposit on pcp and sort out whatever monthlies and final payment.

Dealer still needs 30k day one, so you finance the full 20k and the APR applies to that amount. Hope that makes sense

flamegrill · 07-02-2016 12:21AM

vintagevrs wrote: »

Still not making sense to me. However you pay interest on the balloon payment or gfv as it's known in pcp.

The finance is separate from the dealer even if it's all labeled under the same marque.

Buy a car for 30k. Pay 10k deposit on pcp and sort out whatever monthlies and final payment.

Dealer still needs 30k day one, so you finance the full 20k and the APR applies to that amount. Hope that makes sense

That's not correct.

Look back a few pages where I explained how PCP works, exactly.

It's Total Car Value - GMFV - Deposit = finance amount. This is the _entire_ reason PCP is much cheaper than HP.

It's also the reason why the GMFV is a baloon payment at the end as 1 of your 3 options. You'll pay interest on that if you finance it, but not during the 3 years of PCP.

Simples.

zizou_ · 07-02-2016 12:41AM

flamegrill wrote: »

That's not correct.

Look back a few pages where I explained how PCP works, exactly.

It's Total Car Value - GMFV - Deposit = finance amount. This is the _entire_ reason PCP is much cheaper than HP.

It's also the reason why the GMFV is a baloon payment at the end as 1 of your 3 options. You'll pay interest on that if you finance it, but not during the 3 years of PCP.

Simples.

That's the only way that makes sense tbh. The industry definition for 'finance amount' is Total Car Value - Deposit which just confuses things.

E.g. Kia http://www.kiacredit.ie/

Rusky rusky · 07-02-2016 12:58AM

flamegrill wrote: »

That's not correct.

Look back a few pages where I explained how PCP works, exactly.

It's Total Car Value - GMFV - Deposit = finance amount. This is the _entire_ reason PCP is much cheaper than HP.

It's also the reason why the GMFV is a baloon payment at the end as 1 of your 3 options. You'll pay interest on that if you finance it, but not during the 3 years of PCP.

Simples.

Interest is paid on total car value - deposit. GMVF is the same for any deposit, but the interest will decrease with a bigger deposit. My car is on pcp.

flamegrill · 07-02-2016 01:02AM

Rusky rusky wrote: »

Interest is paid on total car value - deposit. GMVF is the same for any deposit, but the interest will decrease with a bigger deposit. My car is on pcp.

This is not correct.

You can't pay interest on the GMFV. It's not part of the finance equation when it comes to interest.

It's value - deposit - GMFV / 36 monthly payments + interest.

As the GMFV is a balloon payment to own the car after 3 years there is no interest on it. It's like a settlement figure for HP. There is no interest.

Just so we are clear, not every pcp contract is identical.

mickdw · 07-02-2016 01:08AM

Ah for gods sake.
you borrow the full price of the car less deposit. You pay interest on everything you borrow. Just cause you don't pay back a portion of it til the end doesn't mean that you are not paying interest on it.
Who do you think is funding the car people are stocking around in? Do you think it hasn't actually been paid for up front. Of course it has.

flamegrill · 07-02-2016 01:10AM

flamegrill wrote: »

Lets break down PCP once again, from the beginning.

Car (SV) is 30,000 euro. Deposit (DP), 10%, 3000 euro.
GFV: 12,500 euro
Finance cost (FC): 1,500 euro
Term: 36 months
We do the following math to get the finance amount.

(SV - DP - GFV + FC) / Term.

So in this example:

30000 - 3000 - 12500 + 1500 / 36 = 445 euro

Essentially, the finance is not for the 'amount financed' that the quotes say, it's essentially the depreciation or the 'worst depreciation possible' that the finance house is willing to accept.

It's not quite a lease, but it's not quite a loan either. It's a hybrid of the two. It allows a consumer to 'have use of a car' for 3 years that could probably be too expensive for them to own on hire purchase. it also means that manufacturers are guaranteeing churn on new cars every 3 years and thus making a market for new cars.

I hope this helps.

Example above. Based on Skoda pcp.

sunnysoutheast · 07-02-2016 01:11AM

flamegrill wrote: »

That's not correct.

Look back a few pages where I explained how PCP works, exactly.

It's Total Car Value - GMFV - Deposit = finance amount. This is the _entire_ reason PCP is much cheaper than HP.

It's also the reason why the GMFV is a baloon payment at the end as 1 of your 3 options. You'll pay interest on that if you finance it, but not during the 3 years of PCP.

Simples.

No.

The "GMFV" or balloon payment is an interest-only loan with no capital repayment element, which is the reason the monthly payments are lower.

For this reason a PCP will actually work out more expensive over a given term than a straightforward loan, but with a lower monthly payment amount.

Of course the balloon payment is the kicker which effectively means most people roll over into a new PCP.

Rusky rusky · 07-02-2016 01:16AM

flamegrill wrote: »

This is not correct.

You can't pay interest on the GMFV. It's not part of the finance equation when it comes to interest.

It's value - deposit - GMFV / 36 monthly payments + interest.

As the GMFV is a balloon payment to own the car after 3 years there is no interest on it. It's like a settlement figure for HP. There is no interest.

Just so we are clear, not every pcp contract is identical.

From consumer hire purchase agreement
1. cash price
2. Deposit/ part exchange
3. Settlement
4. Amount financed (1-2)+3
5. Interest charge
6. Document fee
7. Completion fee
8. Total repayable (4+5+6+7)
9. Hire purchase price (1+5+6+7)

Schedule of payment
1 instalment including document fee
35 monthly instalments
1 instalment - ballon payment + completion fee

flamegrill · 07-02-2016 01:18AM

Rusky rusky wrote: »

From consumer hire purchase agreement
1. cash price
2. Deposit/ part exchange
3. Settlement
4. Amount financed (1-2)+3
5. Interest charge
6. Document fee
7. Completion
8. Total repayable (4+5+6+7)
9. Hire purchase price (1+5+6+7)

Schedule of payment
1 instalment including 6
35 instalments monthly
1 instalment - ballon payment

Pcp is not hire purchase. You never own the car. You're essentially leasing it for a term.

Rusky rusky · 07-02-2016 01:26AM

flamegrill wrote: »

Pcp is not hire purchase. You never own the car. You're essentially leasing it for a term.

I'm fully aware that I don't own the car until I clear the last payment. Pcp is a form of hire purchase. Can't post any urls but the first link in Google when searching for pcp leads to the consumer help site. Have a look

PCP finance.

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