PCP finance.

mickdw · 17-03-2016 09:59AM

I'd say in this case if you planning on keeping the car after the 3 years you are better just dinar the 17 over 5 years and be done with it.
From what I've seen, the zero interest finance is only available in very limited circumstamces with vw and audi so I don't think you will get better than 5.9 on a 3 year old audi.
I'd run the figures on new cars too. With your 10k deposit, you have alot of options.

donkey balls · 17-03-2016 01:58PM

Thanks for the reply guys,I haven't actually asked the dealership about the PCP on a 131 reg car,I just saw on their website used car PCP so I assumed that it was for any year.
I will drop in and see what they can offer me regarding used PCP or normal finance packages,And compare them to a bank loan.

donkey balls · 19-03-2016 01:55PM

Just a quick up date I can get PCP on the used car,But I'm more so steering towards a normal finance package over 5 years.
I managed to get an A4 with 22000km on the clock 131D reg the car was hardly used.

Fiskar · 19-03-2016 02:00PM

donkey balls wrote: »

Just a quick up date I can get PCP on the used car,But I'm more so steering towards a normal finance package over 5 years.
I managed to get an A4 with 22000km on the clock 131D reg the car was hardly used.

Nice one, what did you trade in against it and was it a main dealer? Looking and deciding on my yoke at the mo.

sheff the ref · 19-03-2016 04:46PM

donkey balls wrote: »

Just a quick up date I can get PCP on the used car,But I'm more so steering towards a normal finance package over 5 years.
I managed to get an A4 with 22000km on the clock 131D reg the car was hardly used.

Mileage very low for a three year old car

donkey balls · 19-03-2016 07:43PM

Fiskar wrote: »

Nice one, what did you trade in against it and was it a main dealer? Looking and deciding on my yoke at the mo.

Main dealer selling my car private.

donkey balls · 19-03-2016 07:46PM

sheff the ref wrote: »

Mileage very low for a three year old car

Yeah it is for a diesel I'm buying from a main dealer where the car was originally purchased,Seemingly it was a lady who owned it and use it as a run about.

millix · 25-03-2016 01:17PM

This is a very useful thread. This question may have been answered earlier but I can't find it if it has. I can't understand how the quoted APR 3.9% applies here. Am I missing something obvious ?

VW bank is quoting PCP examples for 2016 cars - e.g.

Passat Estate Trendline 1.4TSI 125HP OTRP €30,170.
Deposit / Part Exchange €9,087.18.
36 monthly payments of €309. APR 3.9%.
Optional Final Payment €11,758.
Total cost of credit €1,949.18*. ( includes €150 fees at start and finish )

Is the following correct

* FINANCED AMOUNT= OTRP - DEPOSIT = 30170-9087=21083
* Interest only repayments on FINALPAYMENT over 36 months = X
* Interest + Principal repayments on OTRP-DEPOSIT-FINALPAYMENT over 36 months = Y
* repay X+Y over 36 months, in equal instalments, leaving FINALPAYMENT to be made at the end of the 36 months

in the above case VW calculates X+Y to be 11124 ( = 36*309)

I wanted to make an excel model of this to see the effect of a different deposit but I can't seem to get these numbers using an APR of 3.9%, so maybe my assumptions above * are not correct.

Thanks for any insight - M

mickdw · 25-03-2016 02:24PM

millix wrote: »

This is a very useful thread. This question may have been answered earlier but I can't find it if it has. I can't understand how the quoted APR 3.9% applies here. Am I missing something obvious ?

VW bank is quoting PCP examples for 2016 cars - e.g.

Passat Estate Trendline 1.4TSI 125HP OTRP €30,170.
Deposit / Part Exchange €9,087.18.
36 monthly payments of €309. APR 3.9%.
Optional Final Payment €11,758.
Total cost of credit €1,949.18*. ( includes €150 fees at start and finish )

Is the following correct

* FINANCED AMOUNT= OTRP - DEPOSIT = 30170-9087=21083
* Interest only repayments on FINALPAYMENT over 36 months = X
* Interest + Principal repayments on OTRP-DEPOSIT-FINALPAYMENT over 36 months = Y
* repay X+Y over 36 months, in equal instalments, leaving FINALPAYMENT to be made at the end of the 36 months

in the above case VW calculates X+Y to be 11124 ( = 36*309)

I wanted to make an excel model of this to see the effect of a different deposit but I can't seem to get these numbers using an APR of 3.9%, so maybe my assumptions above * are not correct.

Thanks for any insight - M

If you apply the interest rate to the overall outstanding reducing monthly borrowing you will get very close to vw figures. Your repayment should then be such that after 36 months, the balloon amount is outstanding.

ajamesr · 26-03-2016 09:17AM

I think with PCP, one of the main things to consider is how your initial deposit will be eaten into over the 3 years - which all comes down to how realistic the GMV is.
You want a low GMV - a higher GMV (one that will be very close to the actual final value of the car on trade in) is not good. A higher GMV will mean lower monthly repayments, but you will get stung at the end of the 3 years. Because the equity in the car will not be much.

Say the car is 30000 - and the GMV is 14000, this is not good for you. You should expect 50% loss in value over 3 years. So your car may well only fetch 15000 from a trade in. So the future equity in this car is 1000. Thats not good after 3 years, especially if you put the max 30% deposit of 9000 down at the beginning.
You will have LOST 8000 in equity - but your monthly repayments where way cheaper - so were you disciplined enough to safe that difference for your next deposit?

Now lets say they gave a GMV of 10000 - well now this is good for you long term. You will now have 5000 equity in the car at the end of 3 years, so in this case just put 5000 deposit down (about 16%) and you will not lose any equity over the 3 years - but your monthly repayments will be more. But these monthly repayments are a much fairer reflection of what the car is costing you. You are effectively paying for the depreciation over the 3 years.

My point is, for PCP to work for you, you really need to only put in a deposit that is equal to the difference between the GMV and actual expected trade in value of the car after 3 years (usually 50%). If based on this amount of a deposit, you cant afford the monthly repayments, then PCP is probably going to hurt in the long run.

You may even get lucky and the GMV is 10000, and after 3 years you might get offered 17000 for a low milage well looked after car, so now you have not only your initial 5000 back but 2000 on top of it.

The only control you have in the PCP arrangement is the deposit you start with. We are so used to thinking that a large deposit up front is good as it will bring down repayments over the term of the loan - but that only works for 100% loans. PCP works different. Keep your deposit at between 15% & 20%. 30% will reduce your monthlys but you will get stung on the trade in after 3 years. Your 30% deposit will have been eaten into.

So take 50% of the total cost of the car, subtract the GMV they are projecting and that should be the max deposit you put down in order to not lose equity over the 3 years. With any luck, doing it this way should even put a little equity your way towards the next car.

vintagevrs · 26-03-2016 09:31AM

That all makes sense, and is good idea if the apr is 0%. Not the cheapest way if its not 0%. If the apr is 4% for example, a higher deposit means you are financing less and therefore less interest will be paid making the cost of ownership cheaper. As you say though, if your expected equity is going to be low you need to be wary of where that may leave you in three years time.

Your point around putting in a deposit reflective of future equity is a good one though. As you said, if the monthlies with the low deposit are too high, maybe you should look for a less expensive car.

sheff the ref · 26-03-2016 04:33PM

The three years time thing is a gamble.

However I have been told on my new 0% PCP that they will refinance the remaining lump sum at the end of the three years if the value of the car wont provide enough equity to start a new deal. This is subject to credit ratings etc. of course but was told that any refinancing would most likely not be at 0%, even though the 0% may still be available on a new car

In any event, my preferred option would be a new car at the same payments.

Drummerboy08 · 26-03-2016 05:15PM

With VW Bank they will refinance the GFV after 3 years at 6.9%.

ajamesr · 27-03-2016 09:58AM

Does anyone know how it works when a 0% PCP offer comes along but you want to order a car that may take 6 months before delivery?
Usually the 0% offers include the clause that you must order before 31st of Jan (for example) and register before 31st March. But if I order before 31st Jan and car doesn't arrive until June sometime - what % am I tied into?
Does the 0% offer therefore just tie you into whatever is readily available in the country and not your specific custom build that you want from the factory?

sheff the ref · 27-03-2016 11:27PM

I had to order and they had to register the car by the end of February. That meant that the car had to be taxed for February with arrears even though I only have it 2 weeks tomorrow.

However they had to get special clearance from Seat Ireland for that as there happened to be a car in the country. Otherwise I would not have been eligible for 0% finance as there would have been a 2-3 month wait for a car.

Best to act early if going with 0% finance deals

ajamesr wrote: »

Does anyone know how it works when a 0% PCP offer comes along but you want to order a car that may take 6 months before delivery?
Usually the 0% offers include the clause that you must order before 31st of Jan (for example) and register before 31st March. But if I order before 31st Jan and car doesn't arrive until June sometime - what % am I tied into?
Does the 0% offer therefore just tie you into whatever is readily available in the country and not your specific custom build that you want from the factory?

sheff the ref · 27-03-2016 11:38PM

If offered a new car at 0% it would probably be a better deal than 6.9% to pay off what I have depending on equity created above GFV

Drummerboy08 wrote: »

With VW Bank they will refinance the GFV after 3 years at 6.9%.

ajamesr · 28-03-2016 08:34AM

sheff the ref wrote: »

If offered a new car at 0% it would probably be a better deal than 6.9% to pay off what I have depending on equity created above GFV

I think PCP @ 0% is almost an unbelievable offer. Take the 30,000 car example. Pay a 5000 deposit (& at the moment in the UK SKoda are contributing a 1000 to the deposit on top of the 0% offer & a further 500 cash back) And the GV will probably be around 11000 - So you are making payments on 14000 for 3 years at 0% - which is about 390 a month.
Say you squirrel away another 100 a month on average - at the end of 3 years you will owe the GMV of 11000 but if you put the 100 a month away you can pay about 4000 of that straight away leaving you owing about 7000 for a 30000 -within a 3 year period !
Would you give 7000 for a 3 year old car that was worth 30000 new? Absolutely. You could even finance that 7000 the old fashioned way at a bank or credy - @ 6.9% over 3 years - about 200 a month.

Finance that 25000 through a bank at 6.9% over 4 years even - about 600 a month for 4 years.
Even if you finance it over the same 6 years (if you can get it) as I use in the PCP example - its still just over 420 a month EVERY month for 6 years.

Credit cost on the normal finance option - 5400
Credit cost on the 0% PCP option with 3 year normal finance at end - 750

Drummerboy08 · 28-03-2016 08:41AM

sheff the ref wrote: »

If offered a new car at 0% it would probably be a better deal than 6.9% to pay off what I have depending on equity created above GFV

Yes probably but even if your intentions are to keep the car from day one it's still cheaper to pcp it on 0% and then financethe balance at 6.9% than it is to buy on HP.

ajamesr · 28-03-2016 08:48AM

ON another note with regard to equity in a PCP bought car - it will never be over 20% of the starting value of the car.
Again using the example of a 30000 car. 20% is 6000. You will be doing well to have equity of 6000 after the 3 years, no matter how large the deposit you put down to begin with. In fact the deposit will not impact the equity one bit, the deposit will only affect your monthly repayments. WHY?
Simple maths. Its rate of depreciation V's the GMV

Over 3 years a car is estimated to lose about 50% of its value. This is an average and can be more or less depending on many circumstances - has a new model come out, was the market flooded, did they have recall or reliability issues, were they well reviewed, are they selling well in second hand market etc etc thats before we get to how well you kept it and how much mileage you piped on.

The GMV will usually be set around 38% (which is what you want) to about 43% - (although I have seen higher by some manufactures to keep the monthlies down, but its false economy)

So mathematically the only equity you can have in the car is the % difference between the GMV and rate of depreciation. If your car depreciates by say 45%, well then you have 55% equity left - but the GMV needs to taken from that now. So if your GMV was set at 38%, you now have 17% equity.

If you do well and the car drops in value by only 40% - you have 60% equity left. And say your GMV was at 40% - you now have 20% equity.
You would be doing really well to get above 20% and I reckon you should plan for about 15%.

You will of course know the GMV going in, the only thing you can't really be sure of is the depreciation over 3 years. But you will have a fair idea of that if you do a little research.

kefir32 · 28-03-2016 11:39AM

Are the 0% or circa 3% PCP finance deals usually offered on models that are well into their cycle, for instance I notice the 5 series BMW is on offer, I know thats up for replacement next year or 18 mths but an X5 will usually have a much higher rate being a relatively new model.

mickdw · 28-03-2016 01:14PM

Well you would imagine if stuff is flying out the door that you won't get good offers but vw are doing 0 percent on very fresh models

ajamesr · 29-03-2016 08:52AM

Has anyone tried negotiating with VW Bank on an existing PCP contract? Say you are 2 years into a 3 year PCP deal and fancy changing again. Say you got 0% on the original PCP but at the moment the rate is 3.9% on the vehicle you want. I wonder could you negotiate direct with VW Bank to renew your 0% PCP for another 3 years on the vehicle you want to upgrade to?
I would think they would be happy to tie you into another 3 years and in all likelihood they will probably be offering 0% at some stage in the future anyway so why not give it to you early.

sheff the ref · 29-03-2016 03:35PM

0% is strict enough. Garage dont have the final say on it, it is the Irish headquarters

Wouldnt see them continuing the 0%

Basically what changing after 2 years means is that you have one year of payment left on the car so it is the GFV plus one year that is owed. In some ways it may make more sense to change after 2 years rather than 3. Less mileage, a car worth more to a dealer on the secondhand market and a new car again for yourself

ajamesr wrote: »

Has anyone tried negotiating with VW Bank on an existing PCP contract? Say you are 2 years into a 3 year PCP deal and fancy changing again. Say you got 0% on the original PCP but at the moment the rate is 3.9% on the vehicle you want. I wonder could you negotiate direct with VW Bank to renew your 0% PCP for another 3 years on the vehicle you want to upgrade to?
I would think they would be happy to tie you into another 3 years and in all likelihood they will probably be offering 0% at some stage in the future anyway so why not give it to you early.

Shefwedfan · 31-03-2016 07:59PM

OK so I never really looked into PCP, my plan was to head to UK and buy a car but it is just not working out for me.

I am looking at people carrier. Got a quote from Peugeot for the 5008 and also from Ford for the SMAX.

The first Ford dealer I talked to said the best way to use PCP is to go in at minimum deposit, see section below. Is this correct? I also asked the Peugeot dealer and they said similar as the money used for the deposit justs decreases the monthly repayment but in 3 years time it is gone so pointless paying up front....

Is this correct? or they spinning a story?

Please note, it is usually recommended that the deposit is made at a lower amount as it affects your equity for the next car – PCP is better when planned in the very long run, for more than a single vehicle.
Because of the intricacy of the process, I’d suggest coming down for a visit where we’d be able to show you both S-Max units in stock, used and new, and go through the PCP options available to you.

ajamesr · 31-03-2016 09:00PM

Fair play to this sales guy, he is spot on. He is looking long term where it might be easier to sell it at the temptation of lower monthly payments, but long term you will have no equity in the car. My take on it is no more than 20% deposit.
The GMV is usually set around the 40% mark, if the car depreciates by 40% over the three years, you have your 20% still in equity in the car. So your payments have been covering the depreciation but your deposit is still safe for you next car.
You might even have a bit more than that in equity if the car has low KM's and is in good shape etc. Any more of a deposit will only lower your monthlies but not increase your equity in the car at the end of 3 years. Thats just the way PCP works.

ajamesr · 31-03-2016 10:14PM

I'm thinking of trading my PCP car after 2 years and going again. This time around I want to order a car built to my specs rather than whats available.
My understanding is that I could be waiting 3 or 4 months for the car to arrive. So how does it work in the meantime?
I understand I can agree a sales price for the car I want, but how do we agree trade in price? Is it when I place the order, or is it when the ordered car arrives in 4 months time?
And when is the the new PCP agreement sorted? Because obviously I will make 4 more payments before new car arrives, which will be about €1700.

And just to help me negotiate - the car I have is currently selling at dealers for about €22,500 - if mine will likewise be on sale in the dealers yard for 22,500 in a few weeks, how much should I expect to get from dealer? The car is 3 months shy of 2 years old, still under warranty and needs nothing done to it. Could literally take it from me and put on forecourt.

Lantus · 31-03-2016 10:16PM

Correct. The ideal deposit will set you up with a monthly payment that will be consistent running into the next 3 year period. The equity which is the extra value of the car which forms your next deposit is going to be the same regardless of your initial deposit to monthly ratio. So giving the dealer a huge deposit up front will artificially reduce the monthly payment but is not sustainable.

E.g. your deposit is 2k and monthly is 300. After 3 years the equity is also 2k. Happy days the next 3 year monthly is 300.

If your deposit was 4k and monthly 150. After 3 years your equity is still 2k and so your monthly will now rise to 300 unless you inject 2k cash to retain the lower level.

The best approach for long term stability is to match the deposit to the predicted equity.

sheff the ref · 31-03-2016 11:09PM

Injecting 2k in cash after 3 years is not a bad way of upgrading to a new vehicle!!!

Lantus wrote: »

Correct. The ideal deposit will set you up with a monthly payment that will be consistent running into the next 3 year period. The equity which is the extra value of the car which forms your next deposit is going to be the same regardless of your initial deposit to monthly ratio. So giving the dealer a huge deposit up front will artificially reduce the monthly payment but is not sustainable.

E.g. your deposit is 2k and monthly is 300. After 3 years the equity is also 2k. Happy days the next 3 year monthly is 300.

If your deposit was 4k and monthly 150. After 3 years your equity is still 2k and so your monthly will now rise to 300 unless you inject 2k cash to retain the lower level.

The best approach for long term stability is to match the deposit to the predicted equity.

Shefwedfan · 01-04-2016 07:31AM

ajamesr wrote: »

Fair play to this sales guy, he is spot on. He is looking long term where it might be easier to sell it at the temptation of lower monthly payments, but long term you will have no equity in the car. My take on it is no more than 20% deposit.
The GMV is usually set around the 40% mark, if the car depreciates by 40% over the three years, you have your 20% still in equity in the car. So your payments have been covering the depreciation but your deposit is still safe for you next car.
You might even have a bit more than that in equity if the car has low KM's and is in good shape etc. Any more of a deposit will only lower your monthlies but not increase your equity in the car at the end of 3 years. Thats just the way PCP works.

Thanks for info

I was putting in around 25-30% deposit.

Am I better off then just sticking to 10%?

Shefwedfan · 01-04-2016 07:51AM

I have the numbers for SMAX.

Min Deposit
Price: €33,750
Deposit: €3,723
Repayment: €563.47
APR 6.5%
GMV: €13,988
Interest: €4,256.65

8k Deposit
Price: €33,750
Deposit: €8,000
Repayment: €432.76
APR 6.5%
GMV: €13,988
Interest: €3,891

The 8k number is just one I picked from top of my head but for the SMAX it is probably around 20%

PCP finance.

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