PCP finance.

26000 Elephants · 18-04-2016 02:18PM

TiltedBrain wrote: »

Any examples of the less interest on older cars finance?

You pay less interest on the reduced principle.

I'm not talking about rates.

e.g you will pay less interest on €3k over 2 yrs @ 9% than you will on €14k over 3 years @ 5.9%

SteelyDanJalapeno · 18-04-2016 02:22PM

26000 Elephants wrote: »

You pay less interest on the reduced principle.

I'm not talking about rates.

That makes no sense then, you're paying more interest, it's basic maths, forget perceived values of the cars for a minute.

The finance cost is a lot more on older cars.

26000 Elephants · 18-04-2016 02:30PM

TiltedBrain wrote: »

That makes no sense then, you're paying more interest, it's basic maths, forget perceived values of the cars for a minute.

The finance cost is a lot more on older cars.

How do you pay more interest? You are borrowing significantly less, over a shorter period of time.

Work it out. My maths are correct.

grogi · 18-04-2016 02:42PM

26000 Elephants wrote: »

You pay less interest on the reduced principle.

I'm not talking about rates.

e.g you will pay less interest on €3k over 2 yrs @ 9% than you will on €14k over 3 years @ 5.9%

Not to forget that with PCP your average debt over the whole period is not ~50% of the whole financed amount.

26000 Elephants · 18-04-2016 02:57PM

grogi wrote: »

Not to forget that with PCP your average debt over the whole period is not ~50% of the whole financed amount.

A PCP for a €16k Kia Rio costs €500 per year in interest. (based on 20% deposit) €1500 total

A €3000 loan over 2 years at 9.9%APR costs €150 per year. €300 total.

grogi · 18-04-2016 03:08PM

26000 Elephants wrote: »

A PCP for a €16k Kia Rio costs €500 per year in interest. (based on 20% deposit) €1500 total

A €3000 loan over 2 years at 9.9%APR costs €150 per year. €300 total.

Compare apples to apples, new and 3-year old

I am pulling those numbers out of a hat:
* New on PCP 3years: 5.9% APR, Price €25000, Deposit 20%: €5000, GFV €10000.
* Used 3-year-old HP 3 years: 9.9% APR, Price €15000, Deposit €5000.

So, the financing cost looks like that:
* PCP works out at €353/month, total cost is then €27708; PCP alone costed €2708.
* HP works out at €320/month, total cost is €16520; HP costed €1520.

However, with same APR HP would be even more cheaper:
* HP@5.9% works out at €303/month, total cost is €15908; HP costed €908.

Even HP for new car costs less, at the extortion rate of 9.9% is almost comparable to PCP@5.9.
* HP@5.9% @ €20000: €606/month, total cost is €26816. Financing costs €1816.
* HP@9.9% @ €20000: €640/month, total cost is €28040. Financing costs €3040.

To sum up: IMHO the PCP is a very expensive way to finance the car... At comparable APR the HP will always be cheaper overall.

Gael23 · 18-04-2016 03:10PM

Is PCP available on used cars?

26000 Elephants · 18-04-2016 03:22PM

grogi wrote: »

Compare apples to apples, new and 3-year old

I am pulling those numbers out of a hat:
* New on PCP 3years: 5.9% APR, Price €25000, Deposit 20%: €5000, GFV €10000.
* Used 3-year-old HP 3 years: 9.9% APR, Price €15000, Deposit €5000.

* PCP works out at €353/month, total cost is then €27708; PCP alone costed €2708.
* HP works out at €320/month, total cost is €16520; HP costed €1520.

However, with same APR HP would be even more cheaper:
* HP@5.9% works out at €303/month, total cost is €10908; HP costed €908.

Even HP for new car costs less:
* HP@5.9% @ €20000: €606/month, total cost is €26816. Financing costs €1816.
* HP@9.9% @ €20000: €640/month, total cost is €28040. Financing costs €3040.

Ah, you corrected before I got a chance to!!

grogi · 18-04-2016 03:23PM

26000 Elephants wrote: »

Ah, you corrected before I got a chance to!!

I used a dodgy calculator at first, some things weren't adding up

26000 Elephants · 18-04-2016 03:29PM

grogi wrote: »

Compare apples to apples, new and 3-year old

Ok, I admit to a little hyperbole with my example - but its not as outlandish as it seems.

Based on Falcon L's payments, all he could afford _sustainably_ was something like a kia rio or dacia sendero ( with a bit of kit) Even a poverty spec Fiesta was out of his league.

The deposit for the PCP was €3200, so lets assume we have that burning a hole in our pocket.

I gave an example of a 131 Sendero for €5995. Pay the €3200 upfront, and you are left financing €2795. Thats where I got my figure from.

An extreme example, but still illustrative.

Falcon L · 18-04-2016 03:34PM

26000 Elephants wrote: »

Ok, I admit to a little hyperbole with my example - but its not as outlandish as it seems.

Based on Falcon L's payments, all he could afford _sustainably_ was something like a kia rio or dacia sendero ( with a bit of kit) Even a poverty spec Fiesta was out of his league.

The deposit for the PCP was €3200, so lets assume we have that burning a hole in our pocket.

I gave an example of a 131 Sendero for €5995. Pay the €3200 upfront, and you are left financing €2795. Thats where I got my figure from.

An extreme example, but still illustrative.

LOL Wwwwronggg. You can do better. Just a little more effort and I'll award you 4/10.

26000 Elephants · 18-04-2016 03:40PM

Falcon L wrote: »

LOL Wwwwronggg. You can do better. Just a little more effort and I'll award you 4/10.

cool, bro! :pac:

mickdw · 18-04-2016 03:48PM

26000 Elephants wrote: »

We are on the same hymn sheet so far.

Bit of depreciation - as opposed to the new one?

why more tax? Lets compare like for like - things havent changed that dramatically between a 131 and a 161 car, have they?

ditto re: fuel consumption.

500 - 1000 repairs would be - as pointed out previously - a bad year for you. But since its still only 1 or 2 payments, its still not an issue. I said its cheaper, not cost free.

Anyway, I think you are just proving my point. Its not cheaper to buy a new car. It never will be. If you can afford it, and you want the new car, then go for it, its a great feeling all right.

Its just not cheaper.

To be fair, I was thinking more a 2k to 4k car versus the new car in my example. In that case you might suffer 1k at worst depreciation but you might get caught for a 1k repair bill also. On that age of car the tax would be more expensive and fuel efficiency would be down too. So relative to a new large family car, the old one could be costing a bigger portion of 5k than many realise.
Take your example of a 131, you will likely suffer half the depreciation of the same car if bought new, you will have same tax roughly, you are possibly into a major service with timing belt etc, quite likely to need a flywheel before 6th birthday and all manner of other repairs.
So if we say your car new was depreciating 15k over its first 3 years. It might lose 7k over the next 3. You saved 8k versus the new car driver over the 3 years of ownership. From that saving, start deducting say 2k for timing belt, service and a flywheel, maybe another 1k for an unexpected fault and maybe discs and pads over and above what might be needed if you had bought new. You are then back to having saved only 5k over the new car. Zero interest being offered only on new could account for another 1k cost against the used car. You are now looking at only 1300 extra per year to get into a brand new car with no surprises.

26000 Elephants · 18-04-2016 04:46PM

mickdw wrote: »

To be fair, I was thinking more a 2k to 4k car versus the new car in my example.

You are going into bangernomics territory there, and I think its even less likely that you will find that PCP is competitive at that point.

You make some valid points, but seriously you are depending on catastrophic bills to weigh the argument in your favour. A decent warranty ( take one out privately if neccessary) will take care of a lot of that. As for timing belts - most leases will allow 30K per year, so in 3 years its possible you will hit the manufacturers recommended interval. If you are buying at that age, make sure its either been done, or price it into the offer you make the dealer.

As for interest free credit - good point, but you wont get the car you want, just the one that nobody else wanted.

As for DMF - again, a warranty that explicitly covers it is your friend.

I still cant see how a PCP on a new car can be cheaper than 3 year old self financed.

mickdw · 18-04-2016 11:39PM

Nobody saying its cheaper but 5k depreciation/year is not as mad as it sounds when you consider the actual costs of running ANY car.
Re zero percent credit - I would have agreed with you as generally it would be run out models or poor selling models that would be put on the zero rate however and perhaps due to their recent troubles, vw have been offering 0% on sought after models.
I was a person who always took these offers with a pinch of salt however Ive seen an offer from vw recently where a customer was looking at a new passat highline. To buy on traditional finance was 5.9%. To buy on PCP was 0%. Both deals were based on same trade in value and the same cost of new car after bargaining etc so the 0% was a true saving in this case and to be fair, the car in question is a recent sought after model.
The direct saving was over 2k on interest. The PCP is then a no brainer - Go the pcp route interest free and if you want to keep the car after, finance the smaller amount at reasonable rate at that stage whether it be via vw bank or anywhere else.
PCP is not something I have considered myself to date however with the low interest, its becoming impossible to ignore.
Good luck finding a used car warranty that will cover DMF and as for those bought warranties, they might have some use as toilet paper. Each and every claim Ive heard via a third party warranty resulted in the owner having to front costs associated with strip down (at main dealers) prior to the warranty company making a decision on covering the work. Not alot of good to anyone.

ajamesr · 19-04-2016 12:44AM

"The PCP is then a no brainer - Go the pcp route interest free and if you want to keep the car after, finance the smaller amount at reasonable rate at that stage whether it be via vw bank or anywhere else."

I think this is the point for many. Its not that PCP on a new car is the "cheapest" way to run ANY car. But it is often the case that it is the cheapest way to have a car in the 3 year old bracket.
So for those that want a newer car, up to say 3 -5 years old, they may have once shopped in the 2 year old market when the car had taken the big hit in the first 2 years, kept that car for 3 years then gone and got another 2 year old car. THOSE customers are now tempted by some of the PCP packages for brand new cars because they are more attractive than buying that 2 year old car.
So the market for the 2 year old cars is shrinking.

For sure there are cheaper ways to have a motor on the road. But if you are happy to spend 300 - 500 a month on a car, the question is how is your 300/500 best spent? At the moment some of the PCP options are the best value even with the early depreciation on a new car.

26000 Elephants · 19-04-2016 12:55AM

mickdw wrote: »

Nobody saying its cheaper.

My post was in reply to this earlier post:

ajamesr wrote: »

But the point I was making is that if you want to be in a car that is no more than 5 years old then buying a 2 year old one is actually more expensive than buying a new one on PCP.

Simply saying that this is not the case.

Re: warranties: Yes, there are a lot of sh*te cheap warranties out there, but if you buy a good one, and stick to the terms (like having vat receipts for the servicing, etc) then you will be covered. Or you can stick to Kia, Hyundai orFiat who offer a 5 year warrenty. Or better still, just save the money you would otherwise be paying monthly in a fund if the worst happens.

Also, many small/medium cars dont have DMF's (especially petrol variants*) so its not a certainty.

edit: Just looked and renault/dacia dci's have a traditional flywheel. Some Fiat mjets too. Seem to be a few cars that avoid the dmf route.

26000 Elephants · 19-04-2016 12:58AM

ajamesr wrote: »

I think this is the point for many. Its not that PCP on a new car is the "cheapest" way to run ANY car. But it is often the case that it is the cheapest way to have a car in the 3 year old bracket.

Kinda like saying the cheapest way to have a new car is to buy a new car.

I contend that buying a 3 year old car, keeping it for 2 will always be more cost effective. Unless you really want the "new car" vibe ( which you only get for 6 months anyway)
But that costs, and as long as folks are happy to do so, then thats cool. But its not cheaper. Even if the PCP payment is €200, you will be caught further down the line.

I know of no new car dealer who moonlights as a charity operation. And they offer no quarter to fools.

guylikeme · 19-04-2016 08:19AM

mickdw wrote: »

Nobody saying its cheaper but 5k depreciation/year..

This boils my p1ss. The 5K depreciation is (maybe) the first year. Not per year.

Otherwise, id be looking at a car worth 4K at end of my deal. Saying 5K depreciation per year is frankly misleading where people here are looking for honest advice.

SteelyDanJalapeno · 19-04-2016 08:22AM

guylikeme wrote: »

This boils my p1ss. The 5K depreciation is (maybe) the first year. Not per year.

Otherwise, id be looking at a car worth 4K at end of my deal. Saying 5K depreciation per year is frankly misleading where people here are looking for honest advice.

Yep, the new 16k clio my gf got will only be worth 1k on upgrade in 3 years

mickdw · 19-04-2016 10:07AM

guylikeme wrote: »

This boils my p1ss. The 5K depreciation is (maybe) the first year. Not per year.

Otherwise, id be looking at a car worth 4K at end of my deal. Saying 5K depreciation per year is frankly misleading where people here are looking for honest advice.

To be honest I'm talking typical family sized car such as a passat retailing at over 30k and costing 15k to upgrade every 3 years.
My current car has lost an average of 5k per year over my 8 years of ownership. Yes, a 40k drop! Everyone isn't driving a sub 20k car so my previous example of passat is a happy medium.

26000 Elephants · 19-04-2016 11:57AM

TiltedBrain wrote: »

Yep, the new 16k clio my gf got will only be worth 1k on upgrade in 3 years

So, whats your point?

:):):):):):):)

conzy · 19-04-2016 12:06PM

I have read a lot of this thread as I was looking at PCP on a car. Depending on the value of the car in question and whether you can get very low / 0% APR then PCP can make total sense.

I'm changing my RX8 to something more sensible, but I still wanted something fun but less "involved" than an RX8. My monthly repayments on the RX8 (credit union loan) were about 350.

So I had two options:

get a credit union loan and buy another used car (that was both fast and efficient and reliable)
PCP a new hot hatch

I ended up getting a new Seat Ibiza Cupra for about 24k on PCP with 0% interest. So now I'm getting a new car with 192HP that should do 35-40MPG and I have added some options (sunroof, android auto, heated seats, leather / alcantara etc etc ) and have all the associated new car fun and warranty (first time buying new, never thought I would) I cant see the future, but I will probably pay the balloon payment and keep the car (GFV: 8500)

So over the next 3 years I will pay 24k for the car. Tax is 390 a year also

Lets look at the other option:

Get a credit union loan, If i borrowed 21k It would cost 24k (3000 in interest at 8.2% over 3 years) So now I have a 21k budget. So my buying power is now 21k vs 24k not that big a deal as its new vs used but anyway. In option A I'm getting a "free" loan from VW Bank.

So it came down to this:

What can I buy for 21k that will be as fun, efficient and reliable as the Ibiza Cupra? Answers on a post card please.

Some used cars made the short list. But a lot of them were 2.5 litre+ (330d 330i Focus ST) So this alone would add several grand over the 3 years. 1294 tax VS 390 tax is 2712 euro extra and none of them would be anywhere near as efficient as the Ibiza Cupra (claimed MPG of 47) We'll see how good it is really...

So for me, in this case PCP made sense, I'm getting a fun efficient car with a warranty. I have no credit costs and I right now I plan on paying the bubble.

On the other hand there are cases where PCP is madness e.g Something way more expensive that will depreciate, where you might not get 0% APR and will not be able to afford the balloon payment. Now you have no choice really but to PCP again and you may not be able to afford the next deposit so you need at add more of your own money and you are consigned to paying for cars as a service for life.

Thats a grim example but you get the picture. PCP can be abused to get yourself into a shiny car you cant afford. I bought a car I can afford.

fm · 19-04-2016 01:08PM

A post 2008 e90 330d is 750 tax, a 325d is 570

conzy · 19-04-2016 01:46PM

fm wrote: »

A post 2008 e90 330d is 750 tax, a 325d is 570

Now find me one? With leather and M Sport with immaculate paint and interior

26000 Elephants · 19-04-2016 03:15PM

conzy wrote: »

Now find me one? With leather and M Sport with immaculate paint and interior

Brazenly offer 21,500 for this and you will probably come away with it. Not m-sport, but its a coupe with leather, a 2 year warranty and only 21K miles. 2013, so just off lease I bet. da chape tax too.

The Ibiza is a great deal, but I imagine the novelty will wear off,and next year this coupe will look a lot better than it.

N2JlZDhhYjQ3ZmY0ZmI2OGJlNmMwNjliMDFkNTYyYzS80uI1Ii-HIsPY5Pfo3CFmaHR0cDovL3MzLWV1LXdlc3QtMS5hbWF6b25hd3MuY29tL2RvbmVkZWFsLmllLXBob3Rvcy9waG90b181MjQ3ODk3N3x8fDYwMHg2MDB8fHx8fHx8fA==.jpeg

ok, so its not a 3 series either....:)

26000 Elephants · 19-04-2016 03:47PM

OSI wrote: »

It's also 50bhp short and missing a whole bunch of kit his Ibiza will be coming with.

At least its driving the right set of wheels... :pac::pac::pac::pac:

ajamesr · 20-04-2016 12:13PM

An up side to PCP is that if the economy suffers another crash, or the value falls out of the bottom of the car you have, or your circumstances change - you can just hand it back without penalty. (I think after 1.5 years this is an option)
A traditional loan would need settling in full. I know you could sell the car and clear the loan, but if the value has dropped below the loan amount or people just ain't buying what your sellin, it can be a problem. PCP has the hand back option.
I bet many wish their mortgages had a hand back option when negative equity is anchoring them here.

26000 Elephants · 20-04-2016 12:46PM

ajamesr wrote: »

An up side to PCP is that if the economy suffers another crash, or the value falls out of the bottom of the car you have, or your circumstances change - you can just hand it back without penalty. (I think after 1.5 years this is an option)
A traditional loan would need settling in full. I know you could sell the car and clear the loan, but if the value has dropped below the loan amount or people just ain't buying what your sellin, it can be a problem. PCP has the hand back option.
I bet many wish their mortgages had a hand back option when negative equity is anchoring them here.

I think you are talking about VT - voluntary termination. You have a right to do this, but only after you have paid at least 50% of the total costs of the lease - that is the car and the total interest and charges of the contract. It includes the GFV as well, so dont discount that.

Other than that, it depends on what you mean by "without penalty"

If you feel that loosing your 30% deposit and 18 months of payments are "without penalty" then you are laughing.

However, 18 months of payments on a 350pm contract is over 6 grand. A lot of banks will pursue you for that. especially if the value of the underlying asset has depreciated sufficiently to make it important to balance the books I would be very surprised if many contracts explicitly stated you can walk away at 18 months. Why are they 36 months in that case?

Remember that the value of your lease to the finance company lies partly in its cash flows. If they cannot be guaranteed or at least enforced it would wipe away most of their present value.

followmeup · 20-04-2016 03:49PM

Is there a time frame as to when you can change car on PCP? I'm coming upto the year mark on my current PCP deal but looking to change to a larger car later in the year. I'll probably be at around the year and a half mark when I do change and I'll probably go with a different car maker

PCP finance.

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