Is PCP a good way to finance a car?

Below is my attempt at a summary. Correct me if you think any of these are incorrect.

Pros
1. You only need to take out a loan for the difference between the car price less the deposit less the GMFV so for substantially less than you would if buying the car outright or leasing via traditional hire purchase plans
2. You get a new car without requiring any substantial deposit.
3. You have a guaranteed price (GMFV) on the balance owed at the end of the period so know exactly where you stand.
4. You can roll over the deal for another new car at the end of the period if you want.
5. The rate on the loan offered by dealers is much better than anything you could get at the bank or CU (0% in some cases!).
6. You can walk away from the car at the end of the period if you don't want to buy it outright.

Cons
1. There are conditions built into the agreement around the GMFV price which may not suit everyone (such as annual mileage limit)
2. You don't own the car until you pay the balance
3. If you cannot meet the repayments during the period you will still be liable for the loan but the car will be taken off you. This differs from a hire purchase agreement (where you can walk away I believe) or a traditional car loan (where you at least own the car and can sell it to help with the shortfall.
4. There are no PCP deals on second hand cars so it only suits those looking to buy new.
5. It can be very tempting to just look at the monthly payments when making the decision and lose fact of the overall cost of the package. This may be fine for some but may entice in others who are not so savvy.

In my view it's a decent offering from dealers in that, if you are happy with the conditions you have to stick to in order to achieve the agreed GMFV at the end of the period, and if you think the loan repayments shouldn't be an issue, it is a much better offering than a traditional hire purchase offering or the traditional car loan.
As I said, personally I prefer to buy second hand and save in advance so that I don't buy on credit but if I was buying new and on credit I think this would be my preferred choice.
 
Blackrock1 said:
A jalopy, is a jalopy not what the detractors are suggesting is the answer to everyones motoring requirements? or do you believe these 8 and 9 year old cars that are mentioned that never give a moments bother are worth any more than a couple of grand?

I could have bought my car outright from savings, i chose not to
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Relax Blackrock, we're just debating the figures and thanks for coming back.

What is your PCP on the second car that cost 45K.

What equity came into that car from the first one.

What do you have to do to get the guaranteed GMPV.
 
Blackrock1 said:
A jalopy, is a jalopy not what the detractors are suggesting is the answer to everyones motoring requirements? or do you believe these 8 and 9 year old cars that are mentioned that never give a moments bother are worth any more than a couple of grand?
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An 8 or 9 year old car is not the answer to everyone's motoring requirements. In fact unless I had to I wouldn't buy a car that old. I bought my own car when it was almost 5 years old from a main dealer.

Blackrock1 said:
I could have bought my car outright from savings, i chose not to
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Firstly fair play in having that amount in savings considering what you are spending on cars!
 
Bronte said:
I agree with you in that would you pay 45K if you had to pay for it out of your savings. BEcause then you see what it really is.

But another question is. How much would the 45K car cost if you paid cash? Does that make a difference.

Also are they luring people into coming back again and again, for the latest model, higher spec, in the case of the OP he got a this after 20 months, which is crazy (to me) because it would seem the salesman was able to show him it would only cost him an extra 30 euro a month. Like that's a no brainer right when you get a higher spec and a brand new car !
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except i approached them, they didnt approach me, i wanted to change the spec, some people have an interest in cars beyond pure function
 
Firefly said:
An 8 or 9 year old car is not the answer to everyone's motoring requirements. In fact unless I had to I wouldn't buy a car that old. I bought my own car when it was almost 5 years old from a main dealer.


Firstly fair play in having that amount in savings considering what you are spending on cars!
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how old is your car now?

you should see what i spend on watches, it would send the forum into meltdown, my car expenditure has gone way done from younger days :p
 
Bronte said:
We've no clarity on the credit on the second car.

Also not clear to me that he can for sure walk away completly at the end of year 3. Any catches on that.
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you can walk away assuming the car is in reasonable condition, thats a core tenet of the scheme

and apologies, i was wrong, the interest is charged on the whole sum, any pcp i have considered either had 0% interest or lower than 2% so i didnt give it much thought, mea culpa
 
PGF2016 said:
Why did you choose not to? I'm guessing to have cash available for other uses and because of the convenience when upgrading to a newer model.
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yes i believed having the cash available was worth the 1.9% interest charge to finance the car, my next car i will probably just buy outright
 
Blackrock can you confirm the amount of financing on car 2 please.

You said earlier financing is the cost of the car minus deposit minus GMV. Are you sure about this. It doesn't make sense.

Also in 5 years you will have spent 40K (on 2 cars). Your current car retails at 45K. How much would a 5 year car with 50K on the clock be worth?
 
Blackrock1 said:
how old is your car now?
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My car is 11. However, unless I had to I wouldn't buy an 8 or 9 year old car. I bought mine when it was approaching it's 5th birthday (like a family member so it is!). I bought this from a BMW main dealer who gave me a comprehensive warranty. The car is a high spec and it had one owner and less than 50k miles on the clock. I paid with cash and have had free motoring since (apart from servicing and minor repairs (about 1,000 euro). Oh, and I own the car too!

Blackrock1 said:
you should see what i spend on watches, it would send the forum into meltdown
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I like watches too. Like houses and cars, I tend to buy something decent and keep it. An Omega man myself ;)
 
Blackrock1 said:
you can walk away assuming the car is in reasonable condition, thats a core tenet of the scheme

and apologies, i was wrong, the interest is charged on the whole sum, any pcp i have considered either had 0% interest or lower than 2% so i didnt give it much thought, mea culpa
Click to expand...

The interest rate is no biggie in this to be honest.

But I'll come back to it perhaps.

Is there any catches to the 'reasonable' condition rule?

I'm also not getting this, if loads of people are buying cars this way, and they all walked in to hand them back, wouldn't that create a headache for the dealers. It would certainly deflate the prices. And imagine we were just post celtic tiger, it would be doomsday. So there has to be an out for the garages. Something we're missing.

the most important question Blackrock you have not answered, is what is the financing on the second car. Is it 45K?

Also can you give us the mark/brand of this car.
 
Firefly said:
My car is 11. However, unless I had to I wouldn't buy an 8 or 9 year old car. I bought mine when it was approaching it's 5th birthday (like a family member so it is!). I bought this from a BMW main dealer who gave me a comprehensive warranty. The car is a high spec and it had one owner and less than 50k miles on the clock. I paid with cash and have had free motoring since (apart from servicing and minor repairs (about 1,000 euro). Oh, and I own the car too!



I like watches too. Like houses and cars, I tend to buy something decent and keep it. An Omega man myself ;)
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more of a rolex and iwc man myself but i had a dark side of the moon for a while and enjoyed it :)

so your car is worthless now, albeit you own it, you havent had free motoring, you had to pay for it in the first place :) and you are the only person i know who has run a BMW for 5 years at a cost of 1k on repairs and servicing, tyres alone should cost that (one replacement set)
 
Ceist Beag said:
Below is my attempt at a summary. Correct me if you think any of these are incorrect.

Pros
1. You only need to take out a loan for the difference between the car price less the deposit less the GMFV so for substantially less than you would if buying the car outright or leasing via traditional hire purchase plans
Click to expand...

Wrong. The loan is the difference between the cost price and the deposit (Blackrock made an error on this and has since clarified)
 
Ceist Beag said:
Below is my attempt at a summary. Correct me if you think any of these are incorrect.

Pros
1. You only need to take out a loan for the difference between the car price less the deposit less the GMFV so for substantially less than you would if buying the car outright or leasing via traditional hire purchase plans
Click to expand...

I would like confirmation on this. I can't see how this is the case. Of course the loan would be the difference between what the finance company pays the garage for the car and what the purchaser puts forward as a deposit (same for any other loan). However I can't see any rationale why the finance company would subtract a GFV agreement between the garage and the driver of the car?
 
Bronte said:
The interest rate is no biggie in this to be honest.

But I'll come back to it perhaps.

Is there any catches to the 'reasonable' condition rule?

I'm also not getting this, if loads of people are buying cars this way, and they all walked in to hand them back, wouldn't that create a headache for the dealers. It would certainly deflate the prices. And imagine we were just post celtic tiger, it would be doomsday. So there has to be an out for the garages. Something we're missing.

the most important question Blackrock you have not answered, is what is the financing on the second car. Is it 45K?

Also can you give us the mark/brand of this car.
Click to expand...

the out is that the GFV is set at such a level that if you did just hand it back that they are comfortable that the car will be worth more. its a risk obviously but one they must be prepared to take. PCP has functioned for years in the US and the UK.

second car was an audi a5 (not sure what difference this makes anyway) and the financing was probably something like 37k, 45k less the 'equity' in the first car (residual deposit)

again working from memory here
 
Firefly said:
I would like confirmation on this. I can't see how this is the case. Of course the loan would be the difference between what the finance company pays the garage for the car and what the purchaser puts forward as a deposit (same for any other loan). However I can't see any rationale why the finance company would subtract a GFV agreement between the garage and the driver of the car?
Click to expand...

like a politician i have since changed my stance here

a flip flop if you will
 
Blackrock1 said:
so your car is worthless now, albeit you own it, you havent had free motoring, you had to pay for it in the first place :) and you are the only person i know who has run a BMW for 5 years at a cost of 1k on repairs and servicing, tyres alone should cost that (one replacement set)
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My 11 year old car was 'valued' at 1K about 5 years ago. What cost do I have for it for the last five years?

My big service (garage told me it was the big one) last November cost me €631 including tyres and brakes and it passed it's annual MOT last month. I forgot to service it in 2015 and it cost 209 Euro in November, 2014.
 
Bronte said:
My 11 year old car was 'valued' at 1K about 5 years ago. What cost do I have for it for the last five years?

My big service (garage told me it was the big one) last November cost me €631 including tyres and brackes and it passed it's annual MOT last month. I forgot to service it in 2015 and it cost 209 Euro in November, 2014.
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i wasnt referring to your car, you have stated already that you are happy with functional a to b car, the other poster bought a specced bmw.

i shudder to think what tyres you have on the car
 
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