# Is PCP a good way to finance a car?



## Brendan Burgess

I haven't looked into this, but I would naturally steer clear of these sort of agreements. I don't know how 0% works. I am told that at the end of the period, the car dealer will find all sorts of excuses to make it more expensive for you. 

I saw this interesting comparison from a Credit Union. 

http://stpaulscu.ie/car-loan-v-pcp/


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## Gordon Gekko

My view is that it's a good way to buy a car if you have plenty of cash but would prefer to do something more profitable with it, or if you know that you will have plenty of cash in the medium term (e.g. through share based remuneration). But otherwise, I believe that borrowing to buy a depreciating asset is generally bonkers.


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## cremeegg

The reason that car makers offer these deals is to make it as easy as possible to buy a new car. As the St Pauls website says, "The Personal Contract Plan is designed to help car makers sell you a car now, and another one three years from now."

To tempt people away from a 3 year old to a new model.

The catch is not the cost, which really is 0% on a full price new model, it is the ease of spending more than you otherwise might.


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## Brendan Burgess

Gordon Gekko said:


> I believe that borrowing to buy a depreciating asset is generally bonkers.



Hi Gordon 

Very good point!

Can you get PCP on second hand cars? 

I suppose this thread is about how to finance a car, so I have edited the title to reflect that. 

I would agree that borrowing to buy a new car is bonkers, but borrowing to buy a car when you need it is not bonkers. 

Brendan


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## Gordon Gekko

Agreed. Personally I will never buy a new car...far better to let someone else take the biggest hit. This PCP stuff is a timebomb just waiting to blow-up.


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## twofor1

Gordon Gekko said:


> I will never buy a new car...far better to let someone else take the biggest hit.



Many a bar stool debate on this issue and unlikely to ever be resolved.

I am the opposite, I would always buy new but would keep for several years.

I traded in my 15 year old car earlier this year, I was allowed $3K off the $24K on the road price of the new car.

The invoice stated $250 trade in, which is what several had told me they would get for my car passing it on to a small dealer, and $2,750 discount.

I would not have got this discount off a second hand car, the admittedly asking price for similar one year old models was more than I paid for new.

Seems to me that list prices of new cars are deliberately inflated to justify the high price of second hand models.


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## rev87

Brendan Burgess said:


> I haven't looked into this, but I would naturally steer clear of these sort of agreements. I don't know how 0% works. I am told that at the end of the period, the car dealer will find all sorts of excuses to make it more expensive for you.
> 
> I saw this interesting comparison from a Credit Union.
> 
> http://stpaulscu.ie/car-loan-v-pcp/



Does that article not support PCP in a strange way?

Ballon payment is €9,768 but a 3 year old model is selling for between €17,750-€21,750, so someone who is now coming to the end of their 36 month agreement they will have approx €9k "change" after paying the balloon - the hope is that you can use this as the deposit for another new model & the cycle continues. So give us a deposit at the beginning, keep paying your monthly payments & dealer will give you a new car every 3 years! 

We bought our car on PCP this year & negotiated a discount so to say you must pay full price is misleading.


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## twofor1

rev87 said:


> We bought our car on PCP this year & negotiated a discount so to say you must pay full price is misleading.



I agree, twice before delivery, after I signed contract to buy with my 10%+ discount and without  garage finance I was contacted by garage to offer PCP or HP for the outstanding amount, probably they get some commission, which might be a bonus to them, but the deal was already done and going ahead regardless.

Whether the draft comes from savings, a loan from my bank / credit union, my granny or the garages finance company I think is mostly irrelevant, it’s all money in the bank for them.


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## Dr.Debt

Cars are such a scam in this country. An individual approach to car purchasing is needed and really depends on your annual mileage, the length of the intended ownership, the availability of finance to you  and your willingness to deal privately or not.

In my case, I drive around 28,000 business miles per year. The approach i use is to buy a three year old car every year  (with cash) in the UK. I will usually buy a well specced Merc, BMW, Volvo etc from a main dealer for GBP 18k/20K with around 40,000 miles on the clock and full  service history. After one year the car will then be approaching 70,000 miles and is then sold privately for more or less the same price as i paid for it (including VRT). I then buy a replacement car and repeat.

If I was to instead buy a new BMW 520 for 55,000 in Ireland. After three years, the mileage on the car will be 84K and if I'm lucky it might be worth €25,000, meaning that I have suffered €30,000 depreciation over three years. In addition I will have to pay additional interest on the extra capital.

Everyone needs to figure out the best method for themselves. Anyone driving less than 15000 miles per year is wasting money on a new car. The depreciation charge cant be justified UNLESS you plan to run it for ten years.

Someone driving 8000 per year and repeatedly buying new cars and changing every three years needs serious financial advice.


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## Firefly

PCPs: experts warn on how wear-and-tear conditions could hit you hard in the pocket

http://www.independent.ie/life/moto...ould-hit-you-hard-in-the-pocket-35026412.html

All very subjective too, of course!


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## monagt

Dr.Debt said:


> Cars are such a scam in this country. An individual approach to car purchasing is needed and really depends on your annual mileage, the length of the intended ownership, the availability of finance to you  and your willingness to deal privately or not.
> 
> In my case, I drive around 28,000 business miles per year. The approach i use is to buy a three year old car every year  (with cash) in the UK. I will usually buy a well specced Merc, BMW, Volvo etc from a main dealer for GBP 18k/20K with around 40,000 miles on the clock and full  service history. After one year the car will then be approaching 70,000 miles and is then sold privately for more or less the same price as i paid for it (including VRT). I then buy a replacement car and repeat.
> 
> If I was to instead buy a new BMW 520 for 55,000 in Ireland. After three years, the mileage on the car will be 84K and if I'm lucky it might be worth €25,000, meaning that I have suffered €30,000 depreciation over three years. In addition I will have to pay additional interest on the extra capital.
> 
> Everyone needs to figure out the best method for themselves. Anyone driving less than 15000 miles per year is wasting money on a new car. The depreciation charge cant be justified UNLESS you plan to run it for ten years.
> 
> Someone driving 8000 per year and repeatedly buying new cars and changing every three years needs serious financial advice.



Can you outline the process for these UK purchases? (If you don't want to, thats OK)

How do you find a suitable car? (web/visit/friend/car importer)
Visit garage in person to see car and deposit.
Rely on Main Dealer record and reputation or do 3rd party check on HP, history?
How do you get to garage and collect it (or use a car importer)
Is setting up Insurance so as to drive it back to Ireland difficult (or delivered by a car importer for a fee)

Any other info!

Thanks in advance, M


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## Firefly

So, I think I have found out where most people buying PCP cars will be stung:

Firstly a word on the marketing. I notice that instead of calling these plans Hire Purchase (which is what they are and are referred to in the small print ("This offer is made under a hire purchase agreement." [broken link removed]), they are called PCP plans. In addtion, the "balloon payment" at the end is now called the optional final payment. Balloons must be out of favour - perhaps people got stung with these beauties before?!

So, let's look at the the Options available after the 3 years are up:

1 - hand the car back and the GFV of the car will cover the baloon payment with a few thousand left over. Then what? Would someone who has been driving a shiny new car for the past 3 years and came up with a 30% deposit just walk away with a few grand and buy a 10 year old Primera on donedeal? I doubt it!

2 - Buy out the remaining balloon payment. After stumping up a 30% deposit and paying a few hundred a month for the past 3 years, how do you think people would feel about heading to the bank / credit union and borrowing money for a car they have being paying for for the last 3 years sitting outside their doors?

3 - "Go again", i.e. buy another new car on HP - this is what most people will do.

So, consider the following example for a VW Passat

Typical Finance Example: Passat Trendline 1.4TSI 125HP M6F OTRP €28,410.
Deposit / Part Exchange €8,151.88.
36 monthly payments of €329. APR 5.9%.
Optional Final Payment €11,054.00.
Total cost of credit €2,789.88*.

Let's make the following assumptions (even though these may not hold and may make things even worse in 3 years time):

The purchaser is happy to go for the same car again and the car hasn't gone up in price after 3 years
The interest rates haven't increased

The purchaser will need to get 19,205 (11054+8151) for their 3 year old Passat, otherwise they will need to find more money in order to have the same deposit and therefore the same monthly repayments. Maybe 19,205 is achievable but that would indicate a depreciation of just 32% and according to cartell.ie "As a general rule of thumb all new cars will lose about 50% of their value after 3 years – some more, some less". I'm not an expert on cars and their depreciations but I would imagine a Passat would be somewhere around the middle. If this was the case, a 50% depreciation would mean the purchaser would only get 14,205 meaning they would have to come up with exactly 5,000 euro more to have the same deposit for their next car. That works out at 139 euro per month - that figure should be added to the 329 euro per month figure above, so in addition to coming up with the initial deposit the true monthly cost is 468 euro per month in order to "go again" and have the same repayments. Of course, at some stage the "optional" final payment won't be optional anymore and this will also need to be saved for / borrowed for.

There are benefits to these plans for sure - a new, trouble-free (in most cases) car with low MPG and road tax. However, apart from the cost of the car (that will be paid for in the end), the cost of credit above is 77 euro per month in interest.

The only case for taking out a PCP plan I can see if the following are true:

You get a good trade in for your fully owned car
You get 0% or close to it for the 3 years
You have the balloon payment in the bank and are happy to use it to buy out the car at the end (Option 2).

If I am missing something let me know and really, this all just sounds too good to be true!

Firefly.


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## willyfones

PCP is not as good as a credit Union loan.. its more generally more expensive (or about the same) but more restrictive. 

The biggest drawback of all... you don't actually own the car.. (the garage does)...  so you can't sell it.. 
The car can be repossessed for missing a payment,,, unlike the loan from the Credit Union,, where you can pay off the loan early with no hidden fees or charges.. and of course you actually own the car.. 

Car garage number one customer is someone who wants to buy a car using finance options from the garage.. that's how they make most money,,  

I fully agree that cars are a scam in Ireland,, in particular upgrading to a new car every couple of years is a terrible waste of money,,, the whole system is geared towards this.. "NCT,, "emissions" higher tax for old cars,, "safety" everyone with kids must have an SUV.. 

I ditched my car years ago and walk or cycle,,  anyone who can commute to work by other means should consider ditching one of their cars.. having access to one car is all you need.


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## Jazz01

willyfones said:


> "NCT,, "emissions" higher tax for old cars,, "safety" everyone with kids must have an SUV..



Don't forget to add " less chance of getting insurance on cars 10+ years old"


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## demoivre

willyfones said:


> The biggest drawback of all... you don't actually own the car.. (the garage does)... so you can't sell it..
> The car can be repossessed for missing a payment,,, unlike the loan from the Credit Union,, where you can pay off the loan early with no hidden fees or charges.. and of course you actually own the car..



But you also have to tie up savings with the credit union as they will require security for the loan in the form of shares. On a 20k loan with the cu you might require savings of 5 or 6 thousand ! That, for me, doesn't make much sense when you could do a straight forward HP deal with the garage without tying up any savings.


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## Leo

demoivre said:


> But you also have to tie up savings with the credit union as they will require security for the loan in the form of shares. On a 20k loan with the cu you might require savings of 5 or 6 thousand ! That, for me, doesn't make much sense when you could do a straight forward HP deal with the garage without tying up any savings.




Agreed, on top of that, CU APRs are higher than most PCP deals as well.


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## Gerry Canning

On 10,000 loan , Credit union over 60 months start @ 10 euro per month more than most HP/PCP .
When you factor in
1. That you can repay CU earlier  without penalty as against PCP/Hire purchase, where you will be penalised.
2.  You really own the car with CU loan.
3. You are not tied in CU with mileage/condition /servicing etc.

People get caught up in APR but if you can,t afford the cost of car on Day 1 ?


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## Firefly

I think the vast majority of people would balk at going to the CU for a 30k+ loan for a car...and rightly so!


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## Gerry Canning

Firefly said:


> I think the vast majority of people would balk at going to the CU for a 30k+ loan for a car...and rightly so!



Nice one firefly , yet the PCP suckers people in = dangerous product.


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## Gordon Gekko

How the companies get away with the adverts is beyond me..."yours for €299 per month".

Eh, no it's not...it's yours for €10,000 upfront, €299 a month for three years, and a balloon payment of €15,000.

"A house on Shrewsbury Road, yours for €499 per month"*




*optional final payment of €4,982,000


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## Brendan Burgess

The Indo has an article on it today in the motoring section

*PCPs are popular, but don't overlook other ways of getting a car. Here's some advice*


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## Firefly

Charlie Weston wrote another piece on 01.01

*Charlie Weston: PCP car finance deals could be a sub-prime mess all over again*

http://www.independent.ie/business/...-a-subprime-mess-all-over-again-35331251.html

I don't think these plans are going to work well for a lot of people. Doing the sums on bringing a car in from the UK and the difference is staggering. As an example, a 2015 Skoda Superb with 10,500 miles. All in (including VRT) that comes to approx. 18,000 - 18,500.



New price here is 28,950!

[broken link removed]


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## Bronte

I haven't examined this in great detail but anything that sounds like it makes it simple to purchase a big ticket item must have some catches.  Listening to media I get the impression that a lot of cars have PCP's on them now.


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## demoivre

Firefly said:


> Charlie Weston wrote another piece on 01.01
> 
> *Charlie Weston: PCP car finance deals could be a sub-prime mess all over again*
> 
> http://www.independent.ie/business/...-a-subprime-mess-all-over-again-35331251.html
> 
> I don't think these plans are going to work well for a lot of people. Doing the sums on bringing a car in from the UK and the difference is staggering. *As an example, a 2015 Skoda Superb with 10,500 miles. All in (including VRT) that comes to approx. 18,000 - 18,500.*
> 
> 
> 
> *New price here is 28,950!*
> 
> [broken link removed]



 Importing cars from the UK is becoming very common where I am in Wexford. If Sterling falls further as a result of Brexit it will become even more poplular imo.


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## demoivre

Bronte said:


> I haven't examined this in great detail but anything that sounds like it makes it simple to purchase a big ticket item must have some catches.  Listening to media I get the impression that a lot of cars have PCP's on them now.



I had a fairly casual conversation with a guy recently who was considering a PCP on a suv costing about 40k. He wasn't that clear on how the GMFV worked and nor am I, but I'm not considering a 40k PCP !! How often is the returned car valued at more than the GMFV by the garage? If you only get the GMFV you have to stump up another deposit to change your car. If the amount offered by the garage, upon returning the car, is just the GMFV and this is less than the Open market selling price as determined by Revenues's VRT calculator how can you haggle since you don't own the car in the first place?

Has anyone on here actually done a PCP from start to finish and how did it work out?


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## Blackrock1

lads lets get some perspective here, whats the very worst that can happen to you on a PCP deal? you lose your initial deposit, thats it.

Ok its not ideal but as long as you are sensible about keeping that low and comfortable with the risk of losing it then whats the issue.

also the dealers will want to get people onto more PCPs so notwithstanding the fact that a similar car can be imported from the UK more cheaply, it will be in their interest to prop up the residual value.

i am half way through a second one, the equity left after the first one (one an audi, circa 45k) meant i didnt have to present any additional deposit on the second one and got a new better specced car at around the same monthly cost.


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## Ceist Beag

Firefly said:


> I don't think these plans are going to work well for a lot of people. Doing the sums on bringing a car in from the UK and the difference is staggering. As an example, a 2015 Skoda Superb with 10,500 miles. All in (including VRT) that comes to approx. 18,000 - 18,500.
> 
> 
> 
> New price here is 28,950!
> 
> [broken link removed]


You're comparing the new price here with a 2 year old car in the UK? This has already been discussed on another thread and I think there is broad agreement that you can save, on average, between 20-30% on the price of a second hand car if importing from the UK but it is not without risk so I think it's best to compare like with like when showing these examples.


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## Bronte

Blackrock1 said:


> lads lets get some perspective here, whats the very worst that can happen to you on a PCP deal? you lose your initial deposit, thats it.
> 
> .




What an extraordinary statement on a financial advice website. I'm gobsmacked.


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## Bronte

demoivre said:


> I had a fairly casual conversation with a guy recently who was considering a PCP on a suv costing about 40k. He wasn't that clear on how the GMFV worked and nor am I, but I'm not considering a 40k PCP !! How often is the returned car valued at more than the GMFV by the garage? If you only get the GMFV you have to stump up another deposit to change your car. If the amount offered by the garage, upon returning the car, is just the GMFV and this is less than the Open market selling price as determined by Revenues's VRT calculator how can you haggle since you don't own the car in the first place?
> 
> Has anyone on here actually done a PCP from start to finish and how did it work out?



What kind of car do you get for 40K Demoivre.  I'd be interested in whether anyone has done a PCP from start to finish.  And that reminds me, this topic was discussed about two weeks ago on Irish radio, but I can't remember with who. I just got the distinct impression everybody was buying this way and I just wondered to myself at the time what catch was there to it.


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## Blackrock1

Bronte said:


> What kind of car do you get for 40K Demoivre.  I'd be interested in whether anyone has done a PCP from start to finish.  And that reminds me, this topic was discussed about two weeks ago on Irish radio, but I can't remember with who. I just got the distinct impression everybody was buying this way and I just wondered to myself at the time what catch was there to it.



i have already given you an example of what happens from start to finish, see above

once you get over your gobsmackedness 

i wasnt belittling the loss of the initial depost merely trying to add some perspective, on a 40k car it could be as low as 4k altho probably more like 8k.


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## Bronte

Blackrock1 said:


> i have already given you an example of what happens from start to finish, see above
> 
> once you get over your gobsmackedness
> 
> i wasnt belittling the loss of the initial depost merely trying to add some perspective, on a 40k car it could be as low as 4k altho probably more like 8k.



Am I misunderstanding your point.  You think throwing away 4K or more likely 8K, is nothing?

And you did not give us any example, you singularly omitted actual numbers.

So here goes:

Car 1: Cash price (as versus)
PSP Price
Deposit
Trade in value

Car 2 - ditto

And what have you got now and how much did it cost you.


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## Bronte

Blackrock1 said:


> lads lets get some perspective here, whats the very worst that can happen to you on a PCP deal? you lose your initial deposit, thats it.
> 
> Ok its not ideal but as long as you are sensible about keeping that low and comfortable with the risk of losing it then whats the issue.
> 
> also the dealers will want to get people onto more PCPs so notwithstanding the fact that a similar car can be imported from the UK more cheaply, it will be in their interest to prop up the residual value.
> 
> i am half way through a second one, the equity left after the first one (one an audi, circa 45k) meant i didnt have to present any additional deposit on the second one and got a new better specced car at around the same monthly cost.



What does half way through mean?
What equity

You remind me of a poster a long time ago on here.  His wife I think it was came on here.  He was on about car 5 in as many years and now owed 70K. I don't have the full gist of it, but something along those lines.  For him it was all about the latest model the latest spec etc.


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## PGF2016

Bronte said:


> What does half way through mean?
> What equity


I think it means... 
Half way through a second PCP plan.
After the first PCP plan ends I believe you can buy the car or else use the 'equity' in it to fund a new car. The value of the car is used as a deposit on a new car.


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## Bronte

Thanks PGF but he needs to supply numbers.  I don't believe anything without numbers.  And he's gone very silent now !

I know from experience on here that when a man talks about a car being a better deal because of spec that the figures will not add up. So I'm dying to hear about the 'equity'. 

It's the same story with TV's.  That HD nonsense.  And the latest now is curved TV's.  Yes we got the HD, husband told me it was the biz, the kids laugh with me about it, they tell me their conclusion is that it might, as in could be, brighter.  And of course he persuaded me about the SMart TV too.  At least he's not going to buy a tv the same size as the wall, like my brother in law did.


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## so-crates

PGF2016 said:


> I think it means...
> Half way through a second PCP plan.
> After the first PCP plan ends I believe you can buy the car or else use the 'equity' in it to fund a new car. The value of the car is used as a deposit on a new car.



The value of the car is used in the first instance to clear down the balloon payment, any remainder can then be used as deposit on the new car.

The problem I would have is you are sourcing the car from them, agreeing in advance what they will buy it back for but allowing them to decide on a lower value if their conditions aren't met (you don't for example get more money if they car has a lower mileage or is in better condition than expected) and financing it by a loan from them. Basically you are completely tied into your provider. It may be a comfortable relationship and it may work out okay but it is you that are the vulnerable party in this and it is you that will suffer if you have to break out of the relationship.


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## so-crates

For example, you agree a future value based on an assumed usage. You change jobs and suddenly are driving considerably more. Your usage is now at a rate whereby you will exceed your arrangement with them and then you will (probably) be penalised for it. You might anticipate having 10k towards the next PCP arrangement but find that actually you only have 8


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## Bronte

Weston summary:

- Car needs to retain it's value
- Many PCP deals may bomb out
- Because of the volume of sales, when you go to do your deal, that will be a problem
- You've to decide how many KM you will do in advance (best be sure you're not changing job/moving house/going on maternity leave so, for three years)
- Instead of buying the car outright when the three years are up, most people buy another car !

Straight away there I have a mega problem with this.  Firstly with the quality of cars nowadays you don't need to change your car every three years.  And secondly, there's to me the trick, keep people constantly in credit.  That's where they are making the money.

- Something about pre agreed value, lovely new word for me - GMFV - how is that decided? Sounds pretty vague to me

Next bit is very confusing

- Minimum value at the end of the term, must cover the final payment. ???
- Must be enough value in the car so that you have 'equity' - that's the word Blackrock used.  Is this where he is getting that from.


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## Bronte

Firefly said:


> I think the vast majority of people would balk at going to the CU for a 30k+ loan for a car...and rightly so!



I only just read your great post Firefly now. 

The thing about the CU is this, or a bank for that matter.  You're unliely to lose the run of yourself and go to borrow 30K. When you're told a PCP only costs x and you just sign here, then it's easy money and nobody thinks about down the road. 

With the CU you can pay it off early.  No penalty. You'll get to own your car.  You don't have to think about futrure values, how many km's your doing, will it be the  magic value in three years time etc. 

Westin is right.  So we'll have people rolling over the PCP's a couple of times and then they will realise that they can't continue and that they've overpaid.  Massively.


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## Firefly

Bronte said:


> And secondly, there's to me the trick, keep people constantly in credit.  That's where they are making the money.



This is it for me. Constantly making capital & interest payments without ever owning the car. If at the end you do go to buy out the car you will probably have to finance that balloon payment with some other loan. Looking at this over 10 years that could be a shed load of interest. Each to their own but changing cars is a very expensive process. I prefer the buy & hold strategy myself. As you pointed out, cars are so good they don't need to be changed as often. My own car is 11 years old. It was a high spec in its day and I've yet to drive anything as good that wouldn't cost an arm & a leg. Of course, it's only a wipper-snapper compared to my wife's car.


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## Firefly

Bronte said:


> I only just read your great post Firefly now.
> 
> The thing about the CU is this, or a bank for that matter.  You're unliely to lose the run of yourself and go to borrow 30K. When you're told a PCP only costs x and you just sign here, then it's easy money and nobody thinks about down the road.
> 
> With the CU you can pay it off early.  No penalty. You'll get to own your car.  You don't have to think about futrure values, how many km's your doing, will it be the  magic value in three years time etc.
> 
> Westin is right.  So we'll have people rolling over the PCP's a couple of times and then they will realise that they can't continue and that they've overpaid.  Massively.



Exactly. The salesman in his shiny suit will have many shopping trips to New York in the meantime. 

When the biggest selling car in the country is a 30k+ Hyundai Tucson you know there's something wrong. It should probably be a Ford Focus / Opel Astra...


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## Bronte

Firefly I presume this new idea is American in origin.  Nowadays it's all about keeping people constantly in credit. 

Until my current car I always bought second hand.  It's a tiny car, (known to you as an Suzuki Wagonlit) I mentioned it years ago on here, but it made sense to me to purchase outright.  Cars are much cheaper here and I paid a deposit and borrowed the rest from the garage at zero interest over about 3 years.  Now 11 years old and going strong with only 65K on it.  I only borrowed because of the zero interest, that's a no brainer.  Best financial advice I can give to people on here is that this PCP is to be avoided unless someone supplies figures, guaranteed ones, not future this or that.  And then we can do the sums.  Also people currently paying off their cars, and of course most people have to borrow, is that they put some money aside for the future car purchase. 

Does your wife have a company car, is that what you mean?


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## Firefly

Ceist Beag said:


> You're comparing the new price here with a 2 year old car in the UK? This has already been discussed on another thread and I think there is broad agreement that you can save, on average, between 20-30% on the price of a second hand car if importing from the UK but it is not without risk so I think it's best to compare like with like when showing these examples.



Yeah, that's a fair point. I suppose I am trying to argue that it would be a lot cheaper to finance a car via the CU or a bank (albeit at a higher interest rate) and buy a nearly new car in the UK and own it outright than to be lured into the PCP plans with their low interest rates. Reminds me of people who paid over the odds for houses on tracker rates during the boom. The low interest rate isn't much of a comfort if you paid too much for something.


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## Firefly

Bronte said:


> Firefly I presume this new idea is American in origin.  Nowadays it's all about keeping people constantly in credit.
> 
> Until my current car I always bought second hand.  It's a tiny car, (known to you as an Suzuki Wagonlit) I mentioned it years ago on here, but it made sense to me to purchase outright.  Cars are much cheaper here and I paid a deposit and borrowed the rest from the garage at zero interest over about 3 years.  Now 11 years old and going strong with only 65K on it.  I only borrowed because of the zero interest, that's a no brainer.  Best financial advice I can give to people on here is that this PCP is to be avoided unless someone supplies figures, guaranteed ones, not future this or that.  And then we can do the sums.  Also people currently paying off their cars, and of course most people have to borrow, is that they put some money aside for the future car purchase.
> 
> Does your wife have a company car, is that what you mean?



My wife owns her own car. It's 16 years old, and like my own, it's running like a clock.

I worked with someone a few years ago who loves Apple products. When that Apple Watch came out I asked her if she was going to buy one and she said "Of course". I asked why and she said "Because it's shiny and it's new". Pretty much sums up the PCP craze for me (along with the neighbours all "buying" new cars).


----------



## Bronte

Firefly said:


> Exactly. The salesman in his shiny suit will have many shopping trips to New York in the meantime.
> 
> When the biggest selling car in the country is a 30k+ Hyundai Tucson you know there's something wrong. It should probably be a Ford Focus / Opel Astra...



Is that one of those large gaz guzzlers. 

I can see that Ireland is getting back on it's feet.  But one of the signs of the Celtic tiger I noticed was when all of a sudden young people were all in brand new cars.  So I expect the sight of the Tucson is evidence for me and for you, of some of that madness coming back. 

We can but try and warn people on here and if they don't listen what can we do.  And you will notice, no figures. Yet !


----------



## demoivre

Several posts later and I'm still not much the wiser about GMFV. As I see this the dealer has covered himself by giving this *minimum* value once the car is returned but it it could be significantly less than the Open Market Selling Price as determined by Revenue. If you only get the GMFV then there is no surplus equity to use against another new car. You are completely at the mercy of one garage as to what they give you when you bring back the car.



Blackrock1 said:


> also the dealers will want to get people onto more PCPs so notwithstanding the fact that a similar car can be imported from the UK more cheaply, it will be in their interest to prop up the residual value.
> i am half way through a second one, the equity left after the first one (one an audi, circa 45k) meant i didnt have to present any additional deposit on the second one and got a new better specced car at around the same monthly cost.



So the garage gave you more than the GMFV? How much more and how did what they offer you compare to the Open Market Selling Price as determined by Revenue?


----------



## Blackrock1

Bronte said:


> Am I misunderstanding your point.  You think throwing away 4K or more likely 8K, is nothing?
> 
> And you did not give us any example, you singularly omitted actual numbers.
> 
> So here goes:
> 
> Car 1: Cash price (as versus)
> PSP Price
> Deposit
> Trade in value
> 
> Car 2 - ditto
> 
> And what have you got now and how much did it cost you.



i didn't realise i needed to explain everything to you in minute detail, 

i dont have the exact figures to hand but a summary that isnt a millions miles off is as follows:

Car 1 - bought new, retail price 47.5k, sales price to me 45k. Deposit 10k monthly payments including servicing plan was 460 something like that. GMFV something like 20k at the end of 36 months .

At the end of month 36 i could hand the car back, buy it for 20k or trade it against a new PCP deal.

In actual fact i traded after 20 months or so to a new car, retail 50k, sale price to me maybe 45k. Extra deposit 0, monthly payments including the service plan around 490 GMFV a little higher maybes 21.5k

The newer car had a lot of extras the original one didnt.

the figures are off the top of my head but they arent too far off.

This is our only family car and purchased as i wanted something hassle free.

To be clear every car i had prior to that was at least 5 years old (tending to be s/h high performance BMWs mainly) but running something like that as an only family car didnt make sense, as well as that there was nearly 2k tax a year to pay for, expensive tyres, expensive repairs if anything goes wrong.

i never said throwing away 4-8k was inconsequential, rather it isnt the armageddon that you seem to imply. The


----------



## Thirsty

> Instead of buying the car outright when the three years are up, most people buy another car


I think this is the key to these deals.

I bought my car on a PCP as it suited me best at the time, for various other reasons I won't go into.  My previous car I bought new and drove for 10+ years.  For this car, I will have my lump sum payment when my three years are up, I'll buy the car outright & drive it happily for another 10 years.


----------



## Firefly

PCP plans are a twist on leasing (from what I see you have the option of actually buying the car at the end of the deal). Here's what  says regarding costs:

*Is leasing cheaper than buying?*
_In a purely investment sense, it's the worst option, as you've nothing to show for it at the end of the deal. But, monthly payments tend to be low, and leasing can allow you to get behind the wheel of a car you'd never be able to afford to buy._

I think that nails it. Too many people are driving cars they could otherwise not afford. There must be a catch and to me it's a long period of debt servicing.


----------



## Blackrock1

demoivre said:


> Several posts later and I'm still not much the wiser about GMFV. As I see this the dealer has covered himself by giving this *minimum* value once the car is returned but it it could be significantly less than the Open Market Selling Price as determined by Revenue. If you only get the GMFV then there is no surplus equity to use against another new car. You are completely at the mercy of one garage as to what they give you when you bring back the car.
> 
> 
> 
> So the garage gave you more than the GMFV? How much more and how did what they offer you compare to the Open Market Selling Price as determined by Revenue?



It is what you can buy the car for at the end of the agreement thats it, not complicated.

if you believe the car to be worth more you are free to purchase at that price and sell it on. If you believe it to be worth less you hand back and forego your original deposit. Generally they try and structure it that so some of your equity remains and you roll that into another PCP with them, or another marque if you want to do that.


----------



## Blackrock1

Bronte said:


> What does half way through mean?
> What equity
> 
> You remind me of a poster a long time ago on here.  His wife I think it was came on here.  He was on about car 5 in as many years and now owed 70K. I don't have the full gist of it, but something along those lines.  For him it was all about the latest model the latest spec etc.



and this proves you don't understand the concept which reminds me of many things but ill do you the courtesy of remaining civil


----------



## Blackrock1

Bronte said:


> Westin is right.  So we'll have people rolling over the PCP's a couple of times and then they will realise that they can't continue and that they've overpaid.  Massively.



so how does that happen? unless you cant afford the monthly payments that you signed up to, which will be an issue regardless of how you finance.


----------



## Firefly

Blackrock1 said:


> if you believe the car to be worth more you are free to purchase at that price and sell it on.



Lets say for argument the garage offer you 15k but you think you could get 18k. You buy the car from the garage and all going well you now have 3k in your pocket. Would you mind explaining your options then? I see 2 options (1) buy something crappy for 3k (2) come up with another 7-10 grand for a deposit for your next PCP car and the cycle starts again.

Edit: Option (3) you (presumably) borrow 15k to buy the car outright. It would be pretty demoralising to go to the CU and borrow 15k to buy something you have been paying for for the last 3 years and also handed over a nice deposit for..


----------



## Blackrock1

Firefly said:


> Lets say for argument the garage offer you 15k but you think you could get 18k. You buy the car from the garage and all going well you now have 3k in your pocket. Would you mind explaining your options then? I see 2 options (1) buy something crappy for 3k (2) come up with another 7-10 grand for a deposit for your next PCP car and the cycle starts again.



i think you have covered the options there 

the key is to minimise the depost, then you minimise any potential loss and you can effectively cap your monthly motoring costs such that you are comfortable having a monthly cost, as the cars generally come with service packs and a warranty that covers the period.


----------



## PGF2016

Blackrock1 said:


> This is our only family car and purchased as i wanted something hassle free.



Genuine question. Not having a go. What do you mean hassle free?


A colleague was advising me to buy an new Audi estate because new cars are hassle free and if it was to break down Audi would come and collect it and provide a replacement car on the spot.
I bought a 3 year old car. It's now 9 years old and has never failed to start or broke down. Even if it had broken down 2-3 times it would still not be worth while to pay the premium for a new car. My opinion of course.


----------



## Firefly

Blackrock1 said:


> ... the cars generally come with service packs and a warranty that covers the period.



That's an awfully expensive way to drive something "hassle free". Fair enough if it's a Maserati or something, but the biggest selling car is a Hyundai Tuscon. It's got a 7 year warranty. I'm at a loss to understand what's wrong with buying a 3 year old one for half the cost with another 4 years warranty to go..


----------



## Firefly

PGF2016 said:


> I bought a 3 year old car. It's now 9 years old and has never failed to start or broke down. Even if it had broken down 2-3 times it would still not be worth while to pay the premium for a new car. My opinion of course.



Ditto here. Bought mine when it was 4 years old and running like a clock since. Would get nothing for it now so happier to save away and buy a car when I _need_ to (remember that concept?!!)


----------



## Firefly

Blackrock1 said:


> the key is to minimise the depost



If you don't mind me saying it, that sounds like hassle to me. Each to their own but the last thing I want to be thinking about is not going over a pre-agreed mileage limit or something.


----------



## Learner2015

I am in the middle of doing a PCP dea, I'm only looking at ones with 0% rates. I went to three dealers and told each of them I was paying cash, got the best price and then I said actually I want to PCP the car can I still have the same purchase price - yes I can. Now I know I am not paying anything extra for the pleasure of using the finance deal.

Pitfalls have been discussed - mileage clause, condition of car and getting it serviced. My mileage clause I am being allowed is plenty (double my annual mileage), if I damaged my car whether it was on a PCP or not I would be getting it fixed and with regards to servicing I'll be doing that too anyway. You don't have to go to main dealer you can go independent as long as they can show evidence the used OEM parts and have the right equipment.

Re the GFV typically this is set at around 40% of the cars purchase price. So say used prices bomb all you get is this minimum value? - hand the car back and walk away casue it is worth loads less and you paid no interest charge over the 3 years so your doing ok, You could walk in to the dealer the next day and buy your car back for thousands less at the new market value or a similar car from another dealer. If you had bought the car for cash or traditional HP you car would still have lost the same value. Or if for some reason you ended up doing double the allowed mileage - buy the car outright for the minumum value and hold onto it.

Re the equity I personally think if someone is banking on that for their next purchase they cannot afford to buy the car in the first place. I am pretty sure the car I am buying will be worth more then the minimum value in 3 years, probably by at leaset 6k but if its not so be it. You can't win on everything.

Re being tied to the dealer you are not, you can go to any dealer / brand you like at the end of the term just like you would with a car with HP outstanding on it and trade it in.

For me it makes sense - 0% loan, hassel free motoring for three years and I'll have the purchase price in cash in the bank to buy the car outright at then end anyway so can decide what do do then. If there is equity I might go again if not I might buy it myself and run it into the ground who knows!

There is positive and negatives with everything, whether you buy new / used / borrow / cash etc.


----------



## Bronte

Blackrock1 said:


> i didn't realise i needed to explain everything to you in minute detail,
> 
> i dont have the exact figures to hand but a summary that isnt a millions miles off is as follows:
> 
> Car 1 - bought new, retail price 47.5k, sales price to me 45k. Deposit 10k monthly payments including servicing plan was 460 something like that. GMFV something like 20k at the end of 36 months .
> 
> At the end of month 36 i could hand the car back, buy it for 20k or trade it against a new PCP deal.
> 
> In actual fact i traded after 20 months or so to a new car, retail 50k, sale price to me maybe 45k. Extra deposit 0, monthly payments including the service plan around 490 GMFV a little higher maybes 21.5k
> 
> The newer car had a lot of extras the original one didnt.
> 
> the figures are off the top of my head but they arent too far off.
> 
> This is our only family car and purchased as i wanted something hassle free.
> 
> To be clear every car i had prior to that was at least 5 years old (tending to be s/h high performance BMWs mainly) but running something like that as an only family car didnt make sense, as well as that there was nearly 2k tax a year to pay for, expensive tyres, expensive repairs if anything goes wrong.
> 
> i never said throwing away 4-8k was inconsequential, rather it isnt the armageddon that you seem to imply. The



Can I have the brand name of the first car.  And the year of purchase. 

And of course I want minute detail.  That's what this website is about.  I want to figure it out.


----------



## Bronte

Summary of situation now moved to 19th Jan, in light of new information.


----------



## demoivre

Blackrock1 said:


> It is what you can buy the car for at the end of the agreement thats it, not complicated.



No it's not. The bit I struggle with is that the garage alone decides whether the GMFV is what they will give you if you opt for a new car/new PCP. You don't know until you bring back the car whether there's equity over and above the GMFV, or whether you have to stump up more cash as a deposit to enter a new PCP. I'm sure used car salesmen are the most upstanding members of society but.......


----------



## Firefly

Learner2015 said:


> For me it makes sense - 0% loan, hassel free motoring for three years and I'll have the purchase price in cash in the bank to buy the car outright at then end anyway so can decide what do do then. If there is equity I might go again if not I might buy it myself and run it into the ground who knows!



Yip, the only way I can see this being a worthwhile exercise. I'm in a similar boat boat in that I have the funds to change my car but don't need to replace the car anytime soon hopefully.


----------



## Bronte

Firefly and Demoivre, have I asked all the right questions.  As you can see I'm not great on cars.


----------



## Blackrock1

Bronte said:


> Car 1  45k.
> Deposit 10k
> Brand: Audi ??
> 3 year PCP monthly 460
> including servicing plan  ??
> After 3 years GMFV 20k
> 
> At the end of month 36 i could hand the car back, buy it for 20k or trade it against a new PCP deal.
> 
> Car 2 45K
> Deposit Zero
> ? Year PCP Monthly 490
> Service plan ??
> GMFV 21.5 K
> 
> In actual fact i traded after 20 months or so to a new car, , monthly payments including the service plan around 490 GMFV a little higher maybes 21.5k
> 
> Questions:
> 1. Brand name of first car, Don't just say Audi give me the real thing.  What is it in Audi's, number I think.  Like an Audi 6
> 2. Where did you get the 10K deposit
> 3. What was the interest rate on each PCP.
> 4. What is the duration of each PCP
> 5. When did you start the second PCP, month and year please
> 6. What is the service plan? How much is this costing annually. Why do you need one for a new car?
> 7. What is your annual mileage
> 
> Figures
> Car 1. 460 X 20 =  9200 paid plus deposit = 19,200
> Owe Zero
> *But you've spent 19K* !! IN A YEAR AND A HALF.
> 
> 
> Car 2
> 
> 490 X? =



As i have mentioned i dont have the agreement in front of me, im working off memory, also your tone leaves a lot to be desired, something to work on.

Deposit 10k
Brand: Audi A5 sportback
3 year PCP monthly 460
including servicing plan  yes
After 3 years GMFV 20k

At the end of month 36 i could hand the car back, buy it for 20k or trade it against a new PCP deal.

Car 2 45K
Deposit Zero
3 Year PCP Monthly 490
Service plan yes
GMFV 21.5 K

In actual fact i traded after 20 months or so to a new car, , monthly payments including the service plan around 490 GMFV a little higher maybes 21.5k

Questions:
1. Brand name of first car, Don't just say Audi give me the real thing.  What is it in Audi's, number I think.  Like an Audi 6 - there is no audi 6, altho there is an A6, this is an A5 sportback
2. Where did you get the 10K deposit - from my current account
3. What was the interest rate on each PCP. - 1.9%
4. What is the duration of each PCP - 36 months
5. When did you start the second PCP, month and year please - Say the first one started in May 2013 second one started July 2015
6. What is the service plan? How much is this costing annually. Why do you need one for a new car? - Service plan is fixed price servicing, costs around 500 for 3 years, covers one annual service a year, a new car needs to be serviced every year, the same as an old one. there is on no interest charged on this and its split into 36 and added to your monthly payment. therefore your annual service costs around 167 euro at an authorised garage,
7. What is your annual mileage - low, circa 10,000km or less

Figures
Car 1. 460 X 25 =  12,420 paid plus deposit = 21,500

Car 2

490 X 36 = 17,640

so if i keep to the end thats 5.25 years motoring at a cost of 39k, or 7.4k per annum or 620 a month on the assumption that i have no deposit left at the end of the second PCP.


----------



## Blackrock1

Bronte said:


> Firefly and Demoivre, have I asked all the right questions.  As you can see I'm not great on cars.



for someone getting so exorcised by this the one thing that shines through is that you arent particularly knowledgeable on cars


----------



## Blackrock1

Firefly said:


> Ditto here. Bought mine when it was 4 years old and running like a clock since. Would get nothing for it now so happier to save away and buy a car when I _need_ to (remember that concept?!!)



good for you, the 6 year old cars i had cost me a lot to run, as i said 2k tax, 1200 for a set of tyres, annual servicing costs of 500-800 etc etc, it was a choice i made as i love cars and they are something i get enjoyment from i dont see them as purely utilitarian.


----------



## Bronte

Blackrock1 said:


> for someone getting so exorcised by this the one thing that shines through is that you arent particularly knowledgeable on cars



Ain't that the truth.  I'll see if I can work out the figures instead.  To justify those alloy wheels.  I used to test my husband on those, which cars had them and which hadn't.  They all look the same to me. LOL.

Just asked himself what was the company audi he had a couple of years ago.  It was an Audi A6, how ironic is that.  I hated it.  He only had it for two months thank god.  It had cream carpets, how mad is that.  And I hated that it was automatic.  You had to sink into it rather get into it.  And the chhidlren still laught about it.  It had heated front seats tough, and while I liked that, they were leather so they were cold when you got in first.  (see now I'm actually good on cars)


----------



## Blackrock1

Bronte said:


> Ain't that the truth.  I'll see if I can work out the figures instead.  To justify those alloy wheels.  I used to test my husband on those, which cars had them and which hadn't.  They all look the same to me. LOL.
> 
> Just asked himself what was the company audi he had a couple of years ago.  It was an Audi A6, how ironic is that.  I hated it.  He only had it for two months thank god.  It had cream carpets, how mad is that.  And I hated that it was automatic.  You had to sink into it rather get into it.  And the chhidlren still laught about it.  It had heated front seats tough, and while I liked that, they were leather so they were cold when you got in first.  (see now I'm actually good on cars)



cream carpets

that was a mistake !


----------



## Ceist Beag

Blackrock1 said:


> so if i keep to the end thats 5.25 years motoring at a cost of 39k, or 7.4k per annum or 620 a month on the assumption that i have no deposit left at the end of the second PCP.


Blackrock, the one point you've missed there is at at the end of the 5.25 years you will still owe the remaining 20K if you want to actually own the car. You can of course roll it on to a new deal and keep paying 7.4K per annum for the privilege but it's a big gap in your story that you never actually own the car if you do opt for this approach.
The alternative view on this would be for someone who comes along after you, picking up your old car every 3 years. It will be a car in good condition (given the terms of the PCP deal) and let's say the dealer factors in 20% on top for themselves. So this buyer could buy your 3 year old car for say 24K cash (assuming the GMPV was 20K) and by the end of the 3 year term that car would still be worth around 12K (possibly more if looked after well). So that buyer is paying just 4K per annum and they actually own the car. 
Obviously it's different strokes for different folks. You might prefer a new car and the warranty that goes with it. You might not mind that you don't own the car outright. You might just have the cash and are happy to spend it.
But as this is a financial website it is hard to ignore the fact that there is an alternative which costs much less money and I don't think anyone would say these days that a 3 year old car is old or likely to cause you problems.


----------



## Blackrock1

Ceist Beag said:


> Blackrock, the one point you've missed there is at at the end of the 5.25 years you will still owe the remaining 20K if you want to actually own the car. You can of course roll it on to a new deal and keep paying 7.4K per annum for the privilege but it's a big gap in your story that you never actually own the car if you do opt for this approach.
> The alternative view on this would be for someone who comes along after you, picking up your old car every 3 years. It will be a car in good condition (given the terms of the PCP deal) and let's say the dealer factors in 20% on top for themselves. So this buyer could buy your 3 year old car for say 24K cash (assuming the GMPV was 20K) and by the end of the 3 year term that car would still be worth around 12K (possibly more if looked after well). So that buyer is paying just 4K per annum and they actually own the car.
> Obviously it's different strokes for different folks. You might prefer a new car and the warranty that goes with it. You might not mind that you don't own the car outright. You might just have the cash and are happy to spend it.
> But as this is a financial website it is hard to ignore the fact that there is an alternative which costs much less money and I don't think anyone would say these days that a 3 year old car is old or likely to cause you problems.



i havent omitted that at all, i assumed it was plainly obvious.

Also the point you are missing is that if i don't buy the new car someone cant come along and buy the second hand one! and they will have to tie 24k in cash up immediately.

Also the 24k price is low and assume all equity is gone


----------



## Ceist Beag

Blackrock1 said:


> Also the point you are missing is that if i don't buy the new car someone cant come along and buy the second hand one! and they will have to tie 24k in cash up immediately.
> 
> Also the 24k price is low and assume all equity is gone


You're taking the example too literally Blackrock. The example was based on the market value provided for your car (20K for a 3 year old in your case) is close to the actual market value after 3 years. Maybe it's low as you say but given the number of these PCP deals going I wouldn't be surprised if it is not too far off the mark. So in my example there should be plenty of 3 year old cars available when your 3 years are up so someone looking to buy one should get one without too much trouble. So I think 24K is not low based on that. Time will tell.
You're right in that they need to have the 24K in cash but if you can change your thinking to saving for 3 years before purchasing, instead of purchasing on credit and paying off over 3 years, I think you'll view this as being a better approach (or at least I do!). The 24K in cash in my example would more like be 12K cash plus 12K trade in value but I think you get the point I'm making here.


----------



## Leo

In essence, PCP deals are a financing model that gives you an option to break after 2 or 3 years, and so give a little more flexibility than straight financing. At the break point, you can walk away with nothing, pay off the remaining finance, or continue with the monthly payments for a further 2/3 years. Most of the manufacturers offering these deals have decent calculators online that show you exactly what you're getting into. Adjusting the mileage option adjusts the portion of the financed amount to be repaid over the initial PCP period.

Many brands are offering better terms for PCP than they are for straight financing, as their goal is to roll you over to a new car when the break period comes around, and keep rolling you over every time. That way they win a customer for life, and secure a predictable supply of second hand models in good condition. That is why you'll find the deposit amount limited on PCP deals, their goal is to get you used to the monthly payment, and keep you rolling over every 2/3 years. If you pay a large deposit, when you come to roll-over, unless you're willing to put in a lump sum, your monthly payments are likely to increase if you choose to take the new car option. 

Most  dealers offer better rates for PCP than the banks or CUs do for car loans, so if you are after a new car on finance, they can offer savings over the traditional options.


----------



## Firefly

Ceist Beag said:


> You're right in that they need to have the 24K in cash but if you can change your thinking to saving for 3 years before purchasing, instead of purchasing on credit and paying off over 3 years, I think you'll view this as being a better approach (or at least I do!).



You and me both. We only purchase from savings.  Saving is tough but it distills great discipline. Also when it comes to buying something you are well aware of the sacrifices that went into building the funds and are much better at buying what you need for a fair price. Getting the cash up front from a bank or instantly from the guy in the shiny suit and you'll start adding bells and whistles to a car you don't really need in the first place.


----------



## Leo

Ceist Beag said:


> But as this is a financial website it is hard to ignore the fact that there is an alternative which costs much less money and I don't think anyone would say these days that a 3 year old car is old or likely to cause you problems.



Charity shop (or even the likes of Tesco or Dunnes) clothing costs a lot less than many other alternatives, but a majority still choose more expensive options. Very few people base all or even a majority of purchasing decisions purely on financial terms.


----------



## Firefly

Blackrock1 said:


> lads lets get some perspective here, whats the very worst that can happen to you on a PCP deal? you lose your initial deposit, thats it.
> 
> Ok its not ideal but as long as you are sensible about keeping that low and comfortable with the risk of losing it then whats the issue.



Depends . If you can't keep up the repayments you will indeed lose the car. But you still owe them the difference between what you bought the car for and whatever payments you have made to date, i.e. the balance. If the finance company can recoup this amount by selling your car, then you're OK. If they can't (which is more probable unless you had a very big deposit, given the price of imported cars from the UK) you will be chased for the difference. After all that then at best you are left with nothing and you've lost your deposit, at worst you now have to find extra money at a time when you were not in a position to pay for the car anyway.


----------



## Ceist Beag

Leo said:


> Charity shop (or even the likes of Tesco or Dunnes) clothing costs a lot less than many other alternatives, but a majority still choose more expensive options. Very few people base all or even a majority of purchasing decisions purely on financial terms.


With all due respect Leo, I don't think you can compare purchasing a car with clothes! A car is probably the second biggest purchase people ever make (after house obviously) so financial terms form (or at least should form!) a massive part of the decision in buying a car.


----------



## Blackrock1

Firefly said:


> Depends . If you can't keep up the repayments you will indeed lose the car. But you still owe them the difference between what you bought the car for and whatever payments you have made to date, i.e. the balance. If the finance company can recoup this amount by selling your car, then you're OK. If they can't (which is more probable unless you had a very big deposit, given the price of imported cars from the UK) you will be chased for the difference. After all that then at best you are left with nothing and you've lost your deposit, at worst you now have to find extra money at a time when you were not in a position to pay for the car anyway.



of course like any finance, This post will be deleted if not edited immediately everyone loves the doomsday scenarios on here


----------



## Blackrock1

so can we summarise this thread as follows,

the people who only purchase from savings and who only buy 3-6 year old cars see PCP as the work of the devil

the people who for one reason or another see a rationale for buying a new car on 0% or very low levels of financing at a monthly cost that comfortably fits in their household budget can see a benefit in doing it, understanding that there will be a decision to be made at the end of the process


----------



## Ceist Beag

Blackrock1 said:


> so can we summarise this thread as follows,
> 
> the people who only purchase from savings and who only buy 3-6 year old cars see PCP as the work of the devil
> 
> the people who for one reason or another see a rationale for buying a new car on 0% or very low levels of financing at a monthly cost that comfortably fits in their household budget can see a benefit in doing it, understanding that there will be a decision to be made at the end of the process


Why are you getting so defensive about it? All we're doing is pointing out some gotchas in the PCP approach. As has already been said, if you're good with those and are happy to spend the extra cash to buy new then go for it. All we're doing here is pointing out that it is not without it's flaws and that some of us prefer to buy from savings, not credit, and buy second hand.
There is no right and wrong here, each of us can decide what's best for our own circumstances.


----------



## Blackrock1

Ceist Beag said:


> Why are you getting so defensive about it? All we're doing is pointing out some gotchas in the PCP approach. As has already been said, if you're good with those and are happy to spend the extra cash to buy new then go for it. All we're doing here is pointing out that it is not without it's flaws and that some of us prefer to buy from savings, not credit, and buy second hand.
> There is no right and wrong here, each of us can decide what's best for our own circumstances.



except that the tone is that anyone buying on PCP must be off their head and obviously not understand it, rather the people who dont understand it are the people bashing it

for the record i could have bought my car from savings but i chose not to and instead availed of the very low interest rate offered.

i never bought a new car until recently, the previous 10 cars i owned were all minimum 5 years so its not as if im some reg plate snob that was determined to get himself into a new car at any cost


----------



## Ceist Beag

I hope I wasn't coming across as suggesting that anyone buying on PCP must be off their head? I previously made the point that it can be a good option for some and I certainly don't think there is anything wrong with people choosing this option, if it suits them and they have the money to spend.
Some of the concern raised on this thread about PCP was around those who may not have the money to spend and who see this as a cheap way of driving an expensive asset - and we know enough from the last 10 years that cheap credit can come back to bite some people!


----------



## Learner2015

I think the thread was good at showing both sides of PCP deals.

Like everything it has its pros and cons, if you are informed, know the risks and I think above all don't rely on the future value of your trade in being vastly more than the GFV then your fine.

0% sealed it for me, as a former car salesman I understand the unpredictability of used car values but think it is a calculated risk not a a Hail Mary to assume I'll have some equity at the end of it.

What's right for some is not for others. Over the years I had customers who would never buy a used car and the same who would never buy a new car. Some financed, some didn't, some bought with their heart and some with their head.

Yes this is a money forum but consideration needs to be thought of in respect of needs v wants. I actually don't need a car, I could survive without one (awkwardly) and save loads of cash. Fact is I want one, a nice one and am prepared to pay for it.


----------



## Leo

Ceist Beag said:


> With all due respect Leo, I don't think you can compare purchasing a car with clothes! A car is probably the second biggest purchase people ever make (after house obviously) so financial terms form (or at least should form!) a massive part of the decision in buying a car.



True, it's a significant single purchase, but to say you can't compare the approach to an occasional large purchase to that of many, many smaller purchases that can amount to a greater spend makes no sense. I know quite a few people who drive decent cars, but spend more money on clothes.


----------



## Brendan Burgess

Anyone fancy doing a balanced summary of the pros and cons? 

Brendan


----------



## Bronte

delete


----------



## Bronte

*Example of PCP leading to another PCP - Poster Blackrock*

_Car 1 May 2013_
Cost: 45k.
Deposit 10k (from savings)
Brand: Audi A 5 Sportback
3 year PCP 1.9 % monthly 446
Servicing Plan 167 annually, monthly 14
After 3 years GMFV 20k
Annual mileage 10K

GMFV
Car returned after 25 months with 15KM on the clock.

3 options

a) Hand the car back
b) Buy it for 20k
c) Trade it against a new PCP deal

_Car 2 July 2015_
Cost: 45K
Deposit 8K
3 Year PCP 1.9 % Monthly 476
Servicing Plan 167 annually, monthly €14
GMFV 21.5 K
Annual mileage 10K


Questions:
1. For car one, it's 1.9 % of what figure? 35K presume.
2. For car two, it's 1.9 % of what figure?
3. How was the GMFV calculated.



Figures
Car 1. 476 X 25 =  11,900 paid plus deposit of 10K = 21,900 Or 22K


Car 2

Car cost 45K
476 X 36 = 17,136
Car GMFV 21.5 K


----------



## Blackrock1

Bronte said:


> Questions:
> 1. For car one, it's 1.9 % of what figure? 35K presume.
> 2. For car two, it's 1.9 % of what figure?
> 3. Is the servicing plan monthly cost of 14 euro included in the 460 monthly, I presume it is.



the financing is on the cost price, less your deposit less the GFV, thats the amount you are borrowing.
the service plan is included in the monthly cost


----------



## Bronte

I'll subtract 14 Euro so.  What is the GFV?

How much is the PCP for the second car? Is it 45K?


----------



## Firefly

Blackrock1 said:


> of course like any finance, This post will be deleted if not edited immediately everyone loves the doomsday scenarios on here



I didn't paint any doomsday scenarios. You've stated that the worst that can happen is that you lose your deposit and the car. That is incorrect. You are on the hock for the balance between what the finance company purchased the car for and the repayments you have to the finance company thus far. If the finance company can sell the car for this balance, then you are right. However if they can't, you are on the hock for the difference.




Blackrock1 said:


> so if i keep to the end thats 5.25 years motoring at a cost of 39k, or 7.4k per annum or 620 a month on the assumption that i have no deposit left at the end of the second PCP.



So you've spent 39k and you still don't own the car? You can keep kicking the can down the road if the finance company keeps offering this deal of course. Assuming that the price of cars doesn't increase and interest rates stay at 1.9% (not very likely I would say), your best case is paying 7,400 a year in perpetuity or else taking what little equity you have left and buying a jalopy. However if you go for PCP #3 though you are probably after paying 50 - 60k at this stage. Regardless, at some stage, that final "optional" payment will need to be repaid and you will be left with little or nothing to show for it.

I don't mean this as a dig at you, but I wonder how many people taking out PCP deals for cars costing 45k would spend 45k on a car from their savings account if 45k was magically lodged to their savings account. I would say very few.


----------



## Firefly

Blackrock1 said:


> the financing is on the cost price, less your deposit _*less the GFV*_, thats the amount you are borrowing.



Are you sure about that? Why would the finance company factor this in when lending you money? It has to obtain the 35k itself (45k - deposit) and lend all of this to buy the car from the garage.


----------



## Bronte

Blackrock1 said:


> so if i keep to the end thats 5.25 years motoring at a cost of 39k, or 7.4k per annum or 620 a month on the assumption that i have no deposit left at the end of the second PCP.



This is broadly correct. 
Car 1 25 months plus car 2 36 months = 61 months or circa you will have paid 620 a month. But you own nothing.  And you've spent the guts of 40K in 5 years.


----------



## Firefly

Learner2015 said:


> For me it makes sense - 0% loan, hassel free motoring for three years and I'll have the purchase price in cash in the bank to buy the car outright at then end anyway so can decide what do do then. If there is equity I might go again if not I might buy it myself and run it into the ground who knows!





Learner2015 said:


> I actually don't need a car, I could survive without one (awkwardly) and save loads of cash. Fact is I want one, a nice one and am prepared to pay for it.



It's a great play in your case. You want a new car and have the funds to buy one outright. You are availing of 0% and probably getting free servicing and everything else. It's a no brainer (assuming you are ok with the depreciation side of things that go with buying a new car).

I may well adopt this strategy myself. I would be interested in a 3-4 year old car from a main dealer. If they can offer me 0% I would take it too as I will have the funds to buy the car outright before I step into the garage.

For the majority of people though they will be losing most of their initial deposit, paying several hundred a month over a number of years and in the end have little or nothing to show for it.


----------



## Blackrock1

Firefly said:


> your best case is paying 7,400 a year in perpetuity or else taking what little equity you have left and buying a jalopy.
> 
> I don't mean this as a dig at you, but I wonder how many people taking out PCP deals for cars costing 45k would spend 45k on a car from their savings account if 45k was magically lodged to their savings account. I would say very few.



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


----------



## Bronte

Firefly said:


> Are you sure about that? Why would the finance company factor this in when lending you money? It has to obtain the 35k itself (45k - deposit) and lend all of this to buy the car from the garage.



I'm not getting what he means here. Like you, his 'pcp' has to be for 35K?

What is GFV, did we mention this earlier.  I realise now what GMFV because it's in the Weston article.


----------



## Blackrock1

Firefly said:


> Are you sure about that? Why would the finance company factor this in when lending you money? It has to obtain the 35k itself (45k - deposit) and lend all of this to buy the car from the garage.



the amount of credit is the amount of credit why would you pay interest on a different figure?


----------



## Firefly

Bronte said:


> I'm not getting what he means here. Like you, his 'pcp' has to be for 35K?
> 
> What is GFV, did we mention this earlier.  I realise now what GMFV because it's in the Weston article.



I think GFV and GMFV are one in the same or pretty close. It's what the garage say they will give you if you return the car to them after the 3 years. That's between you and the garage though. Don't see where the finance company comes into it..nothing to do with them. They have lent you 35k to buy a car and surely they will charge interest on the 35k?


----------



## Blackrock1

Bronte said:


> This is broadly correct.
> Car 1 25 months plus car 2 36 months = 61 months or circa you will have paid 620 a month. But you own nothing.  And you've spent the guts of 40K in 5 years.



thank you for checking my maths


----------



## Firefly

Blackrock1 said:


> the amount of credit is the amount of credit why would you pay interest on a different figure?



Exactly. The amount of credit is 35k.


----------



## Blackrock1

GFV GFMV interchangeable acronyms, guaranteed future value, guaranteed minimum future value


----------



## Bronte

Firefly said:


> your best case is paying 7,400 a year in perpetuity or else taking what little equity you have left and buying a jalopy. However if you go for PCP #3 though you are probably after paying 50 - 60k at this stage. Regardless, at some stage, that final "optional" payment will need to be repaid and you will be left with little or nothing to show for it.
> 
> I don't mean this as a dig at you, but I wonder how many people taking out PCP deals for cars costing 45k would spend 45k on a car from their savings account if 45k was magically lodged to their savings account. I would say very few.



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  !


----------



## Ceist Beag

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.


----------



## Bronte

Firefly said:


> Exactly. The amount of credit is 35k.



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.


----------



## Bronte

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



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.


----------



## PGF2016

Blackrock1 said:


> I could have bought my car outright from savings, i chose not to



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.


----------



## Firefly

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?


 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


Firstly fair play in having that amount in savings considering what you are spending on cars!


----------



## Blackrock1

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  !



except i approached them, they didnt approach me, i wanted to change the spec, some people have an interest in cars beyond pure function


----------



## Blackrock1

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!



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


----------



## Blackrock1

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.



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


----------



## Blackrock1

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.



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


----------



## Bronte

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?


----------



## Firefly

Blackrock1 said:


> how old is your car now?



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



I like watches too. Like houses and cars, I tend to buy something decent and keep it. An Omega man myself


----------



## Bronte

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



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.


----------



## Blackrock1

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



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)


----------



## Bronte

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



Wrong.  The loan is the difference between the cost price and the deposit (Blackrock made an error on this and has since clarified)


----------



## Firefly

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



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?


----------



## Blackrock1

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.



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


----------



## Blackrock1

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?



like a politician i have since changed my stance here

a flip flop if you will


----------



## Bronte

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)




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.


----------



## Blackrock1

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.



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


----------



## Ceist Beag

Bronte said:


> Wrong.  The loan is the difference between the cost price and the deposit (Blackrock made an error on this and has since clarified)


No I think you are wrong Bronte. Any examples I have seen show that the loan is cost price - deposit - gmfv. See http://www.consumerhelp.ie/pcp or http://www.hyundai.ie/pcp/


----------



## Bronte

Blackrock1 said:


> 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



'Residual deposit'

We didn't hear of that before.  So the garage decided they'd allow you 8K off the second car. How I wonder did they calculate that. 

What was so great about the new spec that you switched.  It's because you're really into cars I presume.  Which is fine, I get that. I'm more concerned about how that can be manipulated on vulnerable customers.  

In your case it's clearly different.  You have plenty of cash and just choose to finance this way.  You're not really, it seems to me, interested in the financials. 

What I'd really like to understand is, would you have actually paid 45K out of your savings for a new car, or would you have been more sensible and gone for a family car that costs say 20 to 30K (how much is a decent family car in Ireland folks?)


----------



## Bronte

Blackrock1 said:


> i
> 
> i shudder to think what tyres you have on the car



Odd statement.  I go to a reputable dealer. For two decades now !


----------



## Bronte

Ceist Beag said:


> No I think you are wrong Bronte. Any examples I have seen show that the loan is cost price - deposit - gmfv. See http://www.consumerhelp.ie/pcp or http://www.hyundai.ie/pcp/



Ok, but how come Blackrock came back to us at post 108 and said:

_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
_
Also for your cons - just a suggestion

People purchase a higher priced car than they would if they were using their own month or borrowing directly from a bank/cu

Which leads to higher costs, insurance, tax, tyres 

(It never ceases to amaze me the way the garage reacts to my husband than with me.  Two years ago the guy was apologising to me the cost of my service €209 because they had to do something extra, can't remember now what, but I think it helps arriving in my much loved tin can and dressed to match.  And my husbands car is all electric and it cost something crazy to fix a pipe for the water to the wipers because a rat ate it)


----------



## Ceist Beag

Bronte said:


> Ok, but how come Blackrock came back to us at post 108 and said:
> 
> _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_


Not sure Bronte but all the examples show it is only on the difference less the GMFV - Google PCP examples Ireland and you'll see they all show this.


Bronte said:


> Also for your cons - just a suggestion
> 
> People purchase a highter priced car than they would if they were using their own month or borrowing directly from a bank/cu
> 
> Which leads to higher costs, insurance, tax, tyres



I think I covered that one in point 5 (below)?
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.


----------



## Blackrock1

Bronte said:


> 'Residual deposit'
> 
> We didn't hear of that before.  So the garage decided they'd allow you 8K off the second car. How I wonder did they calculate that.
> 
> What was so great about the new spec that you switched.  It's because you're really into cars I presume.  Which is fine, I get that. I'm more concerned about how that can be manipulated on vulnerable customers.
> 
> In your case it's clearly different.  You have plenty of cash and just choose to finance this way.  You're not really, it seems to me, interested in the financials.
> 
> What I'd really like to understand is, would you have actually paid 45K out of your savings for a new car, or would you have been more sensible and gone for a family car that costs say 20 to 30K (how much is a decent family car in Ireland folks?)



you did hear about this before, it was mentioned ages ago, its how people roll from PCP to another. If your car is worth more than the GFV at the end of year 3 this is effectively residual deposit and used as a deposit to get you onto another PCP.

Yes i am into cars, i dont want to explain what the spec was as i dont think you would care or get it.

i would have paid 45k out of savings, i just dont see why i would bother at negligible interest rates.


----------



## Firefly

Blackrock1 said:


> more of a rolex and iwc man myself but i had a dark side of the moon for a while and enjoyed it



Not mad on Rolex but I do like IWC a lot . The dark side of the moon is nice too. I tried one on though and it just didn't look as good. 



Blackrock1 said:


> so your car is worthless now



probably worth 1 or 2k but worth an awful lot more to me. Instead of paying 460 a month to a finance company I can instead lodge it to my savings account



Blackrock1 said:


> 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)



I should have clarified that a bit better. The 1,000 doesn't cover servicing or tyres. I get the car serviced at 18 months usually and it usually costs me 200 - 300 or thereabouts. My tyres are changed every 2 years at a cost of about 450 euro (no runflats for me!). The 1,000 referred to expenses over and above normal servicing and tyres. For example last year my mechanic notified me of and oil leak and a coolant leak when servicing the car and I had both fixed. The heater had to be replaced also. Stuff like that. So taking that into consideration along with servicing and tyres it works out at about 670 euro per year. So when you are into the 3rd week in Feb with your repayments we're all square regarding costs.


----------



## Blackrock1

Bronte said:


> Odd statement.  I go to a reputable dealer. For two decades now !



if you got brakes, tyres and a service for 600 quid they have skimped somewhere.

what brand are the tyres on your car


----------



## Bronte

INTEREST

37k at 2% is about €740 annually.  Or 2K over 3 years.  Not sure if it's on the decreasing amount or not.


----------



## Blackrock1

Firefly said:


> Not mad on Rolex but I do like IWC a lot . The dark side of the moon is nice too. I tried one on though and it just didn't look as good.
> 
> 
> 
> probably worth 1 or 2k but worth an awful lot more to me. Instead of paying 460 a month to a finance company I can instead lodge it to my savings account
> 
> 
> 
> I should have clarified that a bit better. The 1,000 doesn't cover servicing or tyres. I get the car serviced at 18 months usually and it usually costs me 200 - 300 or thereabouts. My tyres are changed every 2 years at a cost of about 450 euro (no runflats for me!). The 1,000 referred to expenses over and above normal servicing and tyres. For example last year my mechanic notified me of and oil leak and a coolant leak when servicing the car and I had both fixed. The heater had to be replaced also. Stuff like that. So taking that into consideration along with servicing and tyres it works out at about 670 euro per year. So when you are into the 3rd week in Feb with your repayments we're all square regarding costs.



again im struggling to see how you can put decent tyres on a bmw for 450 quid, unless they are very small diameter wheels? what model is it?


----------



## Bronte

Blackrock1 said:


> if you got brakes, tyres and a service for 600 quid they have skimped somewhere.
> 
> what brand are the tyres on your car



No clue.  It's 2 tyres for the front, cost 113 Euro.  But remember things are cheaper than Ireland, and the cars are way cheaper.  The break pads were around 60 Euro.  Something about balancing the two tyres (I've to read the invoice in another language and cars wouldn't be my expertise) the check for the mot 12 Euro, service was 92, oil was very expensive, that cost 50 euro, pollen filter 23, air filter 17, some bulbs, 12 and 33, brake fluid 12 & 8, back brakes, clean and regulate  24.


----------



## Blackrock1

Bronte said:


> No clue.  It's 2 tyres for the front, cost 113 Euro.  But remember things are cheaper than Ireland, and the cars are way cheaper.  The break pads were around 60 Euro.  Something about balancing the two tyres (I've to read the invoice in another language and cars wouldn't be my expertise) the check for the mot 12 Euro, service was 92, oo was very expensive, that cost 50 euro, pollen filter 23, air filter 17, some bulbs, 12 and 33, brake fluid 12 & 8, back brakes, clean and regulate  24.



2 tyres for 113 euro are likely to be some chinese ditch finders what will be a danger to you and anyone else on the road


----------



## Bronte

Blackrock1 said:


> 2 tyres for 113 euro are likely to be some chinese ditch finders what will be a danger to you and anyone else on the road



How come I passed the MOT then, and I did with the old tyres last year etc.  Anyway I think they look great, but they're showing up the thing that covers the screws, the hubcap thing, that's a bit cracked from my brilliant parking.


----------



## Firefly

Blackrock1 said:


> again im struggling to see how you can put decent tyres on a bmw for 450 quid, unless they are very small diameter wheels? what model is it?



I'm not a car expert. The tyre company asked what I was interested in and I said "Something middle of the road"  My tyres are Aeolus 225s. I've had them 14 months now and can't fault them. Not claiming them to be top of the range. On my previous car I once splashed out on a set of Conti's and they were really good. My car is a BMW 320i SE.


----------



## Ceist Beag

... and once again this thread goes way off topic and the facts I posted in the Pros/Cons post are lost in the midst of this nonsense...


----------



## Firefly

Bronte said:


> INTEREST
> 37k at 2% is about €740 annually.



That's what our ferry trip to France next summer came in at!


----------



## Blackrock1

Bronte said:


> How come I passed the MOT then, and I did with the old tyres last year etc.  Anyway I think they look great, but they're showing up the thing that covers the screws, the hubcap thing, that's a bit cracked from my brilliant parking.



the MOT or NCT dont concern themselves with how good the tyres are just that they meet the min reqts re thread depth. As long as you are happy they look great, i hope you dont ever have to stop in the wet


----------



## Blackrock1

Ceist Beag said:


> ... and once again this thread goes way off topic and the facts I posted in the Pros/Cons post are lost in the midst of this nonsense...



sorry i have taken this off topic, poor tyres are a pet peeve of mine and i always get suspicious when people quote low running costs on their cars.


----------



## Firefly

Ceist Beag said:


> Cons
> 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.



Good post (and sorry for on my behalf for taking it off topic). "you will still be liable for the loan but the car will be taken off you". I think it needs to be clarified that if, after taking the car off you the finance company are not able to get enough for it to cover the balance of the loan (for whatever reason - a glut of cars, less demand, damage to the car etc) then you are also liable for this shortfall.


----------



## Leo

Bronte said:


> How come I passed the MOT then, and I did with the old tyres last year etc.  Anyway I think they look great, but they're showing up the thing that covers the screws, the hubcap thing, that's a bit cracked from my brilliant parking.



MOT tests to minimum standards. Better tyres will significantly reduce stopping distance, aquaplaning, and the chances of losing traction.


----------



## Blackrock1

Firefly said:


> Good post (and sorry for on my behalf for taking it off topic). "you will still be liable for the loan but the car will be taken off you". I think it needs to be clarified that if, after taking the car off you the finance company are not able to get enough for it to cover the balance of the loan (for whatever reason - a glut of cars, less demand, damage to the car etc) then you are also liable for this shortfall.



firefly, a good comparison might be what you paid upfront for your BMW, what its worth now, what the annual servicing and repairs costs are (excluding tyres) and the annual road tax to get a comparative monthly cost.


----------



## Bronte

Blackrock1 said:


> the MOT or NCT dont concern themselves with how good the tyres are just that they meet the min reqts re thread depth. As long as you are happy they look great, i hope you dont ever have to stop in the wet



What do you think I do be doing, turning corners like Ayrton Senna.  I don't set out in the car of a morning to test just how well they work.


----------



## Bronte

Leo said:


> MOT tests to minimum standards. Better tyres will significantly reduce stopping distance, aquaplaning, and the chances of losing traction.



Look guys, I do low mileage, on secondary roads in a city and I might be on the motorway a couple of times a week at around 110 km and they work perfectly.  I once nearly ended up in a lake though.  And that was with the children  took a bend wrongly in the ice and skidded to within a foot of the water (frozen).


----------



## Bronte

Firefly said:


> . "you will still be liable for the loan but the car will be taken off you". I think it needs to be clarified that if, after taking the car off you the finance company are not able to get enough for it to cover the balance of the loan (for whatever reason - a glut of cars, less demand, damage to the car etc) then you are also liable for this shortfall.



This is the bit I need clarifying.  So when is a 'guarantee' not a guarantee for the GMFV exactly?


----------



## Leo

Ceist Beag said:


> ... and once again this thread goes way off topic and the facts I posted in the Pros/Cons post are lost in the midst of this nonsense...



We can do a key post from this and 'sticky' it so it remains at the top of the forum. 

Nissan's calculator is one of the better ones out there, you can play around with deposit, term, and mileage options to see how they affect the numbers.


----------



## Blackrock1

Bronte said:


> What do you think I do be doing, turning corners like Ayrton Senna.  I don't set out in the car of a morning to test just how well they work.



i think that everyone needs to be prepared for an emergency stop in sub optimal conditions


----------



## Blackrock1

Bronte said:


> This is the bit I need clarifying.  So when is a 'guarantee' not a guarantee for the GMFV exactly?



you are assuming its not guaranteed but as i said thats the premise of the agreement.


----------



## Leo

Bronte said:


> This is the bit I need clarifying.  So when is a 'guarantee' not a guarantee for the GMFV exactly?



You won't get the GMFV if you do not maintain the car to the agreed standards in terms of mileage and damage. The T&Cs are pretty clear on what's expected, so there should be little doubt about what to expect when the time comes.


----------



## Ceist Beag

Leo said:


> We can do a key post from this and 'sticky' it so it remains at the top of the forum.
> 
> Nissan's calculator is one of the better ones out there, you can play around with deposit, term, and mileage options to see how they affect the numbers.


Thanks Leo, I think that would be good as there is a lot of incorrect or irrelevant talk on this thread and I think Brendan was looking for one factually correct post on the pros and cons of PCP which I tried to address so it would be good to take this make this a sticky to help people see the wood from the trees here.


----------



## Firefly

Blackrock1 said:


> firefly, a good comparison might be what you paid upfront for your BMW, what its worth now, what the annual servicing and repairs costs are (excluding tyres) and the annual road tax to get a comparative monthly cost.



OK, a useful exercise!

A few things on the calculations:

TAX. The tax on my car is a whopping 710 euro. A newer diesel model comes in at about 290 I believe. So the extra cost to me is 420 per year.

Fuel. I get 30mpg but could probably double that with a newer diesel so I am also taking into account this extra cost to me in keeping the car I have.
I do approx 12,500 miles a year. This works out at 417 gallons a year. At 4.5 litres per gallon that's 1,875 litres per year. At say 1.30 a litre that comes in at 2,438. The newer diesel would only use half the fuel and going on a lower price of 1.20 a litre the annual cost would be 1,125. So from a fuel perspective it's costing me 1,313 per year to stick with what I have.

Servicing. I get the car serviced at 200-300 a pop every 18 months or so. Going with the higher figure, this works out at 198 per year.

Tyres are tyres and will have to be changed regardless (they're obvioulsy included in the new car cost also) so I have left this out. Ditto for insurance. The annual NCT charge does apply though. So it's .5 of the full charge, or about 23 euro.

One thing to note though. As in Bronte's case my car is practically fully depreciated at this stage, so that annual depreciation charge below will continue to drop the longer I keep the car.

Regarding the car itself, I believe its original price was circa 50k. I  drove a 2012 model last year (albeit a lower spec) and I couldn't wait to get into my own car afterwards. Interestingly the only car I have driven that surpassed my own was indeed an Audi A5 for about the 50k mark too.

Soooo, here are my costings:

Purchase Price            15600
Current Value               2000
Net Cost                     13600
Years                                 6
Annual Depreciation Cost    2,267
Servicing                        198
TAX *                             420
Additional fuel cost       1,312.50
Total Annual cost          4,220.17

So, my car has cost me just over 4k a year, all in, to buy outright. As mentioned this figure will fall the longer I have it.


----------



## Blackrock1

Firefly

a little comparison over the 6 years of my two PCPs then, some assumptions made but nothing outlandish

Purchase                  15,600.00
Value                         2,000.00

Cost                         13,600.00

Monthly over 6 years    188.88
Extra tax                       42.50 ( per your figures FF)
Servicing                       16.67 (assume 200 per year)
Maintenance / repairs     20.83 (assume 250 per year)
Extra fuel cost                83.33 (assume 1k extra per year)

Monthly cost                 352

Initial depost                                      10,000
6 years of monthly payments at 480     34,560
Remaining 'equity'                               -3,000 (who knows)
                                                         41,560

Monthly cost                                       577.22 

you have your car at the end but technically i should have enough 'equity' to go and buy a similar or better car to yours (10 / 11 year old bmw for 2-3k)


----------



## Firefly

Blackrock1 said:


> Firefly
> 
> a little comparison over the 6 years of my two PCPs then, some assumptions made but nothing outlandish
> 
> Purchase                  15,600.00
> Value                         2,000.00
> Cost                         13,600.00
> Monthly over 6 years    188.88
> Extra tax                       42.50 ( per your figures FF)
> Servicing                       16.67 (assume 200 per year)
> Maintenance / repairs     20.83 (assume 250 per year)
> Extra fuel cost                83.33 (assume 1k extra per year)
> Monthly cost                 352



You are assuming an interest rate of 1.9% to buy a 4/5 year old car. Can you show me any dealer offerring this rate (and please do as I might be interested).



Blackrock1 said:


> you have your car at the end but technically i should have enough 'equity' to go and buy a similar or better car to yours (10 / 11 year old bmw for 2-3k)



I have my car from the _beginning_. I am not constrained on my annual mileage and am free to keep the car in any condition I choose (I keep mine well in any case). In addition I am not at the whim of a garage to honour my GFV (those guys in the shiny suits can be awfully shmart). Also, I would never buy a 10 / 11 year old car. God knows what it's been through. My car runs like a clock but I wouldn't expect anyone buying it to believe this. Hence why it's fully depreciated.


----------



## Blackrock1

sorry where am i assuming the interest rate? i just took what you paid in cash?

i am not constrained by annual mileage either, i can do up to 20km per annum, although we only do 10 or so. and i have always kept all of my cars new or old in pristine condition so no constraint there.

i think you are being overly suspicious of a garage honouring the FV, PCP isnt a new product.


----------



## Firefly

Blackrock1 said:


> sorry where am i assuming the interest rate? i just took what you paid in cash?



But that's no comparing like for like then. A PCP has an interest rate. For second hand cars (if you can get one) this would be higher than zero. Therefore you would need to include this cost surely?



Blackrock1 said:


> i am not constrained by annual mileage either, i can do up to 20km per annum, although we only do 10 or so. and i have always kept all of my cars new or old in pristine condition so no constraint there.



That's a decent allowance to be fair and as you love your cars you should be fine regarding the condition it is kept in also.



Blackrock1 said:


> i think you are being overly suspicious of a garage honouring the FV, PCP isnt a new product.



I probably am. However the shiny garage and the shiny suits have to be paid for somehow! The finance company also needs a return on their investment.


----------



## Blackrock1

Firefly said:


> But that's no comparing like for like then. A PCP has an interest rate. For second hand cars (if you can get one) this would be higher than zero. Therefore you would need to include this cost surely?



no, but i was more comparing your specific circumstance to my PCP, and you bought yours for cash? id imagine to borrow to buy a 5 year old car would 5-7%


----------



## Leo

Firefly said:


> The finance company also needs a return on their investment.



In many cases, the finance provider is the manufacturer themselves as more and more of them run fully licensed FS businesses to boost sales.


----------



## Firefly

Blackrock1 said:


> no, but i was more comparing your specific circumstance to my PCP, and you bought yours for cash? id imagine to borrow to buy a 5 year old car would 5-7%



I understand now. You can get 1.9% on a new car, but for someone borrowing to buy a 5 year old car the interest rate would be higher (which I would agree with), making the cost of finance for a new car cheaper. That's true alright.


----------



## Firefly

Leo said:


> In many cases, the finance provider is the manufacturer themselves as more and more of them run fully licensed FS businesses to boost sales.



That's true alright. And for the larger companies they either have the cash of can probably borrow themselves at near zero rates. In such cases it's the opportunity cost of capital then. But fair point nonetheless.


----------



## Learner2015

A lot of talk about the GFV and how do you know you will get this?

Its simple really if you service the car per the manufactures schedule, repair damage to the car you cause and don't go over the maximum allowable mileage you will at a minimum get the GFV. If the particular car you bought is selling well on the used market at the time you will get more.

So does your car have to be like new when you bring it back? No it does not, it has to be in good condition for its age. Look at any 3 year old on a forecourt and it will have the odd mark etc.

So when will you get more then GFV for you car? If the market is there for it as a used vehicle you probably will. Small example on the basis car is in good shape when you bring it back after three years:

GFV - €15k
Equivilant used models selling for €23K
Dealer will stock car at €20k, sell for €23k and dealers makes €3k less his costs.
You get €5k "equity" towards your next purchase.

or
You write the bank a cheque for €15k - you now own the car.
Sell it your self for €21.5k and walk away with €6.5k cash for your self.

When these GFV are set by the banks / dealers they are set assuming the worst case possible market conditions i.e. if we get 50 of these cars back in one go can we sell them all to the trade and not loose any money.


----------



## Bronte

How much is an Audi A6 Sports if I walk in with cash?

How much could I sell it for after 5 years with 50K on it


----------



## Bronte

Learner2015 said:


> When these GFV are set by the banks / dealers they are set assuming the worst case possible market conditions i.e. if we get 50 of these cars back in one go can we sell them all to the trade and not loose any money.



So then please explain to me what Charlie Weston means here:

_Motor experts warn there is likely to be a glut of three-year-old cars as recent PCP deals mature.


This is likely to push values down, meaning many cars bought with PCPs will be *below their guaranteed minimum future values*.

http://www.autoexpress.co.uk/car-news/90794/pcp-personal-contract-purchase-car-deals-explained
_
The article from the UK is much more upbeat.


----------



## Learner2015

Bronte what this means is the customer will not have any equity for the next PCP purchase as all they will get is the GFV (assuming car is in good shape as I mentioned earlier).

The dealer is the one left with a car costing him more than the market value, customer can just walk away.

Obviosuly the customer is left with nothing cause after making three years worth of payments too they have no car - in effect they have rented a car for three years.


----------



## Leo

Bronte said:


> _This is likely to push values down, meaning many cars bought with PCPs will be *below their guaranteed minimum future values*._



In that case, and it very well may happen, particularly if Ireland follows the tend of penalising diesels, then you would be advised to walk away and let the garage take the hit unless they're offering you a compelling deal to chose a new car. The buyer will not have to fund any shortfall between the GMFV and the market price. 

The option of keeping that car via either paying off or financing the GMFV would be a poor choice at that point.


----------



## Learner2015

I must add to the above and stress again the GFV really are already set at the lowest level possible. If you really want to try and help protect youself from a dip in used values make sure you buy a poplular model in a normal colour etc that will sell well to a wide audience. I would imagine a petrol mercedes car in yellow would be a hard sell in any used market but a silver low tax small hatchback like a Ford Foucs will nearly always have a market.

I know predicting used car values is really crystal ball stuff but at least give yourself half a chance and buy something that is typically a sellable car!


----------



## Blackrock1

Bronte said:


> How much is an Audi A6 Sports if I walk in with cash?
> 
> How much could I sell it for after 5 years with 50K on it



You don't seem to be disadvantaged in terms of discounts achievable PCP v cash so you normally you won't save any more on the purchase price with cash 

A New 2.0 tdi a6 sport is around 51k with limited options and a 5 year old one retails at say 24/25k , trade value probably closer to 20?


----------



## Blackrock1

Bronte said:


> _
> 
> This is likely to push values down, meaning many cars bought with PCPs will be *below their guaranteed minimum future values*.
> 
> http://www.autoexpress.co.uk/car-news/90794/pcp-personal-contract-purchase-car-deals-explained
> _
> The article from the UK is much more upbeat.



As Leon says an issue for the industry not the consumer as such


----------



## Bronte

Blackrock1 said:


> You don't seem to be disadvantaged in terms of discounts achievable PCP v cash so you normally you won't save any more on the purchase price with cash
> 
> A New 2.0 tdi a6 sport is around 51k with limited options and a 5 year old one retails at say 24/25k , trade value probably closer to 20?



But you said your two audi's cost 45K.  How are they now 51K?

Here's a good article on the pitfalls

http://www.telegraph.co.uk/motoring/news/10683988/Is-PCP-finance-a-good-deal-in-the-long-term.html

It warns that the deposits and monthly payments hide the fact that after the three years there will be no equity in the car, but that the dealers are subtly suggesting there will be equity, (sales talk, low value but if you take care of the car it will be worth a lot more, so don't worry about that now, and sure look over there at a three year model at x high price and that's what you'll likely get....)

Which is no coincedence that Blackrock mentioned 'equity' at some stage.


----------



## Blackrock1

Bronte said:


> But you said your two audi's cost 45K.  How are they now 51K?



I'm out now I'm convinced this is a wind up


----------



## Bronte

Blackrock1 said:


> I'm out now I'm convinced this is a wind up



How so? You gave me the figures and I put them in my summary.  And you said each car cost 45K???

And I can assure you it's no windup.  I may have joked a bit (banter) about cars in general but I take finance real serious.


----------



## Cervelo

I really don't understand some peoples reluctance and disapproval of both buying new cars and using PCP to fund this purchase.
whats wrong with wanting a new car and using a financial product to purchase it, dont we do the same with houses and mortgages.


----------



## demoivre

Cervelo said:


> I really don't understand some peoples reluctance and disapproval of both buying new cars and using PCP to fund this purchase.
> whats wrong with wanting a new car and using a financial product to purchase it, dont we do the same with houses and mortgages.



TBF you're not really comparing like with like. This whole notion of a GMFV, for me anyway, lacks clarity. In fact it's not even a guaranteed minimum because if there is excess wear and tear on the car you will not get the so called GMFV. However , if the ads in my local paper are anything to go by, these deals are becoming more popular. The cynic in me says they must be better for the dealer !


----------



## Firefly

Cervelo said:


> I really don't understand some peoples reluctance and disapproval of both buying new cars and using PCP to fund this purchase.
> whats wrong with wanting a new car and using a financial product to purchase it, dont we do the same with houses and mortgages.



2 things come to mind:

(1) New and 2nd hand houses often cost the same. In fact a 2nd hand house can often cost more. On the other hand you should be able to pick up the majority of 3 year old cars for half their original cost. Doing this with finance means you are knowingly borrowing something for which you are almost certain to lose half its value in 3 years.

(2) Unless you inherit or win a lot of money, buying a house from savings for the average buyer is not feasible. On the other hand a second hand car, even and old one, should be affordable for most people without borrowing.


----------



## peno

I have a PCP and the GMFV to me is quite clear. If I go over the mileage allowance there is a very clear rate per mile as a minimum.
Granted the service condition of the car may be problematic - but I think if you can afford the PCP payments than annual servicing on a new car which has a warranty should be affordable - even if not at a main dealer.
If you crash the car and fail to fix it I think its clear the garage/finance company can hold you liable for the difference in car value and GMFV.
General wear and tear and dents scraps are all normal on the car - it may impact the value they offer but at no time will you get less than the GMFV unless the car has been significantly damaged.

I scratched my car badly at the front - I then got it fixed in a reputable garage. The PCP was one reason but irrespective of this I would have got it fixed because I've spent a lot of money on a car that I want to look after.

I don't do a lot of miles and my plan is to hold onto the car after the 3 years. As i know it is a good car and well looked after etc and the financing of it was relatively cheap - much cheaper than any bank loan.

That said if I get a good deal at the end of the 3 years I may renew - but thats no different than if I bought the car outright.

One reason why PCPs may look expensive is that you are always in a new car - whether 2 or 3 years old etc.
If I want a new car every 3 years whether on PCP or cash it is going to cost a lot of money - there is no way of getting away from that.
One reason for this is no matter what the GMFV is new cars always depreciate and the majority of this is picked up in the first 3 years so PCP or not if you replace your car every few years it is going to be expensive.

To me the cost of paying cash and PCPs are very similar - only really comes down to the interest rate of the PCPs - then you need to compare financing options.

In summary - PCPs aren't the evil some people think they are and are in fact quite simple - but at the same time like all financial products you need to enter with your eyes open.


----------



## Ceist Beag

Bronte, Firefly et al, I think you're doing this thread a disservice tbh at this stage. You are arguing whether it is a good idea to buy new or second hand. The point of this thread is, for those who want to buy new (not second hand), is PCP a good way to finance that purchase (over traditional loans from bank/CU or hire purchase options). 
You have brought it to 9 pages by arguing over your views about buying new versus second hand but that's not what Brendan was asking for in the thread.


----------



## Firefly

peno said:


> If I want a new car every 3 years whether on PCP or cash it is going to cost a lot of money - there is no way of getting away from that.



That's true. But I think the point is that a lot of people are lured in with low monthly repayments without factoring in the complete cost of what they are getting into - losing their initial deposit and facing higher repayments on car #2 due to the lack of a deposit. I you have the cash in the bank and intend on buying the car after the 3 years, then it looks like a very good deal, as long as you are comfortable with the depreciation side of things.


----------



## Fella

What's the answer to the original question ? Someone in work asked me is that PCP thing good and I was going to read 9 pages and check but I'm lazy . 

My answer to him was buying cash is always best then just look for lowest interest rate if you can't get cash.


----------



## Ceist Beag

See post #101 which got lost in discussions around completely irrelevant topics Fella.


----------



## Firefly

I think another risk with PCP finance is a dependency on exceptionally low interest rates (0% compared to a typical bank / CU rate of circa 8%). People are therefore able to "buy" a much more expensive car via PCP than they could get if they borrowed the conventional way. It reminds me of tracker mortgages where people paid over and above for houses because the repayments were affordable. Except in this case the term is only 3 years after which the finance providers can increase their rates.


----------



## Thirsty

> Except in this case the term is only 3 years after which the finance providers can increase their rates


Or you may sure you have the lump sum payment available


----------



## Leo

Thirsty said:


> Or you may sure you have the lump sum payment available



Which you can source via alternative financing if required.


----------



## Firefly

Thirsty said:


> Or you may sure you have the lump sum payment available



True, but I suspect a lot of people don't.



Leo said:


> Which you can source via alternative financing if required.



True, but if you need to source via alternative financing, it's surely going to be higher than 0%


----------



## Leo

Firefly said:


> True, but if you need to source via alternative financing, it's surely going to be higher than 0%



Absolutely, I can't see any of them offering 0% where the consumer chooses to hold on to the car. But at least having this option at least means the dealer can't apply a punitive rate to someone who chooses to do so.


----------



## Firefly

Does anyone know when PCPs came into force in any case and who was the first main brand to offer them?


----------



## Firefly

Mega thread over on boards:

http://www.boards.ie/vbulletin/showthread.php?t=2057120240

Good advice here:

_In relation to the pcp deals, the way I see it, you must look down the road to your next car if considering a pcp. If you can work out roughly how much equity you will have at 3 year stage (value over gfv) and see if you can then afford another new car with that equity amount as a deposit, well then you can afford the car. If on the other hand, you are relying on a large upfront deposit now in order to have a small monthly payment, you cannot really afford the car unless you will have access to similar deposit in 3 years time._


----------



## Cervelo

Firefly, I wasn't trying to compare purchasing a car to a house but rather the financal product that is used to buy the more expensive things in life
Most people when buying a new car don't have the 30,40 or €100,000 sitting in their bank account so a product like PCP makes perfect sense,
and even if they did have the cash sometimes financing part if not all might make better sense to that person.


----------



## Firefly

Cervelo said:


> Most people when buying a new car don't have the 30,40 or €100,000 sitting in their bank account so a product like PCP makes perfect sense, and even if they did have the cash sometimes financing part if not all might make better sense to that person.



My point is that PCP is luring people (with low monthly repayments) into buying a more expensive car (i.e. a new car) when they probably shouldn't. The full price of the car will have to be repaid eventually..


----------



## Cervelo

Firefly said:


> My point is that PCP is luring people (with low monthly repayments) into buying a more expensive car (i.e. a new car) when they probably shouldn't. The full price of the car will have to be repaid eventually..



well then that person shouldn't be allowed access to credit if they cant afford it or understand what they are getting themselves into!!


----------



## Firefly

Cervelo said:


> well then that person shouldn't be allowed access to credit if they cant afford it or understand what they are getting themselves into!!



Ain't that the truth! What's that they say about history repeating itself!


----------



## jim

So when its all said and done, is PCP a good way to finance a car then? Is there a simple summation to all of this?


----------



## demoivre

From Joe Duffy website.

PCP on Volvo XC 60 D3ES

On the road price €40245
Deposit  €12073
Finance amount €28171
36 payments of €390
PAR 4.9%
GMFV €18186

To own the above car through PCP requires 36 x 390 = €14040

Then to buy the GMFV of the car ie (€18186) through finance over 36 months @594 per month = 21384 ( using loan calculator on PTSB website. APR = 11.5%

Total amount repayed for the financing of the car with *PCP is € 35424* 

A* straight loan* from PTSB for the full finance amount of €28171 over 36 months @APR 10.5% would cost €909 per month so total repayed would be *€32724.*

How is PCP more attractive?


----------



## Blackrock1

you are comparing 6 years financing versus 3, what did you expect?


----------



## Firefly

This sums it up for me..

_if you can afford to borrow and repay the full price of a new car, then PCP (esp. at 0%) makes real sense.

If you cant and you are using PCP to get into a car above your budget, then you are in for a painful experience._

http://www.boards.ie/vbulletin/showpost.php?p=102179631&postcount=1300


----------



## demoivre

Blackrock1 said:


> you are comparing 6 years financing versus 3, what did you expect?



If someone wanted to own the car under a PCP that's what you're looking at, its expensive. The cheap PCP rate gives a false sense of a cheap deal IMO.


----------



## Blackrock1

demoivre said:


> If someone wanted to own the car under a PCP that's what you're looking at, its expensive. The cheap PCP rate gives a false sense of a cheap deal IMO.



comparing a 3 year loan v 6 year loan is an unfair comparison and makes no sense


----------



## Firefly

Blackrock1 said:


> comparing a 3 year loan v 6 year loan is an unfair comparison and makes no sense



I would say the majority of people buying on PCP would not have the balloon payment in funds to buy out the car at the end. Many will and are "going again" on another PCP plan but sooner or later the balloon payment will need to be made. Either they sell the car and walk away with nothing (how bad would that feel?) or they will need finance to keep the car they have, in which case it does make sense to look at both the PCP element and the final finance required.


----------



## Blackrock1

you are making an assumption there, fair enough, but that doesn't mean looking at 3yr financing v 6 year financing is a valid comparison.


----------



## demoivre

Blackrock1 said:


> comparing a 3 year loan v 6 year loan is an unfair comparison and makes no sense



You're comparing the cost of buying a car using two methods of financing. If you want to own the car outright through PCP you will probably pay more, fact , but its not what you want to hear.


----------



## shweeney

Blackrock1 said:


> you are comparing 6 years financing versus 3, what did you expect?



no they're not.  the first example is 3 years PCP (@4.9%), followed by a 3 year loan (=6 years); second example is a straight loan over 6 years.

if you can get 0% on  the PCP bit, the result might be different.


----------



## Firefly

Blackrock1 said:


> you are making an assumption there, fair enough, but that doesn't mean looking at 3yr financing v 6 year financing is a valid comparison.



I think it's a valid assumption. The majority of people would not have the funds to buy out the car at the end. They will therefore need finance and 3 years would seem valid. Hence, the 3 + 3 costs provided by Demoivre.


----------



## michaelm

It looks to me that Blackrock1 has a point.  Taking demoivre's example financing the €28k over 6 years (3 years PCP and 3 years personal loan) costs over €35k . . but you can't compare that to finance over 3 years (which you'd expect cost less) . . a 6 year personal loan for the €28k @ the 11.5% quoted would cost closer to €39k, so dearer than the combined PCP/loan option over the same period.


----------



## Blackrock1

shweeney said:


> no they're not.  the first example is 3 years PCP (@4.9%), followed by a 3 year loan (=6 years); second example is a straight loan over 6 years.
> 
> if you can get 0% on  the PCP bit, the result might be different.



look again


----------



## Blackrock1

Firefly said:


> I think it's a valid assumption. The majority of people would not have the funds to buy out the car at the end. They will therefore need finance and 3 years would seem valid. Hence, the 3 + 3 costs provided by Demoivre.



i disagree with your assumption, i can only take my own situation but i could buy my car out of savings at the end if i chose.

regardless of that comparing 3 years financing versus 6 is nonsensical


----------



## Blackrock1

demoivre said:


> You're comparing the cost of buying a car using two methods of financing. If you want to own the car outright through PCP you will probably pay more, fact , but its not what you want to hear.



your comparison doesn't make sense


----------



## Firefly

Total new car registrations according to SIMI [broken link removed]

2010   88,446
2011   89,918
2012   79,574
2013   74,364
2014   96,284
2015   124,804
2016   146,606

Impressive numbers for 2015 - up 30% on the previous year. There were 50% more cars sold in 2016 than in 2014. I am guessing that the period 2015-2016 will represent "Peak PCP". I would expect super deals in 2018-2019. Renault Kadjar anyone??


----------



## shweeney

Blackrock1 said:


> look again



d'oh


----------



## michaelm

Firefly said:


> There were 50% more cars sold in 2016 than in 2014.


Still, fewer sold in 2016 than in 2007 or 2008, before PCP. 

PCP is, at least, interesting, particularly 0%, as I enables someone who wouldn't secure finance for the full amount of a new car to buy it over 6 years (granted, assuming that they could finance the balloon payment).  One should be wary of all such things but the aversion to it here may be overdone.


----------



## Ceist Beag

demoivre said:


> From Joe Duffy website.
> 
> PCP on Volvo XC 60 D3ES
> 
> On the road price €40245
> Deposit  €12073
> Finance amount €28171
> 36 payments of €390
> PAR 4.9%
> GMFV €18186
> 
> To own the above car through PCP requires 36 x 390 = €14040
> 
> Then to buy the GMFV of the car ie (€18186) through finance over 36 months @594 per month = 21384 ( using loan calculator on PTSB website. APR = 11.5%
> 
> Total amount repayed for the financing of the car with *PCP is € 35424*
> 
> A* straight loan* from PTSB for the full finance amount of €28171 over 36 months @APR 10.5% would cost €909 per month so total repayed would be *€32724.*
> 
> How is PCP more attractive?


I think that's a scenario where PCP would not make sense. However there are a number of assumptions built into this scenario that make it unlikely this person would be suited to buying a new car in the first place.
1. You are assuming this person cannot save (if they could save why would they take out a loan for the GMFV sum) - clearly this is a person who is on a tight budget if they cannot set aside some money each month to save for the lump sum at the end of the three years. Not a good candidate for a new car if that is the case.
2. You are assuming the same person would be able to afford the €909 per month repayments on the straight loan. So let's go with this assumption. That would mean that if they opt for the PCP deal they should have a surplus of 315 each month which would build up to a savings of 11340 at the end of the 3 years. So the balance is only approximately €6500 to meet the GMFV (am allowing for a small amount of interest accrued on the savings). A loan for this amount, repayable over a further 3 years would be approx €215 per month so total cost of this loan would be around €1200. That's a total amount repaid of €14040 plus €11686 (in savings plus interest) plus €7700 for the loan for the balance - €33426 in other words.

This still works out more expensive than the straight loan agreed but I think you need to be clear on your ability to pay and save before you can compare these two approaches.
Ideally you would want to be able to save the full balance at the end of the 3 years which would make the PCP option repayment total add up to €14040 plus €18186 = €32226.
Also bear in mind that some dealers are offering more attractive APR than 4.9% - some are offering 0%.

To me the thing that makes the PCP option attractive is the fact it gives you 3 more years to save for the balance on the car. If you are not going to be able to save a substantial amount of this balance during the 3 years then agreed, the PCP option is not such a good one for you. But as I said, if you are on such a tight budget that you cannot set aside savings to meet the balance then you probably need to question whether you can afford a new car in the first place (which I think is the point some posters are making here)!


----------



## Firefly

Blackrock1 said:


> i disagree with your assumption, i can only take my own situation but i could buy my car out of savings at the end if i chose.



Blackrock1, you are a bit special alright 

I would say the majority of people will be looking for finance whenever they decide to finish the PCP merry-go-round.


----------



## Firefly

Ceist Beag said:


> That would mean that if they opt for the PCP deal they should have a surplus of 315 each month which would build up to a savings of 11340 at the end of the 3 years. So the balance is only approximately €6500 to meet the GMFV



A ceist beag if I may - do you honestly think that the majority of people who are buying 30k-40k cars on PCP (given the amount of depreciation alone that goes with this) are diligently saving away in order to buy out the car at the end? I would say less than 10% fall into this category and the remainder will either go again or seek finance elsewhere to actually buy the car. It's the key danger with PCPs. You see the big sign that says you can drive the car for a few hundred a month, see everyone else driving new cars and just go with the flow.


----------



## Firefly

michaelm said:


> Still, fewer sold in 2016 than in 2007 or 2008, before PCP.



September 2008 was when the curtains came down. The vast majority of cars  pre 2013 were registered in the first 3 months of the year. So to compare car sales in 2016 with the very height of the Celtic Tiger (as if that represented the norm) kinda proves my point! Way too many people are using cheap credit to get themselves into debt again.


----------



## Bronte

Firefly said:


> A ceist beag if I may - do you honestly think that the majority of people who are buying 30k-40k cars on PCP (given the amount of depreciation alone that goes with this) are diligently saving away in order to buy out the car at the end? I would say less than 10% fall into this category and the remainder will either go again or seek finance elsewhere to actually buy the car. It's the key danger with PCPs. You see the big sign that says you can drive the car for a few hundred a month, see everyone else driving new cars and just go with the flow.



I agree with you.  I heard an ad on BBC or ITV yesterday and they said it costs 200 GBP for a new car and it was a big car.  There is something wrong about this from the get go and I suspect it's getting people who can't actually afford a new car to purchase a top of the range one and to keep them forever in credit and buying a new car every three years.  My husband bought a new car in 2015 and it was zero credit so we took that option.  Over 36 months.  With a deposit.  The way I look at it is that we own the car in three years, I don't have to think about scratches or anything as we own it, there is no balooon payment in three years.  And the car will be with us a lot longer than 3 years. Now at month 21 of the 36 months. And servicing is our own business.

I'm also absolutely blown away by the ease with which Blackrock could get another new car after 20 months.  How many people are doing that.  If it were me on the PCP deal, I'd ask to repay more each month and try and own it in the three years.  Can you do that?


----------



## Blackrock1

Firefly said:


> Blackrock1, you are a bit special alright
> 
> I would say the majority of people will be looking for finance whenever they decide to finish the PCP merry-go-round.



are you assuming that because it suits your narrative or is it based on any factual premise?


----------



## Blackrock1

Bronte said:


> I agree with you.  I heard an ad on BBC or ITV yesterday and they said it costs 200 GBP for a new car and it was a big car.  There is something wrong about this from the get go and I suspect it's getting people who can't actually afford a new car to purchase a top of the range one and to keep them forever in credit and buying a new car every three years.  My husband bought a new car in 2015 and it was zero credit so we took that option.  Over 36 months.  With a deposit.  The way I look at it is that we own the car in three years, I don't have to think about scratches or anything as we own it, there is no balooon payment in three years.  And the car will be with us a lot longer than 3 years. Now at month 21 of the 36 months. And servicing is our own business.
> 
> I'm also absolutely blown away by the ease with which Blackrock could get another new car after 20 months.  How many people are doing that.  If it were me on the PCP deal, I'd ask to repay more each month and try and own it in the three years.  Can you do that?



so your husband availed of 0% finance as well, makes sense doesn't it

you are very suspicious of PCP but as i said this isnt new and most of your suspicions are unfounded


----------



## Bronte

Blackrock1 said:


> so your husband availed of 0% finance as well, makes sense doesn't it
> 
> you are very suspicious of PCP but as i said this isnt new and most of your suspicions are unfounded



Unlike you though we are halfway to owning the car.  We won't be trading it in after a mere 20 months to get better options, which I totally do not understand by they way, we will have no balloon payment either and we won't be at the mercy of a garage to comply with rules on mileage and condition.


----------



## Ceist Beag

Firefly said:


> A ceist beag if I may - do you honestly think that the majority of people who are buying 30k-40k cars on PCP (given the amount of depreciation alone that goes with this) are diligently saving away in order to buy out the car at the end? I would say less than 10% fall into this category and the remainder will either go again or seek finance elsewhere to actually buy the car. It's the key danger with PCPs. You see the big sign that says you can drive the car for a few hundred a month, see everyone else driving new cars and just go with the flow.


You're changing the argument now Firefly. I was responding to your example where you were comparing one where the buyer could only afford 594 per month repayment with another where the buyer could afford 909 per month repayment and you were then expressing shock that the latter resulted in a lower overall cost. That's not a like for like comparison so should not be a surprise - so I was pointing out the flaw in your argument.
It's a totally different argument to say that 90% of PCP buyers are those who cannot afford the lump sum at the end of 3 years.


----------



## Blackrock1

Bronte said:


> Unlike you though we are halfway to owning the car.  We won't be trading it in after a mere 20 months to get better options, which I totally do not understand by they way, we will have no balloon payment either and we won't be at the mercy of a garage to comply with rules on mileage and condition.



good for you i am glad that you are so happy with your own situation, you appear to be very concerned about mine however, rest assured it is very much in hand, i could pay off my car in the morning should i choose to, i am at the mercy of no one.


----------



## Blackrock1

Bronte said:


> I heard an ad on BBC or ITV yesterday and they said it costs 200 GBP for a new car and it was a big car.



you must live your life in a permanent state of indignation and anger, i have this image of you protesting outside the garage with a down with this sort of thing sign


----------



## demoivre

Blackrock1 said:


> your comparison doesn't make sense



I would totally disagree. It makes perfect sense when looking at finance options to buy a car to consider 3, 4 and 5 year repayment options as well as PCP deals. The overall cost of finance is what counts so it's perfectly valid to consider different time frames. If PCP was straightforward we wouldn't have  217 posts on the topic.


----------



## Blackrock1

demoivre said:


> I would totally disagree. It makes perfect sense when looking at finance options to buy a car to consider 3, 4 and 5 year repayment options as well as PCP deals. The overall cost of finance is what counts so it's perfectly valid to consider different time frames. If PCP was straightforward we wouldn't have  217 posts on the topic.



you can disagree all you want, but your comparison doesn't make any sense and you will struggle to find anyone who will agree that it does


----------



## fauxblade

demoivre said:


> I would totally disagree. It makes perfect sense when looking at finance options to buy a car to consider 3, 4 and 5 year repayment options as well as PCP deals. The overall cost of finance is what counts so it's perfectly valid to consider different time frames. If PCP was straightforward we wouldn't have  217 posts on the topic.


The cons to a PCP deal are not in the cost of financing. Your comparison is not comparing two comparable scenarios. Ceist Beag has described why that isn't the case above. 

There are a few cons to PCPs, which are mostly based around people either not fully understanding their commitments to the deal or simply overstretching themselves financially, but seeing as this is a finance website, from a pure mathematical analysis point of view, the low credit rate or 0% credit some dealers offer, PCP's will always work out cheaper than an alternative means of financing with a higher interest rate. You can't argue with the maths.


----------



## michaelm

Of course it's valid to 'consider' different time frames but it's not valid to 'compare' them as if equivalent.


----------



## demoivre

fauxblade said:


> The cons to a PCP deal are not in the cost of financing. Your comparison is not comparing two comparable scenarios. Ceist Beag has described why that isn't the case above.
> 
> There are a few cons to PCPs, which are mostly based around people either not fully understanding their commitments to the deal or simply overstretching themselves financially, but seeing as this is a finance website, from a pure mathematical analysis point of view, the low credit rate or 0% credit some dealers offer, PCP's will always work out cheaper than an alternative means of financing with a higher interest rate. You can't argue with the maths.



Correct and _Ceist Beag's_ workings in #206 above using my numbers from Joe Duffy and PTSB also shows the PCP method to be more expensive.


----------



## demoivre

Ceist Beag said:


> You are assuming the same person would be able to afford the €909 per month repayments on the straight loan. So let's go with this assumption. That would mean that if they opt for the PCP deal they should have a surplus of 315 each month which would build up to a savings of 11340 at the end of the 3 years. So the balance is only approximately €6500 to meet the GMFV (am allowing for a small amount of interest accrued on the savings). A loan for this amount, repayable over a further 3 years would be approx €215 per month so total cost of this loan would be around €1200. That's a total amount repaid of €14040 plus €11686 (in savings plus interest) plus €7700 for the loan for the balance - €33426 in other words.



Can you confirm that a bank financing the PCP will accept part payment at the end of 36 months, and then allow the financing of the remainder.



Ceist Beag said:


> This still works out more expensive than the straight loan



Thanks for illustrating that the PCP method is more expensive than the straight loan.


----------



## fauxblade

_From Joe Duffy website.

PCP on Volvo XC 60 D3ES

On the road price €40245
Deposit €12073
Finance amount €28171
36 payments of €390
PAR 4.9%
GMFV €18186

To own the above car through PCP requires 36 x 390 = €14040_
But we have established below this person has the ability to save/spend €909 towards cars. Excess of €519 per month for 36 months = €18684
No need for a further loan as the person has saved in excess of the GMFV, leaving them with an excess of €498.

_Total amount repayed for the financing of the car with _*PCP is € 32226*

_A_* straight loan*_ from PTSB for the full finance amount of €28171 over 36 months @APR 10.5% would cost €909 per month so total repayed would be _*€32724.*


----------



## Firefly

Blackrock1 said:


> are you assuming that because it suits your narrative or is it based on any factual premise?



It's just my opinion. I don't believe the figures are in the public domain. We know that PCPs are a very popular way of financing car purchases at the moment, which means borrowing is way up. Based on our recent history with increased borrowing when rates are low I am led to believe that many people will borrow too much again with little or nothing substantial in reserve to buy out the car at the end without requiring additional finance. I put that number at 90%. How about you, what percentage of people do you think will have the funds saved if you were to guess?


----------



## Firefly

Ceist Beag said:


> You're changing the argument now Firefly. I was responding to your example where you were comparing one where the buyer could only afford 594 per month repayment with another where the buyer could afford 909 per month repayment and you were then expressing shock that the latter resulted in a lower overall cost. That's not a like for like comparison so should not be a surprise - so I was pointing out the flaw in your argument.
> It's a totally different argument to say that 90% of PCP buyers are those who cannot afford the lump sum at the end of 3 years.



I think you were arguing this with Bronte, but nevermind. I take your point, however the point I am making is that it's fine to say that someone could save the difference between the repayments on PCP and a conventional loan, but in reality I doubt many will. The money will go on other things. I would argue that those who borrow for things are not as good at saving as those who don't borrow for things...in the main obviously and not including a mortgage.


----------



## Blackrock1

Firefly said:


> I put that number at 90%. How about you, what percentage of people do you think will have the funds saved if you were to guess?



its impossible to opine on so i wouldnt, i can only work with the information that i have to hand i.e. my own circumstances


----------



## Firefly

Blackrock1 said:


> its impossible to opine on so i wouldnt, i can only work with the information that i have to hand i.e. my own circumstances



I beg to differ. Towards the end of the Celtic Tiger it was apparent to all what was going on even though the information was not yet officially public. Can you offer an explanation why the sales of new cars increased by 50% in 2 years from 2014 to 2016? Do you think that level of growth came from savings?


----------



## Blackrock1

Firefly said:


> I beg to differ. Towards the end of the Celtic Tiger it was apparent to all what was going on even though the information was not yet officially public. Can you offer an explanation why the sales of new cars increased by 50% in 2 years from 2014 to 2016? Do you think that level of growth came from savings?



i think peoples circumstances and / or consumer sentiment has changed, remember a lot of people held off on changing their car for years due to financial uncertaintly. Both my father and father in law held onto cars they had purchased new in 2005 & 6 respectively until last year, then they both bought new with cash.


----------



## Firefly

Blackrock1 said:


> i think peoples circumstances and / or consumer sentiment has changed, remember a lot of people held off on changing their car for years due to financial uncertaintly. Both my father and father in law held onto cars they had purchased new in 2005 & 6 respectively until last year, then they both bought new with cash.



I agree with the first bit - a lot of people did hold off replacing their cars, but I think most of the new car purchases are on PCP and the majority of those are taken out without the balloon payment in funds. IE, most people are buying on the never-never.


----------



## Blackrock1

Firefly said:


> I agree with the first bit - a lot of people did hold off replacing their cars, but I think most of the new car purchases are on PCP and the majority of those are taken out without the balloon payment in funds. IE, most people are buying on the never-never.



perhaps, but its speculation at best, to suit a narrative


----------



## Firefly

Blackrock1 said:


> perhaps, but its speculation at best, to suit a narrative



It's not scientific I agree but I don't think it's speculation either. To me it's more than a coincidence that car sales jumped 50% in 2 years at the same PCPs were introduced all whilst nothing materially improved in the general economy.


----------



## demoivre

fauxblade said:


> _From Joe Duffy website.
> 
> PCP on Volvo XC 60 D3ES
> 
> On the road price €40245
> Deposit €12073
> Finance amount €28171
> 36 payments of €390
> PAR 4.9%
> GMFV €18186
> 
> To own the above car through PCP requires 36 x 390 = €14040_
> But we have established below this person has the ability to save/spend €909 towards cars. Excess of €519 per month for 36 months = €18684
> No need for a further loan as the person has saved in excess of the GMFV, leaving them with an excess of €498.
> 
> _Total amount repayed for the financing of the car with _*PCP is € 32226*
> 
> _A_* straight loan*_ from PTSB for the full finance amount of €28171 over 36 months @APR 10.5% would cost €909 per month so total repayed would be _*€32724.*



Interesting that the difference is negligible despite the substantial difference in APRs. The selling point of the PCP are the low repayments. My suspicion, and it's only that, is that the balloon payment at the end of the PCP, where someone wants to buy out the car, would be the subject of another finance deal over 3 ,4 or 5 years. The only way I can see a PCP being more attractive than a straight loan is where a buyer has the funds to put aside to fund the balloon payment at the end of the 36 months.


----------



## Leo

I think the ultimate aim of PCPs from the dealers point of view is very clear, they want you to roll over to a new car in two or three years time. In fact, they will make it very clear to you when you talk to them that this is what they want to happen. 

So while they can be attractive to those who want to hold on to a car longer-term, such people are not the target audience of these deals. So when assessing PCPs, you need to look at what they cost for those who typically buy a new car every two or three years.


----------



## Firefly

demoivre said:


> Interesting that the difference is negligible despite the substantial difference in APRs. The selling point of the PCP are the low repayments. My suspicion, and it's only that, is that the balloon payment at the end of the PCP, where someone wants to buy out the car, would be the subject of another finance deal over 3 ,4 or 5 years. The only way I can see a PCP being more attractive than a straight loan is where a buyer has the funds to put aside to fund the balloon payment at the end of the 36 months.



I agree entirely and even then I think I would just buy the car outright and not be bothering with all the hassle.


----------



## Leo

Firefly said:


> To me it's more than a coincidence that car sales jumped 50% in 2 years at the same PCPs were introduced all whilst nothing materially improved in the general economy.



PCPs were introduced in 2013/2014 from what I can see, it's just they've come to the fore more recently as new car sales have risen. I don't doubt they have helped fuel the market, but so did a huge shortage of good quality cars at a reasonable price.


----------



## Blackrock1

demoivre said:


> Interesting that the difference is negligible despite the substantial difference in APRs. The selling point of the PCP are the low repayments. My suspicion, and it's only that, is that the balloon payment at the end of the PCP, where someone wants to buy out the car, would be the subject of another finance deal over 3 ,4 or 5 years. The only way I can see a PCP being more attractive than a straight loan is where a buyer has the funds to put aside to fund the balloon payment at the end of the 36 months.



which is what you implied with your initial comparison where you had a 3 year loan costing over 900 a month,

im not sure what point you are trying to make any more


----------



## demoivre

Blackrock1 said:


> which is what you implied with your initial comparison where you had a 3 year loan costing over 900 a month,
> 
> im not sure what point you are trying to make any more



I'm trying to figure out the answer to the original question! I think we're getting there. PCPs are expensive if you have to borrow for the balloon payment, and of course you might not get the finance! If you miss a payment during the first 36 months, or otherwise mess up your ICB record, will you pass underwriting criteria to get further finance to pay the balloon payment?


----------



## Blackrock1

demoivre said:


> PCPs are expensive if you have to borrow for the balloon payment, and of course you might not get the finance!



expensive compared to what? they work out cheaper than a loan (even when 0% PCP isnt available) as shown above.

new cars are expensive but thats the case regardless of how you finance.


----------



## fauxblade

demoivre said:


> I'm trying to figure out the answer to the original question! I think we're getting there. PCPs are expensive if you have to borrow for the balloon payment, and of course you might not get the finance! If you miss a payment during the first 36 months, or otherwise mess up your ICB record, will you pass underwriting criteria to get further finance to pay the balloon payment?


Just to clarify, PCP + 3 years further financing (eg. 3 year credit union / bank loan), is still cheaper than 6 years of standard financing (eg. 6 year credit union / bank loan).


----------



## demoivre

Blackrock1 said:


> expensive compared to what? they work out cheaper than a loan (even when 0% PCP isnt available) as shown above.



They dont as I've shown with my only worked example.



fauxblade said:


> Just to clarify, PCP + 3 years further financing (eg. 3 year credit union / bank loan), is still cheaper than 6 years of standard financing (eg. 6 year credit union / bank loan).



That's not the case in the first Joe Duffy example I used. What finance company will give you a 6 year loan for a car ?


----------



## Blackrock1

demoivre said:


> They dont as I've shown with my only worked example.



your worked example compared the interest cost of a 6 year loan to a 3 year loan, its time to let that one go,

fauxblade corrected it for you


----------



## Firefly

Leo said:


> PCPs were introduced in 2013/2014 from what I can see, it's just they've come to the fore more recently as new car sales have risen. I don't doubt they have helped fuel the market, but so did _a huge shortage of good quality cars at a reasonable price._



I've been wading through some very good threads on boards and one thing that keeps popping up is the relatively high cost of 1-3 year old cars in the main dealers. Some are speculating that this is done so as to make the new car with PCP seem like a no-brainer. 

A case in point: 21k for a 3 year old old-model Skoda Superb with 80k on the clock

http://mynextcar.ie/used-cars-cork/skoda-superb-elegance-1-6-tdi-for-sale-used-skoda-ireland/

If the dealer really wanted to or needed to sell this car, surely they should be competing with what you could bring in from the UK, namely a 2 year old car, the current model with only 17k on the clock. I've been on to the VRT website and currency conversion included could bring this in all included for about 19k


----------



## Leo

Firefly said:


> I've been wading through some very good threads on boards and one thing that keeps popping up is the relatively high cost of 1-3 year old cars in the main dealers.



I've a friend who works for the Irish distributor for one of the big brands. He's been talking about it for some time, indeed he told me not to buy a couple of years ago as there was no value. He says the prices are just based on what the dealers are able to get due to the limited supply as a result of the crash in sales post tiger. The exchange rate worked in their favour as well for most of that time, but the recent drop in Sterling has made the UK market a far more compelling prospect for good recent-year bargains.


----------



## Leo

demoivre said:


> They dont as I've shown with my only worked example.



I've worked out a few examples in the Key Post.


----------



## Bronte

Firefly said:


> I've been wading through some very good threads on boards and one thing that keeps popping up is the relatively high cost of 1-3 year old cars in the main dealers. Some are speculating that this is done so as to make the new car with PCP seem like a no-brainer.



Are the prices of the second hands putting people off?

Are there a lot of one year old cars for sale.


----------



## Firefly

Bronte said:


> Are the prices of the second hands putting people off?



That seems to be the sentiment I'm picking up alright - that the dealers are setting the price of 1-3 year old cars artificially high so that when you compare them to a new one (with the 0% PCP carrot) a new car looks about the same price.


----------



## Ceist Beag

demoivre said:


> From Joe Duffy website.
> 
> PCP on Volvo XC 60 D3ES
> 
> On the road price €40245
> Deposit  €12073
> Finance amount €28171
> 36 payments of €390
> PAR 4.9%
> GMFV €18186
> 
> To own the above car through PCP requires 36 x 390 = €14040
> 
> Then to buy the GMFV of the car ie (€18186) through finance over 36 months @594 per month = 21384 ( using loan calculator on PTSB website. APR = 11.5%
> 
> Total amount repayed for the financing of the car with *PCP is € 35424*
> 
> A* straight loan* from PTSB for the full finance amount of €28171 over 36 months @APR 10.5% would cost €909 per month so total repayed would be *€32724.*
> 
> How is PCP more attractive?


I was looking at this example from Joe Duffy again as it didn't sit right with me. The figures here just don't add up. They claim on the website that the cost of credit for the XC60 D3 ES is €4,118.49. There is no way the cost of credit could be that much if the APR is 4.9%, even if you are paying interest on the full balance (€28171). The cost of credit on €28171 at 4.9% APR over 36 months is €2239.02 - which should mean the total via PCP would actually be just €30411, significantly less than the straight loan option. I'm not sure what Joe Duffy are at here but either their figures are wrong or they are hiding some charges somewhere.

I think Leo has provided better numbers in his key post which illustrate the differences.

I agree with the points made that the danger with PCP is that it could allow someone who is not financially savvy to think they can buy a new car for just €390 per month rather than €909 per month without thinking of the balloon payment at the end but for those fully aware of the repayments involved the PCP certainly beats the straight loan option on purely financial terms.


----------



## demoivre

Blackrock1 said:


> your worked example compared the interest cost of a 6 year loan to a 3 year loan, its time to let that one go,
> 
> fauxblade corrected it for you



fauxblade gave an example showing that if you saved the difference between the low PCP payments and the larger straight loan payments the PCP is more attractive, and only marginally so even though the APR for the PCP was roughly half that for the straight loan ! I'm comparing the overall cost of  two methods of financing. The balloon payment has to be financed, if you want to buy the car outright, and if you can't save for it during the 36 months of the low payments. There will be many people who will finance the balloon payment at the end of the 36 payments so my worked example is a perfectly legitimate way of illustrating the typical total cost of a PCP. If the balloon payment is financed over 5 years the PCP will be even less attractive. 

All the car adds in my local paper this week were plugging PCP and there's a reason for that and it's not altruistic. Caveat emptor when you're considering a PCP.


----------



## Blackrock1

demoivre said:


> fauxblade gave an example showing that if you saved the difference between the low PCP payments and the larger straight loan payments the PCP is more attractive, and only marginally so even though the APR for the PCP was roughly half that for the straight loan ! I'm comparing the overall cost of  two methods of financing. The balloon payment has to be financed, if you want to buy the car outright, and if you can't save for it during the 36 months of the low payments. There will be many people who will finance the balloon payment at the end of the 36 payments so my worked example is a perfectly legitimate way of illustrating the typical total cost of a PCP. If the balloon payment is financed over 5 years the PCP will be even less attractive.
> 
> All the car adds in my local paper this week were plugging PCP and there's a reason for that and it's not altruistic. Caveat emptor when you're considering a PCP.



where you are going wrong is the comparisons you are making, but i see you dont get that so i wont flog this dead horse any more


----------



## Ceist Beag

demoivre said:


> fauxblade gave an example showing that if you saved the difference between the low PCP payments and the larger straight loan payments the PCP is more attractive, and only marginally so even though the APR for the PCP was roughly half that for the straight loan !


As per my post above, the Joe Duffy example is flawed. See my update which shows that if you saved the difference between the low PCP payments and the larger straight loan payments the PCP is substantially more attractive, not marginally (which makes perfect sense when you think about it as how could a loan with half the APR not be substantially better than a loan with double the APR!).


----------



## Leo

demoivre said:


> There will be many people who will finance the balloon payment at the end of the 36 payments so my worked example is a perfectly legitimate way of illustrating the typical total cost of a PCP. If the balloon payment is financed over 5 years the PCP will be even less attractive.



The Key Post includes that in the examples, with the assumption that the GMFV will be financed at 11%APR over 2 years. That is a better like-for-like comparison using 5 year terms for all options.


----------



## demoivre

Blackrock1 said:


> where you are going wrong is the comparisons you are making, but i see you dont get that so i wont flog this dead horse any more



Cop out. How do you make the final balloon payment to buy the car outright if you haven't saved the money during the 36 months of the low payments?


----------



## Leo

Ceist Beag said:


> As per my post above, the Joe Duffy example is flawed.



I agree, I've tried working out the numbers and I can't get close to what they're quoting. Financing 28k @ 4.9% APR, you'd need to go over a 7 year term to get the payments down to €390. They're also choosing a higher % GMFV than most other brands, and only have you knocking 10k off the financed amount over the 37 monthly payments. 

If you were to straight finance the 28k @ 4.9% over 7 years with €395 monthly payments, the total cost of credit would be €5,045 over the entire 7 years. So how are they accruing 80% of the credit cost over ~40% of the term?


----------



## demoivre

Leo said:


> The Key Post includes that in the examples, with the assumption that the GMFV will be financed at 11%APR over 2 years. That is a better like-for-like comparison using 5 year terms for all options.



Ultimately the attractiveness of the PCP will depend on several factors and the cost of financing the balloon payment is one of them. Some folks may have to finance the balloon payment over 5 years so they effectively have an 8 year car loan which is going to be expensive, unsurprisingly.


----------



## Blackrock1

demoivre said:


> Cop out. How do you make the final balloon payment to buy the car outright if you haven't saved the money during the 36 months of the low payments?



if you cant afford to save the balloon why are you comparing it to a 3 year loan with higher monthly repayments than the pcp and monthly amount you would need to save to clear the balloon,

its not a valid comparison


----------



## Leo

demoivre said:


> Ultimately the attractiveness of the PCP will depend on several factors and the cost of financing the balloon payment is one of them. Some folks may have to finance the balloon payment over 5 years so they effectively have an 8 year car loan which is going to be expensive, unsurprisingly.



Why are you assuming a 45% drop off in their ability to repay a loan? Why couldn't they continue to repay the same monthly payment and pay the GMFV off in ~2.5 years? Any modest savings they've made over the 3 year PCP period could also be used to offset this finance.


----------



## demoivre

Leo said:


> Why are you assuming a 45% drop off in their ability to repay a loan? Why couldn't they continue to repay the same monthly payment and pay the GMFV off in ~2.5 years?



I said "some folks" - circumstances change. You made the assumption in the key post that borrowers will be able to increase payments to fund the balloon over 24 months ie from €363.77 to €444.17 in your first example.

Also worth noting that a missed payment during the first 36 months of a PCP may result in an inability to get finance to fund the balloon, if finance is required.  Unlikely you will lose your car if you miss a payment with a straight loan. 



Leo said:


> Any modest savings they've made over the 3 year PCP period could also be used to offset this finance.



Can this be done ie pay some of the balloon in cash and finance the rest?

To answer the original question in two words: It depends.


----------



## demoivre

Blackrock1 said:


> if you cant afford to save the balloon why are you comparing it to a 3 year loan with higher monthly repayments than the pcp and monthly amount you would need to save to clear the balloon,



Don't understand this "sentence" at all, and I'm not being a grammar nazi.


----------



## Firefly

I think it's clear that PCPs are a good option if you need a new car and have the funds to buy out the car at the end of the plan. 0% with servicing & anything else the garage throws in is pretty unbeatable. However, PCPs are clearly not designed for this, but rather for the repeat customer. Remember that a car loses most of its money in the first 2 years and by buying new every time, you're going to ultimately spend a small fortune (either through new injections of cash for a new deposit or higher payments). In the end you'll have spent a frightening amount of money and probably have nothing to show for it.


----------



## Blackrock1

demoivre said:


> Don't understand this "sentence" at all, and I'm not being a grammar nazi.



i'm sure you could if you tried a little harder

thats the issue with responding while doing 3 other things i guess,

anyway:

if you cant afford to save the balloon (i.e. the final payment)

(then) why are you comparing it (the PCP Financing)

to a 3 year loan with higher monthly repayments than the (monthly) pcp (charge) and (the) monthly amount (that) you would need to save to clear the balloon


----------



## Blackrock1

Firefly said:


> I think it's clear that PCPs are a good option if you need a new car and have the funds to buy out the car at the end of the plan. 0% with servicing & anything else the garage throws in is pretty unbeatable. However, PCPs are clearly not designed for this, but rather for the repeat customer. Remember that a car loses most of its money in the first 2 years and by buying new every time, you're going to ultimately spend a small fortune (either through new injections of cash for a new deposit or higher payments). In the end you'll have spent a frightening amount of money and probably have nothing to show for it.



which is a downside of buying a new car every 2 years rather than PCP


----------



## Leo

demoivre said:


> I said "some folks" - circumstances change.



Of course, but the same applies to someone taking out straight finance over 5 or more years, their circumstances can change too. So raising that as a downside for PCPs alone makes no sense.



demoivre said:


> You made the assumption in the key post that borrowers will be able to increase payments to fund the balloon over 24 months ie from €363.77 to €444.17 in your first example.



It's clearly stated the two year term chosen was to give a fair representation of total cost of credit financing over a 5 year term for PCPs and straight financing. Those who choose not to renew their car and pay off the GMFV can finance this however they choose.



demoivre said:


> Can this be done ie pay some of the balloon in cash and finance the rest?



Yes, of course. You terminate the PCP arangement and roll on to a brand new finance agreement.


----------



## Blackrock1

demoivre said:


> Can this be done ie pay some of the balloon in cash and finance the rest?
> 
> To answer the original question in two words: It depends.



why would you not be able to pay some of the balloon in cash and finance the rest?


----------



## Firefly

Blackrock1 said:


> which is a downside of buying a new car every 2 years rather than PCP



I agree, however, PCP plans are luring people to buy new with low repayments. Not even that, people aren't even waiting for the plan to mature before going again. The end result for a lot of people will be that they will drive new cars but be financing debt over a long time which won't always be at 0%..


----------



## Blackrock1

Firefly said:


> I agree, however, PCP plans are luring people to buy new with low repayments. Not even that, people aren't even waiting for the plan to mature before going again. The end result for a lot of people will be that they will drive new cars but be financing debt over a long time which won't always be at 0%..



but they will know the interest rate when they sign up, no one is forcing people into these things,

best way to look at it (while int rates are low) if you can minimise the deposit its basically just a car rental


----------



## Firefly

_Beware - one in nine cars sold are not fully paid for_

http://www.independent.ie/life/moto...ars-sold-are-not-fully-paid-for-35343172.html


_According to new figures obtained by the Irish Independent, the proportion of 'indebted' vehicles being offered for sale went from 9.5pc in June to 11.5pc in December.

There was an 18pc increase in the level of 2015-reg cars for sale with repayments owed. The report said: "This means there is now almost a one-in-three chance of a one-year-old vehicle being offered for sale with finance outstanding."_

2 possible reasons for the high number are given in the artile:

_But there is also the strong likelihood that many people who have Personal Contract Plan (PCP) lease deals are testing the market for the value of their vehicle before entering a new contract.

*But there is a growing concern too that the number of cars for sale with finance owed reflects an inability to meet monthly repayments.*_

Information is not available to identify the % of cars being offered for sale between the 2 camps, but it's surely a concern surely...


----------



## Firefly

Blackrock1 said:


> but they will know the interest rate when they sign up, no one is forcing people into these things,



Yes, but do you think interest will stay at 0%  for the 2nd and subsequent plans? A jump from 0% to 5% would see repayments shoot up. It wouldn't be such an issue if the amount borrowed was small to begin with but in many cases it's a lot. 



Blackrock1 said:


> best way to look at it (while int rates are low) if you can minimise the deposit its basically just a car rental



I would think if you mentioned to 90% of people who are driving cars bought under a PCP plan that they were in fact just renting it either their nose would be out of joint or they'd think you were mad!


----------



## Leo

Firefly said:


> Yes, but do you think interest will stay at 0%  for the 2nd and subsequent plans? A jump from 0% to 5% would see repayments shoot up. It wouldn't be such an issue if the amount borrowed was small to begin with but in many cases it's a lot.



It's clear they won't, and will rise to the prevailing rate at the time. Key Post calculations assume a jump to 11% for financing the GMFV.



Firefly said:


> I would think if you mentioned to 90% of people who are driving cars bought under a PCP plan that they were in fact just renting it either their nose would be out of joint or they'd think you were mad!



Most are PCPs are financed via a HP agreement, the dealer isn't fulfilling their obligations if they don't make that clear. It's also clearly stated in the paperwork.


----------



## Blackrock1

Firefly said:


> I would think if you mentioned to 90% of people who are driving cars bought under a PCP plan that they were in fact just renting it either their nose would be out of joint or they'd think you were mad!



perhaps, but its the most sensible way to look at it


----------



## Firefly

OK, the more & more I am reading up on this the more & more convinced I am that this is going to end horribly for a lot of people. An excellent article by the Telegraph that I think is well worth reading ..

http://www.telegraph.co.uk/cars/advice/how-to-avoid-being-caught-out-by-the-car-credit-crunch/

That's in the UK. Could easily be worse here with the glut of cars were seeing being imported from the UK..


----------



## Firefly

Leo said:


> Most are PCPs are financed via a HP agreement, the dealer isn't fulfilling their obligations if they don't make that clear. It's also clearly stated in the paperwork.



I agree with that, but it's a snobbish thing I am getting at. Tell someone they're just renting "their" new car and see their reaction!


----------



## Firefly

Blackrock1 said:


> perhaps, but its the most sensible way to look at it



I agree 100%.


----------



## Firefly

Again, from UK sites:

PCPs look to be every bit as popular in the UK with some people there raising concerns too:

http://moneyweek.com/merryns-blog/p...d-that-could-turn-out-to-be-a-very-bad-thing/

_....but that’s still an awful lot of happy people driving around in lovely new cars with reversing cameras, hill-start assist and voice-controlled Bluetooth.

So what’s the problem? The same as it always is. PCP deals are effectively debt. They are as popular as they are because they are cheap. They are cheap because interest rates are insanely low. So they are all part of a growing (again) debt problem in the UK.

Consumer credit has grown at a rate of nearly 11% in the last 12 months (we haven’t seen double-digit growth rates here for nearly a decade); and household debt to GDP is back up over 140% (it hit 160% at its pre-crisis peak).

That doesn’t look like a problem right now for the simple reason that, with interest rates so low, the cost of servicing all the debt is low – it came to 10% of household income in 2007 but comes to a mere 4-5% now. But that could all change fast: if interest rates rise (and they will!) the problems of the past could come back to haunt us.

Debt: it can be a good thing, but it doesn’t take much to turn it into a bad thing._


http://www.birminghampost.co.uk/business/business-news/record-car-sales-again-2016-12416753

_...it’s a nifty financing model, for sure. But, the entire PCP structure depends on that residual value remaining robust and keeping the monthly repayments affordable.

And while PCPs have kept the corks popping at dealers, dark clouds may be looming on the horizon which may dent to the ability of PCP to keep cars coming out of the showrooms at quite such a dizzy rate: used car values and a possible slowdown in growth.

In effect, the surge in PCP-propelled new car sales may lead to a wave of used cars hitting the second-hand car market, in turn depressing second hand values

That in turn could impact on the very collateral that lenders rely on to make PCP deals work. If so, car firms may take a hit on the value of used cars being returned, and PCP rates may start be less attractive in the future
_


----------



## Leo

Firefly said:


> I agree with that, but it's a snobbish thing I am getting at. Tell someone they're just renting "their" new car and see their reaction!



Yeah, very true!


----------



## Firefly

Blackrock1 said:


> Car 1 - bought new, retail price 47.5k, sales price to me 45k. Deposit 10k monthly payments including servicing plan was 460 something like that. GMFV something like 20k at the end of 36 months .
> 
> At the end of month 36 i could hand the car back, buy it for 20k or trade it against a new PCP deal.
> 
> In actual fact i traded after 20 months or so to a new car, retail 50k, sale price to me maybe 45k. Extra deposit 0, monthly payments including the service plan around 490 GMFV a little higher maybes 21.5k



Hi Blackrock1,

I hope you don't mind me using your own case, but I am trying to show how falling car values in the 2nd hand market would adversely affect the above deal. I think (and I mean think) that the issue will occur when you try to renew on your _3rd_ car. If you go again and get something similar to what you are currently driving, the GMFV on that 3rd car will be much lower or the repayments would be much higher. You can of course shop elsewhere but I think the other dealers will be in the same position - 2nd hand values will have fallen to such a level that the GMFV promised will be a lot lower. When selling this car, the dealer may only offer the GMFV and you may have little choice if the market is flooded. You bought the car for 50k too so you are looking at a near 30k loss. Of course you have the funds so you're fine, but for many others it could be a different story.


----------



## Leo

It will be very interesting to track what impact these deals have on second hand values over the next couple of years. When you look at second hand prices like  for example (21k for a 3 year old car listed at €27 new), that model coming off a PCP after the minimum 10% deposit would have a GMFV of ~€11k. It'd be very hard to understand why anyone would just walk away or roll on to a new car without a significant discount being applied.


----------



## Bronte

If you ask me this whole think looks and smells like a pyramid scheme. 

I think that the example in the Telegraph of the dealer ringing up the woman early on to get another new car sounds uncannily like what happened to Blackrock.  I'd love to know what percentage of people break their PCP before the 3 years.


----------



## Firefly

Bronte said:


> If you ask me this whole think looks and smells like a pyramid scheme.



That's exactly what I thought when I read the article too. All goes well until new would-be purchasers even pause to think and the whole thing could grind to a halt.


----------



## Firefly

Leo said:


> It will be very interesting to track what impact these deals have on second hand values over the next couple of years. When you look at second hand prices like  for example (21k for a 3 year old car listed at €27 new), that model coming off a PCP after the minimum 10% deposit would have a GMFV of ~€11k. It'd be very hard to understand why anyone would just walk away or roll on to a new car without a significant discount being applied.



I think the going rate for a 3 year old car is 50% of its original price. That would then be 14k. Add another 2-3k to buy from a main dealer and you are still looking at 5k over what it should be.


----------



## Firefly

A post in boards.ie on the topic

_I work in advertising. It's all below and above the line, digital and traditional. 

Two of the advertisers I work with are the most popular motoring brands in Ireland. The push for PCP is very focused, they're targeting young social climbing men that are brand and year-reg obsessed diesel drivers whom are gearing for a new car to show off to contemporaries and family. And it's working very very well.

Making normally unaffordable purchases all of a sudden affordable along with the typical Irish hankering for the newest 162/171 latest reg to impress the neighbours is the new black. 

*If you're buying a 60k car. You will pay 60k for that car*. One way or another. You will pay for it, now, then, three years down the line, fifteen years down the line. You Will pay the top price for these cars. These deals have been very well thought out with the best minds in finance. Don't for a minute think you're cleverer than them. You're not. It's absurd to think that you're getting a deal._


http://www.boards.ie/vbulletin/showpost.php?p=101710453&postcount=84


----------



## Blackrock1

Bronte said:


> If you ask me this whole think looks and smells like a pyramid scheme.
> 
> I think that the example in the Telegraph of the dealer ringing up the woman early on to get another new car sounds uncannily like what happened to Blackrock.  I'd love to know what percentage of people break their PCP before the 3 years.



what happened to me? 

explain to me what happened to me again please?


----------



## Blackrock1

Firefly said:


> Hi Blackrock1,
> 
> I hope you don't mind me using your own case, but I am trying to show how falling car values in the 2nd hand market would adversely affect the above deal. I think (and I mean think) that the issue will occur when you try to renew on your _3rd_ car. If you go again and get something similar to what you are currently driving, the GMFV on that 3rd car will be much lower or the repayments would be much higher. You can of course shop elsewhere but I think the other dealers will be in the same position - 2nd hand values will have fallen to such a level that the GMFV promised will be a lot lower. When selling this car, the dealer may only offer the GMFV and you may have little choice if the market is flooded. You bought the car for 50k too so you are looking at a near 30k loss. Of course you have the funds so you're fine, but for many others it could be a different story.



what has PCP got to do with the depreciation of value of the car, if i bought it for cash id be in the same position


----------



## Blackrock1

Firefly said:


> A post in boards.ie on the topic
> 
> _I work in advertising. It's all below and above the line, digital and traditional.
> 
> Two of the advertisers I work with are the most popular motoring brands in Ireland. The push for PCP is very focused, they're targeting young social climbing men that are brand and year-reg obsessed diesel drivers whom are gearing for a new car to show off to contemporaries and family. And it's working very very well.
> 
> Making normally unaffordable purchases all of a sudden affordable along with the typical Irish hankering for the newest 162/171 latest reg to impress the neighbours is the new black.
> 
> *If you're buying a 60k car. You will pay 60k for that car*. One way or another. You will pay for it, now, then, three years down the line, fifteen years down the line. You Will pay the top price for these cars. These deals have been very well thought out with the best minds in finance. Don't for a minute think you're cleverer than them. You're not. It's absurd to think that you're getting a deal._
> 
> 
> http://www.boards.ie/vbulletin/showpost.php?p=101710453&postcount=84



quoting some random poster from boards doesnt make it any more factual

you will pay top price for these cars... 

sounds far more dramatic than you will pay the rrp less whatever you manage to negotiate off for these cars.


----------



## Gerry Canning

PCP .

In a lot of cases.
To catch the financially stupid.
To catch the social climbers.
To catch those who fall for alluring advertising.
To catch those whose view of future value stretches to next weeks wages !
 To gain sales of new cars .
Sometimes to catch the few it would suit !


----------



## Firefly

Blackrock1 said:


> what has PCP got to do with the depreciation of value of the car, if i bought it for cash id be in the same position



The point I am repeatedly trying to make is that PCPs are luring people to buy new cars which they otherwise wouldn't do.


----------



## Firefly

Blackrock1 said:


> quoting some random poster from boards doesnt make it any more factual
> 
> you will pay top price for these cars...
> 
> sounds far more dramatic than you will pay the rrp less whatever you manage to negotiate off for these cars.



Another point I am trying to make is that for a lot of people they think once the initial deposit is paid they can drive new cars forever and a day with low monthly repayments which won't be the case.


----------



## Ceist Beag

Firefly said:


> The point I am repeatedly trying to make is that PCPs are luring people to buy new cars which they otherwise wouldn't do.


I think most are in agreement on that point Firefly, I don't think we need another 15 pages arguing it. PCPs are designed to give them impression of affordability which, for some people, may blur the fact that you are still paying the full cost of a new car. However as the examples in Leos post show, overall it is a cheaper alternative to traditional car loans.



Firefly said:


> Another point I am trying to make is that for a lot of people they think once the initial deposit is paid they can drive new cars forever and a day with low monthly repayments which won't be the case.


I really don't think this is the case. Maybe some people are fooled by these deals but I think any punter with half a brain is aware of the fact there is a balance owing at the end of the term. You make it sound like it is always easy to roll over to another new car but I don't think it is quite as easy as you suggest. If there is not enough equity built up (i.e. the difference between the GMFV and the market value at that time) then the customer needs to put their hand in their pocket again to top up the deposit required on the next new car. Time will tell but I would suggest that with so many of these deals being taken up, there won't be a massive difference between the GMFV and the market value so the equity built up will rarely come close to a deposit on the next new car. If people are as naive and as strapped for cash as you suggest then it's much more likely they will be handing the car back than rolling over onto a new deal. Obviously that's a concern too as some people may not imagine this can happen to them but I don't see the pyramid scheme doomsday scenario being a real concern with this offer.


----------



## Firefly

Ceist Beag said:


> You make it sound like it is always easy to roll over to another new car but I don't think it is quite as easy as you suggest. If there is not enough equity built up (i.e. the difference between the GMFV and the market value at that time) then the customer needs to put their hand in their pocket again to top up the deposit required on the next new car. Time will tell but I would suggest that with so many of these deals being taken up, there won't be a massive difference between the GMFV and the market value so the equity built up will rarely come close to a deposit on the next new car. If people are as naive and as strapped for cash as you suggest then it's much more likely they will be handing the car back than rolling over onto a new deal.



I agree 100% on this. I am not saying it will always be easy to roll over to another car, in fact I am arguing the opposite.


----------



## Firefly

Ceist Beag said:


> Obviously that's a concern too as some people may not imagine this can happen to them but I don't see the pyramid scheme doomsday scenario being a real concern with this offer.



I think there is a big risk here. Currently the garages are happy to not even bother selling 2nd hand cars (with presumably less margin that new cars). That's all fine as long the new car sales keep increasing. Should they fall however, 2nd hand cars will have to be sold and to do so prices will fall. Falling prices will mean lower GFMV for anyone trying to roll over leaving them with either higher deposits required or higher monthly payments. I would suggest that for a lot of people this would result in their cars being taken back further depressing the market.


----------



## Blackrock1

which will mean they can go and pick up a second hand car for almost nothing if you follow your logic through 

You would be surprised at how little margin there is on new cars, and do you  think garages are sitting on second hand cars and happy not to sell them ?


----------



## Firefly

Blackrock1 said:


> which will mean they can go and pick up a second hand car for almost nothing if you follow your logic through



If they have any money left 



Blackrock1 said:


> You would be surprised at how little margin there is on new cars


It would be interesting to know for sure. We have no idea of what bonuses car manufactures are giving garages to shift new cars. In VWs case, the timing was remarkable - it was around the same time as the emissions scandal. VW could not afford their cars not to sell given their massive production business - the whole thing could grind to a halt. Better to offer 0% and keep the lines going..



Blackrock1 said:


> Do you  think garages are sitting on second hand cars and happy not to sell them ?


I'm not saying that. I am saying that a number of people are suggesting that the price of 2nd hand cars in garages are being kept artificially high to make buying a new car more attractive.


----------



## Blackrock1

Firefly said:


> I'm not saying that. I am saying that a number of people are suggesting that the price of 2nd hand cars in garages are being kept artificially high to make buying a new car more attractive.



well they have to sell them so something has to  give


----------



## Leo

I've been doing some reading on the UK market, where PCPs have been in existence for longer, with volumes really ramping up from 2012 on. In 2013, 80% of private new car purchases were financed via PCPs (793k cars), and that rate has remained around the same since. Now, around 50% of the new car market in the UK is fleet/business purchases, so that share may have a stabilising effect on the second hand market. I haven't found a breakdown for Ireland. 

This 2014 used car market report flags a concern over the potential impact on the second hand market, but I haven't seen any real evidence to suggest that any significant drop has taken place. Some anecdotal reports suggest that certain very popular models have seen a most significant fall off due to over-supply, but mainly low-spec models that tends to depreciate more quickly anyway. If the UK had suffered a crash in the value of second hand cars I would have expected to see a lot more UK imports before the ~20% drop in the value of Sterling after the Brexit vote. 

Some reports suggest the rise in PCP deals on second hand cars since 2015 there has stabilised the second hand market. I see these are already available in Ireland.


----------



## demoivre

Leo said:


> It's clearly stated the two year term chosen was to give a fair representation of total cost of credit financing over a 5 year term for PCPs and straight financing.



Which is fine in theory. In practice there are people who may not be able to stump up the extra cash to pay off the balloon in 2 years. Bear in mind that one of the attractions of the PCP are the low repayments.




Leo said:


> Those who choose not to renew their car and pay off the GMFV can finance this however they choose.



Exactly and those who chose to finance the balloon over 5 years will end up paying more.


----------



## demoivre

Ceist Beag said:


> However as the examples in Leos post show, overall it is a cheaper alternative to traditional car loans.



Leo's key post is fine in theory but it assumes the borrower can increase their repayments to pay off the balloon over two years. That's a big " if " .


----------



## Leo

demoivre said:


> Which is fine in theory. In practice there are people who may not be able to stump up the extra cash to pay off the balloon in 2 years. Bear in mind that one of the attractions of the PCP are the low repayments.



So finance it over 2.5 years with the same repayments. Or 3 years with repayments 15% lower than you were used to.



demoivre said:


> Exactly and those who chose to finance the balloon over 5 years will end up paying more.



I would really hope anyone reading this at this point understands the very fundamental point that financing over longer periods will cost you more.


----------



## Leo

demoivre said:


> Leo's key post is fine in theory but it assumes the borrower can increase their repayments to pay off the balloon over two years. That's a big " if " .



Again as stated, take the option of maintaining the same repayments as the PCP deal and even with the 6 months longer term you still save over €5k opting for the PCP deal over straight finance.


----------



## gnf_ireland

I am coming in a bit late into this discussion. I think the whole thing has been discussed to death, but I would like to point out three things

1. Some people will never buy new cars - they will always buy second hand cards. A 3 year old second hand car with low mileage will always be attractive for this group. PCP allows a steady stream of these cars to the market and should keep the prices 'reasonable'. I don't believe the second hand car market will tank, although there may be some value in certain make/models. I can imagine if VW had another scandal in 2 years time, the value of a second hand VW might drop as an example. I don't see there to be 'bargain' 2nd hand Audi's or BMW's out there, as these will always have a 'floor' price.

2. Some people will always buy a new car where they can. They are willing to take the hit financially to have the new car, whether its PCP or not. For these people, PCP is just another form of lending, or in the case of 0% finance, a means of managing cash flow. This group will be buying the car - PCP available or not.

3. The 3rd group are the ones who will fall for the PCP deals, and potentially get caught by then. They have 10-15k to spend on a car, so instead of buying a second hand one, they are attracted by the PCP offer and buy a new one. In 3 years time, things may not work out the way they expected, and end up without a car or struggling to work out how to keep the car they have. They don't realise that the new 40k car has to be paid for some way, and the 15k deposit and 10k repayments still leaves a balance to be paid. These are the ones who have changed their behaviour because of the PCP deal.


Most people will fall into group 1 & 2 - but a few will fall into group 3. This is the group being referred to in the above posts where people are nervous about the scheme, not the likes of Blackrock1 who will buy the new car no matter what.


----------



## Firefly

gnf_ireland said:


> 1. Some people will never buy new cars - they will always buy second hand cards. A 3 year old second hand car with low mileage will always be attractive for this group. PCP allows a _steady stream_ of these cars to the market and should keep the prices 'reasonable'.



Hi gnf_ireland,

There were 50% more car sold in 2016 that in 2014 and lots of cars imported from the UK too. I think it will be a glut rather than a steady stream, which sounds like a "soft landing to me!!



gnf_ireland said:


> Most people will fall into group 1 & 2 - but a few will fall into group 3.



Again, there were 50% more car sold in 2016 that in 2014. I hope you're right but my aging hunch tells me a lot of people are driving on the never-never.


----------



## gnf_ireland

Firefly said:


> There were 50% more car sold in 2016 that in 2014 and lots of cars imported from the UK too.



Sounds like 2018-2019 will be a good time to pick up a second hand car !



Firefly said:


> I hope you're right but my aging hunch tells me a lot of people are driving on the never-never.


Maybe, but is that because it suits them and they would have bought the car anyway, or is it that they have both a car they would never have dreamed of because 'easy' finance was available ?

PCP is only an issue, in theory, when it changes customer behaviour and they buy a car they cannot afford, or would never have bought otherwise, because of it.


----------



## Leo

Firefly said:


> Again, there were 50% more car sold in 2016 that in 2014. I hope you're right but my aging hunch tells me a lot of people are driving on the never-never.



2016 is the first year that sales exceeded pre-bust levels. There were a few years following the bust where we seemed to lose a lot of the new car snobbery of the good times and there was more kudos in keeping an older car in good nick. That pesky cheap finance is back with a bang now though.

However, look at the CSO stats since 1998:


Year1998199920002001200220032004200520062007200820092010201120122013201420152016New Private Cars138,538170,322225,269160,908150,485142,992149,635166,270173,273180,754146,47054,43284,90786,93276,25671,34892,361121,110142,688

These numbers are new private car registrations, and include first time registrations of second-hand imports. So 2016 was a very good year on recent trends, but we've only just caught up with the 1998/ 1999 numbers, and our population has grown by almost 30%, more than one million people in that time.


----------



## Firefly

gnf_ireland said:


> Sounds like 2018-2019 will be a good time to pick up a second hand car !



I agree. 



gnf_ireland said:


> PCP is only an issue, in theory, when it changes customer behaviour and they buy a car they cannot afford, or would never have bought otherwise, because of it.



I agree again.


----------



## Firefly

Leo said:


> 2016 is the first year that sales exceeded pre-bust levels. There were a few years following the bust where we seemed to lose a lot of the new car snobbery of the good times and there was more kudos in keeping an older car in good nick. That pesky cheap finance is back with a bang now though.[/td][/tr][/td]



Thanks for that. I've always felt that the _real _Celtic Tiger was from 1998 to about 2002. In that period the real economy grew. From 2002 - 2008 it was just massive credit expansion. The fact that we are now approaching the heights of 2006-2008 without any corresponding growth in the real economy tells me that it's all credit again. I think it's more than a coincidence that car sales have increased by 50% after PCPs have been introduced. My gut tells me that difference between the numbers for 2014 and 2016 are those who can't really afford a new car...about 50k cars..


----------



## Leo

Firefly said:


> Thanks for that. I've always felt that the _real _Celtic Tiger was from 1998 to about 2002.



It's a shame the CSO numbers don't go back even just another couple of years further. 



Firefly said:


> In that period the real economy grew. From 2002 - 2008 it was just massive credit expansion. The fact that we are now approaching the heights of 2006-2008 without any corresponding growth in the real economy tells me that it's all credit again.



Yep, [broken link removed] right back up there at 2008 levels!!


----------



## Firefly

More references to PCP finance being sub-prime. Are we going to go through the whole thing again, this time with cars?

https://www.theguardian.com/money/2...s-driving-us-towards-the-next-financial-crash


----------



## Setanta12

I think the difference this time, is that loans for cars per household is a lot less than mortgage loans per household at a national level (I have no numbers backing up my assertion).  

I do see problems though - but nowhere on the same scale.  Cars can be repossessed very quickly without the political drama.


----------



## podgerodge

Firefly said:


> it's more than a coincidence that car sales jumped 50% in 2 years at the same PCPs were introduced all whilst nothing materially improved in the general economy.


This. I've seen no shortage of acquaintances who used to drive 5/6/7 year old cars moving to brand new Tucsons etc in last couple of years. Did they all win a few bob? No.
And, frighteningly, some of them think the gmv IS the future deposit .

PCP is fine if you understand it. If you minimise the deposit to bare minimum there is likelyhood you will achieve consistent monthly repayments if you want to go this route. Bit if low monthly repayments are what attracted you, then its likely you're using your current car as deposit and you will have little or no deposit in 3 years meaning much higher monthly payments to continue on impressing the neighbours or having to accept that you're not as upwardly mobile as you wanted to pretend to be and now they'll know.


----------



## Firefly

PCPs coming to 2nd hand cars....big push on PCPs for 131 (and newer) 2nd hand cars - there are obviously a lot of these hitting the forecourts that need to be shifted asap to keep the show on the road. I'd expect 10, 11 & 12 reg cars to start getting a lot cheaper in the coming months...

http://www.independent.ie/life/moto...-to-benefit-thousands-of-buyers-34563797.html


----------



## Bronte

Firefly said:


> More references to PCP finance being sub-prime. Are we going to go through the whole thing again, this time with cars?
> 
> https://www.theguardian.com/money/2...s-driving-us-towards-the-next-financial-crash



Oh Lordy that graph on the tripling of US car debt is frightening.  Where America leads the British and Irish always seem to follow.  Must say the American's are ever so inventive at getting poor people credit no matter what.  A never ending viscious cycle.


----------



## Brendan Burgess

A good description of PCP by   in this weekend's FT

*Personal finance sets traps for dinosaurs - Financial Times*



"Some PCPs may be good value. The problem is that it is hard to tell. ... PCPs are a hybrid of several different financial products, part lease, part hire-purchase, and part option to choose between the two. Variables include contract length, the guaranteed value of the returned car, the deposit, purchase price of the car itself, maintenance contract tie-ins, mileage allowances, and (of course) the interest rate. There is no reason to think customers can navigate these complexities. 

Suzanne Shu, an economist at UCLA, has shown that picking the cheapest mortgage deals is a problem that will fox even MBA students. PCPs are harder."


----------



## Mrs Vimes

This article was in the Guardian yesterday - https://www.theguardian.com/commentisfree/2017/may/08/credit-car-crash-sub-prime-crisis-cause-next-financial-collapse.

The author reckons that too many PCP-type deals are being taken by people with poor credit ratings and insecure income who can't afford them and don't really understand them but *shiny*new*car*.

He says car sales are such a large part of the economy that when the music stops it could affect more than just garages.


----------



## Firefly

Given what's being touted here and elsewhere, I presume the Central Bank here are actively looking into this. After all they were blamed for falling asleep at the wheel in 2008 so I am sure they won't let this happen again, will they?


----------



## Leo

With Q1 used car imports up over 50% on last year, and an overall drop of 8% in new registrations, I don't think they'll be panicking yet.


----------



## Firefly

Leo said:


> With Q1 used car imports up over 50% on last year, and an overall drop of 8% in new registrations, I don't think they'll be panicking yet.



That's a fair point. Kinda like that new Volvo S90 though so part of me is hoping for a shedload of them to be bought!


----------



## Leo

Firefly said:


> That's a fair point. Kinda like that new Volvo S90 though so part of me is hoping for a shedload of them to be bought!



Actually, you might not be alone there. The increased sales over the past two years may mean there are more bargains to be had in the second hand market.


----------



## IrishGunner

Question about PCP finance that may have been answered but cannot trawl through the thread

We are in the market for a new car and either looking at a Seat Ateca (about €25k+) or the Skoda Karoq(no price cost yet). We are trading in a Golf 08 GT Sports with 50k on it and a 05 Honda 1.5 with close to 200k. So we don’t know how much we can get or how much extra we can afford to put in, until we see trade in value. However Miss Gunner does a lot of miles for work while I don’t. We are both in full time employment and not going to stretch the budget but want to keep payments steady if possible so we can budget. Also we would like to keep the car for a bit so questions:

Is the only option to have the car for 3 years ?
After 3 years do we have to put in another 10% deposit to upgrade?
Does the payment increase/ decrease if in first year we don’t do high mileage but second year yes (as miss gunner will go back to work)?
Trying to decide what is better in the long run and if it’s a case of putting more money in to get a Credit Union or Bank loan this is an option, with the fact that the cars will be ours. What are the other things to watch out for in the small print of a PCP

Anything else I need to consider?


----------



## Leo

IrishGunner said:


> Is the only option to have the car for 3 years ?



Some dealers offer 2-year along with 3-year deals, but 3 is more common. 



IrishGunner said:


> After 3 years do we have to put in another 10% deposit to upgrade?



You don't have to, but your monthly payments will likely increase if you're replacing with a similar spec model.



IrishGunner said:


> Does the payment increase/ decrease if in first year we don’t do high mileage but second year yes (as miss gunner will go back to work)?



No, repayments are fixed for the term. Exceeding the mileage limits may mean you get a lower final value to use as trade-in against the next car if you choose to roll on to a new deal after the 3 years. 



IrishGunner said:


> Trying to decide what is better in the long run and if it’s a case of putting more money in to get a Credit Union or Bank loan this is an option, with the fact that the cars will be ours.



You have the option of taking advantage of better interest rates on offer from some dealers, then at the end of the 3 years pay the final value with cash from savings or financed via conventional means.


----------



## IrishGunner

Thanks for the info

Still undecided what to do need to look more into this option. Need to look more into what we can do at the end of the deal and the value of the car and if we wish to keep/ upgrade or walk away. Need to determine if the car will maintain its value and we get this at the end, taking into account we will keep the car maintained well

 Also if you get PCP from X dealer do you have to stay with that dealer. So for example we get a Seat does that limit us to Seat or whatever cars the dealer has or can you go to another dealer with another car brand?


----------



## Leo

IrishGunner said:


> Also if you get PCP from X dealer do you have to stay with that dealer. So for example we get a Seat does that limit us to Seat or whatever cars the dealer has or can you go to another dealer with another car brand?



At the end of your 2 or 3 year deal, you will have the option of rolling onto a new deal with that same dealer, handing them the keys and walking away with nothing, or paying the balance of the financing (the GMFV). 

If you choose the latter option, after paying the final value, the ownership of the car transfers to you, and you are free to negotiate a deal anywhere you like using the car as a deposit. Likewise if you walk away with nothing, you need to come up with a 10%+ deposit in order to enter into a new deal with any dealer you choose.

If you choose your car well and there is strong demand for 3 year old examples, it will almost certainly be worth significantly more than the final value. In those cases, if you want to switch to another make, you'd be better off paying the final value to take ownership, then sell it privately or trade it in as the deposit. 

Of course it isn't always easy to predict how well individual models will hold their value over time, but a little research will help. For example, look at how long the current model you're looking at has been in production and whether a significantly newer model is in production. After a significant upgrade, some older models can look very dated and this can affect resale value.


----------



## joer

If you take PCP you only have a limited driving "allowance". You can only have your car serviced by the place where you bought it. If there are any marks or scratches on it then that can have a bearing , so I believe.


----------



## Leo

joer said:


> If you take PCP you only have a limited driving "allowance". You can only have your car serviced by the place where you bought it. If there are any marks or scratches on it then that can have a bearing , so I believe.



You have the option to set the driving allowance, and even if you go over that, it will only have a marginal effect on the trade-in value should you choose to roll-over onto a new PCP deal.

You are free to have the car serviced anywhere you like, unles you know of a dealer / make that are enforcing this? Any I've looked at have no restriction on servicing.

The T&Cs will allow some scratches and wear and tear, though full depth scratches over a couple of inches will have an affect as will bad dents or damage. Again, only affects the value if you want to roll-over onto a new deal.


----------



## IrishGunner

Can you get PCP on second hand cars. Just doing some research and wondering if this is an option?


----------



## Firefly

IrishGunner said:


> Can you get PCP on second hand cars. Just doing some research and wondering if this is an option?



I read something about that recently but the rate was 7.9% if I remember correctly.


----------



## Leo

IrishGunner said:


> Can you get PCP on second hand cars. Just doing some research and wondering if this is an option?



First Auto Finance are offering a PCP package available on second hand cars up to three years old at a rate of 8.9%. That covers all franchised dealers and the majority of independents. Some makes including Audi & BMW offer their own more used car PCP deals, suggesting more competitive rates, but looks like you need to contact them to confirm what they are.


----------



## IrishGunner

In relation to PCP is it better to have a bigger deposit. So we have 2 cars and will use these with possible a cash top up(own money) to purchase car. Thus fewer payments over the term and after 3 years car should not depreciate that much....hopefully and we can use this as deposit to upgrade if we choose to do so?


----------



## Leo

A larger deposit will mean lower monthly repayments, but there's a max deposit allowable on many PCP deals. At the end of the 3 year deal, the car is likely to be worth more than the agreed final value so long as it's in good condition and that model/spec level is in demand. But if you choose to roll on to a new PCP deal, unless you come up with more cash for a deposit, your monthly repayments will increase.


----------



## Firefly

Good article in the Irish Times : http://www.irishtimes.com/life-and-style/motors/car-sales-nervously-reliant-on-pcp-1.3088002

This bit has me worried:

_In Ireland, PCPs are not licenced as a specific product, but comer under general financial conduct rules. ......*the Central Bank when asked said that PCPs are a form of hire purchase and are therefore not really within the remit of the Central Bank*. They are provided by “financial intermediaries” such as a car dealer and the credit agreements drawn up under a *PCP are normally looked after by the Competition and[broken link removed] (CCPC).*

As of yet, *the CCPC is not looking at making PCP or any form of car hire purchase a specifically licenced product*. A spokesperson for the CCPC told The Irish Times that “the Central Bank’s Consumer Protection Code, in particular, chapter five, requires regulated financial services providers to ‘know their customer’ in terms of assessing affordability and suitability of the product. However, the Code does not apply to certain categories of financial products including hire purchase and PCP. *We believe the market, particularly the business practices of certain providers in the UK, is quite different to that in Ireland and that some of the practices of concern to the Bank of England may not be relevant in the Irish market.”
*_

Major cop-out by the Central Bank. Given what happened to this country in 2008 the CB should be all over this. As for the CCPC, they are not even looking to to make PCPs a licensed product! Even better, the phrase "Ireland is different" is almost used.


----------



## Firefly

More references to Sub-Prime lending:

http://www.irishtimes.com/business/...of-unregulated-finance-for-new-cars-1.3093726

_One in three buyers of new cars in Ireland is using a form of finance that is entirely unregulated._

_In the Irish market, subprime lenders have been picking up car finance business. In November 2016, Bluestone Asset Finance announced it had completed a €25 million securitisation of an Irish car finance portfolio. The company describes its customers as those who “are self-employed, have little or no credit history or who experienced financial difficulties during the financial crisis but can now demonstrate a stable income”._


Given the massive increase in purchases by PCP I really think the Central Bank needs to step in here.

Also, I note that we almost balanced the books as a country in 2016 - has VRT replaced Stamp Duty ????


----------



## Nordkapp

Good article here in The Guardian, are PCPs leading us to the next financial crash  https://www.theguardian.com/busines...erm=230066&subid=17451664&CMP=EMCNEWEML6619I2


----------



## Firefly

An on-the-fence article from the Indo with references to sub-prime in the UK and the report due by the SIMI (which can probably be taken with a grain of salt!)


----------



## Nordkapp

Yeah, Firefly, saw that too yesterday, also said that UK 2nd hand diesels will be flogged into this market due to impending legislation and emissions testing in the UK. More petrols are sold in the UK now. 
It will be interesting to see how those on PCP fare when they trade in next year as PCPs really took late 2014 and start of 2015.


----------



## PaddyBloggit

Another article here:

http://www.dailymail.co.uk/news/article-4594382/Debt-fears-new-car-deals-need-300-deposit.html


----------



## 24601

I just got a new car and financed it via PCP. It suits me because I was able to max out the deposit and I know that I'll have a significantly higher income come the end of the 36 months as well as an inheritance, so will be happy enough to pay the balloon (or roll over)

One thing I couldn't get over was how lax the underwriting was. I appreciate that the finance company aren't too bothered given that they can repossess the car if required, but if my experience is anything to go by, there's probably a lot of people driving around in new cars they can't afford. There's definitely another credit bubble in PCPs. If enough of them go bad it could be car finance companies looking for bail outs next.


----------



## Brendan Burgess

24601 said:


> If enough of them go bad it could be car finance companies looking for bail outs next.



Well I suppose that the car finance companies are as systemically important as Anglo and Irish Nationwide. 

Brendan


----------



## 24601

Brendan Burgess said:


> Well I suppose that the car finance companies are as systemically important as Anglo and Irish Nationwide.
> 
> Brendan



Judging by the amount of 171 Tucsons on the road I reckon Hyundai might be all right!


----------



## demoivre

24601 said:


> One thing I couldn't get over was how lax the underwriting was.



I'm not surprised as I've seen probably the biggest car dealership in the South east advertising that " Bad credit history is not a problem" in terms of securing car finance.


----------



## Leo

24601 said:


> One thing I couldn't get over was how lax the underwriting was.



That's nothing new with PCPs, they've always been very loose with credit for new cars. I remember speaking to a guy a couple of years back who was having a moan about not being able to afford to buy a house. I asked him about the BMW coupe he was standing beside, and he then admitted he had borrowed to buy it and was still paying off his previous two cars also!!


----------



## Brendan Burgess

Leo said:


> who was having a moan about not being able to afford to buy a house. I asked him about the BMW coupe he was standing beside, and he then admitted he had borrowed to buy it and was still paying off his previous two cars also!!



Consider that story plagiarised the next time someone tells me that it's hard to save up to buy a house.

Brendan


----------



## Leo

Brendan Burgess said:


> Consider that story plagiarised the next time someone tells me that it's hard to save up to buy a house.



You're welcome to it. Next time I see him I must ask him if he's one of those avocado on toast people too


----------



## Firefly

Zero deposit on new Dacia's in Galway. Reminds me of 100% mortgages back in the day, sure what could go wrong!

http://connachttribune.ie/birthday-delight-dacia/


----------



## willyfones

Certainly a credit bubble in the PCP market, and yes it definitely will burst.    They have a fairly slick operation in the car garages, take it for a test drive,, a quick bit of paperwork and it's yours.  The alarm bells ring of course when you see the Central Bank NOT including this in the upcoming CCR credit rules for lending.   I know someone who is looking to borrow to pay down the balloon payment,,, so they paid a deposit on a car (they don't own - the garage does) It depreciates 10% a year,, then they borrow down the line to finally own the car...     makes no sense.


----------



## demoivre

Here is some information from the Competition and Consumer Protection Commission regarding PCPs.  They explain that at the end of the agreement they are three choices, two of which are straightforward, and the third being:  


Put the car down as the deposit on another car and enter into another PCP agreement. It is important to be aware that the deposit you put down for the first car will not be given back to you if you use the car as a deposit for a new PCP agreement. *The equity you have built up in your monthly repayments and the difference of the GMFV is what you put towards the new car. All you have to put towards the new deposit is whatever equity you built up from the first PCP. *This equity may be less than the deposit required for the new PCP, so be aware that you might have to top the deposit up. This could amount to a couple of thousand euro.
( Highlight by me )

Maybe it's just me but I have no idea what this actually means.


----------



## Brendan Burgess

demoivre said:


> Maybe it's just me but I have no idea what this actually means.



To be fair, they are difficult concepts to explain. 

The best way is to give an example using actual numbers. I presume that the CCPC does that? 

Brendan


----------



## Sunny

willyfones said:


> Certainly a credit bubble in the PCP market, and yes it definitely will burst.    They have a fairly slick operation in the car garages, take it for a test drive,, a quick bit of paperwork and it's yours.  The alarm bells ring of course when you see the Central Bank NOT including this in the upcoming CCR credit rules for lending.   I know someone who is looking to borrow to pay down the balloon payment,,, so they paid a deposit on a car (they don't own - the garage does) It depreciates 10% a year,, then they borrow down the line to finally own the car...     makes no sense.



How does that make no sense? Someone wants to buy new car. They buy on PCP for three years. At the end, they don't want to get another new car and they don't want to hand it back. So they either enter a hire purchase arrangement with the garage or they take a loan to make a balloon payment. So what??? Some people take huge loans to do work on their homes that will never see the same value added in the value of the house. Some people get loans to go on holiday. Some people get loans to get bigger boobs. Some people take a loan to buy a car. Who cares? If PCP does crash, do you really care? Do you think the Irish Taxpayer is going to bail out Toyota or Volkswagen like it did the banks. It's like saying the credit card market will crash because people are throwing money on their cards for silly stuff. It's unsecured lending. There is risks to both the lender and the borrower.

Not saying PCP is for everyone but its not a scam and if grown up adults decide to enter into these agreements, then good luck to them.


----------



## Leo

willyfones said:


> Certainly a credit bubble in the PCP market, and yes it definitely will burst.



It's hardly comparable to a bubble when at the end of the period the vast majority will have a car worth more than the final payment. New car sales figures from 2016 are well down on the peak, and sales have fallen again in the first quarter of 2017, again, not very bubble-like.



willyfones said:


> They have a fairly slick operation in the car garages, take it for a test drive,, a quick bit of paperwork and it's yours.



Nothing new there, car dealers didn't get their reputation making it difficult for people to overstretch when buying a car.



willyfones said:


> so they paid a deposit on a car (they don't own - the garage does) It depreciates 10% a year,, then they borrow down the line to finally own the car...     makes no sense.



Have you looked at the calculations earlier in the thread? This can actually be one of the cheapest ways of financing a new car purchase. You should actually tell your friend to price the same finance via the dealer, as in some cases, they will be able to finance the balloon payment at better terms than the banks or CUs.


----------



## Leo

demoivre said:


> ...Maybe it's just me but I have no idea what this actually means.



It is unnecessarily complicated. I believe the point they are trying to make is that at the end of the PCP deal period, provided the car is in good condition, it is likely to be worth more than the final value amount. In some cases, more popular model/spec cars that lose less value over the period may be worth significantly more. 

It is the difference between the final value and the actual worth of the car that can be used as a deposit toward a new model.


----------



## Firefly

Another warning from the Indo this morning:



Most people know the 3 options at the end of the deal at this stage. Here's how I think it will play out. The dealer / finance will be on the hook initially as the GFMV will be higher than the car is worth. However this will only crystalise if the buyer decides to hand back the car or buy the car outright. If the buyer "goes again" they will be offered a lot less than the GFMV if they trade in for a new car. That new car will also have a much lower GFMV or the monthly payments will increase by a significant amount. If the buyer decides enough is enough there are 2 options. (A) Hand back the keys, in which case the buyer is left with nothing after driving a new car for the past 3 years. Some come down. (B) (presumably) take out a loan for the balloon payment. If I traded in a car / provided a desposit and made repayments for 3 years I think it would sicken my craw if I then had to take out a new loan for the car outside my door.

I really think this whole thing will end in tears.


----------



## demoivre

Firefly said:


> Most people know the 3 options at the end of the deal at this stage.



They do and when the CPCC's best explanation for option 3, which is to use the car to roll in to a new PCP, is this:

*The equity you have built up in your monthly repayments and the difference of the GMFV is what you put towards the new car. All you have to put towards the new deposit is whatever equity you built up from the first PCP*

I despair and I still have no idea what it means.



Firefly said:


> If the buyer "goes again" they will be offered a lot less than the GFMV if they trade in for a new car



The irony !!! When is a " Guarantee" not a guarantee? Only with a PCP.  I have personally never come across a financial product that is so shady and I wouldn't touch it with a barge pole. And of course the product is peddled by car salesmen. Enough said.


----------



## Firefly

demoivre said:


> They do and when the CPCC's best explanation for option 3, which is to use the car to roll in to a new PCP, is this:
> 
> *The equity you have built up in your monthly repayments and the difference of the GMFV is what you put towards the new car. All you have to put towards the new deposit is whatever equity you built up from the first PCP*
> 
> I despair and I still have no idea what it means.



It's phenomenally obtuse



demoivre said:


> The irony !!! When is a " Guarantee" not a guarantee? Only with a PCP.  I have personally never come across a financial product that is so shady and I wouldn't touch it with a barge pole. And of course the product is peddled by car salesmen. Enough said.



Agree, in fact I would _guarantee_ it's a house of cards!


----------



## Leo

Firefly said:


> Another warning from the Indo this morning



Looks like more alarmist stuff from the Indo in their race to the bottom. Some their assertions are at odds with the CSO stats on new registrations including the numbers on UK imports.




Firefly said:


> The dealer / finance will be on the hook initially as the GFMV will be higher than the car is worth.



Unless the car is in a really bad way or is just a really unpopular model/ spec, the GFMV will be lower than the market value of the car. The car would have to lose over 60% of its value over the 3 years. Take a look at second hand prices for the more popular models here and you'll see they are retaining significantly more than that.



Firefly said:


> If I traded in a car / provided a desposit and made repayments for 3 years I think it would sicken my craw if I then had to take out a new loan for the car outside my door.



I don't get this. So you buy a car valued at say €30k, pay a deposit of €6k, make ~€15k repayments over 3 years and you somehow feel bad that you have to pay the balance?


----------



## Leo

demoivre said:


> I have personally never come across a financial product that is so shady and I wouldn't touch it with a barge pole.



A huge number of the early PCP deals will already have completed, I would have expected to read lots of complaints from those purchasers if the predictions of doom were to be believed. PCP was available in the UK a couple of years before they made their way over here, and still remain popular with ~80% of new cars being bought on PCP.

Anyone reading this take up the early PCP deals here in 2013/ 2014?


----------



## Firefly

Leo said:


> Unless the car is in a really bad way or is just a really unpopular model/ spec, the GFMV will be lower than the market value of the car. The car would have to lose over 60% of its value over the 3 years. Take a look at second hand prices for the more popular models here and you'll see they are retaining significantly more than that.


Hi Leo,

I have a feeling the garages are keeping the prices of 2nd hand cars artificially high. If you check out what you can bring the same (or better) car in from the UK for the prices seem way out of whack to their true market value.




Leo said:


> I don't get this. So you buy a car valued at say €30k, pay a deposit of €6k, make ~€15k repayments over 3 years and you somehow feel bad that you have to pay the balance?



I think a lot of people don't really think about the balloon payment too much when taking out a deal like this. If/when they need to pay for this I'm sure it would leave a sour taste in the mouths of a lot of people.


----------



## Leo

Firefly said:


> I have a feeling the garages are keeping the prices of 2nd hand cars artificially high. If you check out what you can bring the same (or better) car in from the UK for the prices seem way out of whack to their true market value.



There has always been an element of that, new cars are a lot cheaper in the UK, the 10% devaluation of Sterling has just widened the gap and led to a jump in imports. As an example, taking the best selling car in Ireland, The Hyundai Tuscon at the same Premium spec level is €33,245 here versus £21,088 (€24k) in the UK. 

New car sales numbers are still low, leading to a shortage in the second hand market. We've only just gotten back towards the new car sales numbers of 20 years ago (2016 sales just surpassed 1998, and were ~20% down on 1999), and in the meantime the population has risen by ~29%. 2017 new car sales have dropped on last year.



Firefly said:


> I think a lot of people don't really think about the balloon payment too much when taking out a deal like this. If/when they need to pay for this I'm sure it would leave a sour taste in the mouths of a lot of people.



There's definitely a large element of that at play, but car finance has always been easy to get so there has always been a cohort of people who are willing to believe they're getting a great deal regardless of the small print. From the calculations here, even for those who have to finance the balloon payment, they're still likely to be saving money over the traditional finance options. That should ease the sour taste a little.


----------



## Firefly

Leo said:


> 2017 new car sales have dropped on last year.



I wonder, i.e. speculate!, has the penny dropped with PCPs and people are not "going again" with those 141 cars???


----------



## Leo

Firefly said:


> I wonder, i.e. speculate!, has the penny dropped with PCPs and people are not "going again" with those 141 cars???



I would love to know, so if anyone here reading has a personal story...

I've worked out the numbers on a few options for different brands, and looked at what the 3-year-old examples of the same models are going for. In all cases, unless the dealers are offering significant discounts on the new car, the obvious choice is to hold on to the car and pay-off or finance the final payment.


----------



## Firefly

Leo said:


> I've worked out the numbers on a few options for different brands, and looked at what the 3-year-old examples of the same models are going for. In all cases, unless the dealers are offering significant discounts on the new car, the obvious choice is to hold on to the car and pay-off or finance the final payment.



I agree and would think a significant number of people are doing that. Given the gap between what you could bring the same car in from the UK for that must be a royal pain!


----------



## Learner2015

The GMFV are set at the predicted auction value of the car in three years time i.e. many thousands of euros under the predicted retail value a dealer can sell at. Yes it's a prediction but so is a lot of talk on this thread about various outcomes of PCPs.

Comparing an imported car to one coming off PCP and the price gap between each closing is not as straightforward. What would you prefer to do, write a cheque for €20k and buy the car you have owned since day one or write a higher cheque to be the 2nd owner on a car from another country that you really can't fully verify the history on? I know what I'd rather do...

An imported car of comparable age / mileage etc will cost more than the GMFV of a
PCP car coming off lease. An imported car will generally cost less than an Irish one retailed from dealer.

This is generally how the trade works, of course there ar exceptions there always is.

Are PCPs the devils work, I don't think so. It's actually a very simple product in my opinion.


----------



## RedOnion

I've followed this thread with interest since long before I joined AAM, and until now I've avoided becoming embroiled in the discussion.  In the past my work involved me deeply in leasing & HP and it's been interesting to follow this thread.  Apologies if it's a bit of a rant, but just my 2 cent!

As for PCP being a simple product - well I don't fully understand it in all cases, and I think a thread that extends to over 350 posts shows how unclear the product is.  Do I think it's the devil's work?  No, but I have a lot of issues with it, and how it's marketed.

Firstly the product is specifically designed to sell more cars.  It was designed by the car industry (ford), and not by banks, to help people to purchase cars they couldn't otherwise afford.  One of my biggest issues with PCP (and even HP) is the regulation around them.  Even the regulatory bodies in this country seem to be confused about who exactly is responsible for regulating PCP/HP to the extent that there is actually a loophole in the new CCR legislation that means Car finance deals won't be initially reported as it requires a legislative change (car finance houses don't all fall under the definition of 'Money Lender').  On top of that they are not within the scope of the Consumer Protection Code.  This means when it comes to advertising, the dealer can advertise such things as 'own from €x per month'.  All the advertising you see around cars are focused on the monthly repayment amount, not the total cost, to let people know how 'affordable' the car is.  I won't even get started on the fact that the people selling these products don't have to have any financial advisory training, or that it's being marketed in some cases specifically to people with bad credit history.

My first experience of PCP in a retail context was a few years ago when my neighbour exchanged a 10 year old car for a brand new Hyundai Tucson.  When I said I was surprised he had bought new, his response was that it was cheaper than buying a 2 year old model!  The reality is that most customers don't think about the balloon payment, or what they're going to do in 3 years when the deal is up.  There was talk earlier in the thread around customers being left with a sour taste if they have to borrow money at the end of 3 years to own the car, but I think the biggest problem will be that they have to dig deep into their pockets to 'go again' and get  new car as they won't have much equity above the GMFV; in an effort to keep the monthly repayments as low as possible, I think some brands are pushing the limits of the GMFV which will leave customers with very little equity at the end of the term.

The other option that seems to be forgotten, but is still there, is good old fashioned HP.  I've seen the calculations earlier in this thread, but they need to be updated to reflect the real deals available in the market.  Comparing a 0% PCP to 11% HP is wrong - 11% HP typically is the preserve of the 2nd hand market (or someone who doesn't want to do HP!).  Taking a look at either Peugeot or Hyundai for example, it might actually work out cheaper using HP vs PCP; particularly is you knew you wanted to own the car outright, and in some cases the monthly repayments are actually lower (assuming 5 year HP vs 3 year PCP and then financing the MFV).  Hyundai offer the same APR on both options, and Peugeot even offer 0% HP on one specific model.  (I don't have time at the moment to do out a full table of the options).

Which gets me on to another point.  There is no such thing as 0% finance!  I work in banking, and the concept doesn't exist.  The cost of administration of the loan itself it high, without factoring in cost of finance and bad debts.  If a dealer is offering 0% finance, you're probably forgoing something else.  I know one brand of car I was looking at (not that I'd buy new), and I was being offered over 10% off the list price as a cash buyer (or financing elsewhere), or a much smaller discount if I was going for 0% PCP.  

In terms of a 'credit bubble' have these things collapsed before?  Well yes.  PCP has been around for a while in the UK, and finance houses ended up nursing very heavy losses when the 2nd hand market collapsed in 2009. Similarly here with HP, but not because of the GMFV.  Under legislation, once a customer has made 50% of the repayments due under HP deals (and I understand PCP), they can hand the keys back and walk way.  A lot of customer here & in the UK triggered that clause in 2009 / 2010, and the banks were left with cars they couldn't sell (I know of someone who made a lot of money storing high end cars that the auctions couldn't even shift in 2010).

Because of the losses they made, banks shied away from offering HP on 2nd hand cars since the crash (which was very common up to 2008 so long as the car would be less than 8 years old at the end of the term), so it's very interesting to see PCP for 2nd hand cars arriving from specialist lenders just when the first PCP deals are maturing.  Again, it's purpose is to help garages shift stock just when they're starting to get a lot of it back in - without it it would be cheaper to buy new so there'd be no market for their trade ins.

Rant over!


----------



## Learner2015

Red onion I think ur post was fair enough not a rant at all!

I suppose it just I understand it, the advantages and disadvantages  so that's probably why I'm calling it simple. 

It's like everything I suppose, some love it, some hate it and some will regret it.

The more opinions on these sorts of threads are good so keep em coming!


----------



## RedOnion

Learner2015 said:


> I suppose it just I understand it, the advantages and disadvantages  so that's probably why I'm calling it simple.



Absolutely, and sorry it wasn't a direct dig at your post. The product isn't complicated, but for some reason when people explain it they make it more complicated, or get it completely wrong. I'm including financial journalists in that. If I was to take an example of explanations from dealers and national newspapers, I'm not sure it would explain properly to me what I'm getting into.


----------



## Leo

RedOnion said:


> I've seen the calculations earlier in this thread, but they need to be updated to reflect the real deals available in the market. Comparing a 0% PCP to 11% HP is wrong - 11% HP typically is the preserve of the 2nd hand market (or someone who doesn't want to do HP!). Taking a look at either Peugeot or Hyundai for example, it might actually work out cheaper using HP vs PCP;



That's an interesting development, 11% was what I was seeing at the time from some of the more popular brands. Nissan are still at 11%, Toyota are 8.9%, but most of the others seem to be lower alright. When I get some time I'll update the table, or perhaps it might be better add a new one to reflect the higher deposit levels required for these HP deals, Peugeot for example require a 30% deposit. Do you have a link to Hyundai's HP terms? I can only see the PCP rates on the site.


----------



## RedOnion

Leo said:


> That's an interesting development, 11% was what I was seeing at the time from some of the more popular brands. Nissan are still at 11%, Toyota are 8.9%, but most of the others seem to be lower alright. When I get some time I'll update the table, or perhaps it might be better add a new one to reflect the higher deposit levels required for these HP deals, Peugeot for example require a 30% deposit. Do you have a link to Hyundai's HP terms? I can only see the PCP rates on the site.


I can have a look tomorrow evening at a few examples. Even for Toyota if memory serves me right their PCP is a bit higher than others so will try comparing like for like. Stuck with mobile at moment so I'll see what I can do when I'm back on laptop.


----------



## Leo

RedOnion said:


> I can have a look tomorrow evening at a few examples. Even for Toyota if memory serves me right their PCP is a bit higher than others so will try comparing like for like. Stuck with mobile at moment so I'll see what I can do when I'm back on laptop.



Sounds good, thanks.

Toyota's rates are 2.9% for the Aygo and 4.9% or 5.9% on other models.


----------



## Firefly

RedOnion said:


> One of my biggest issues with PCP (and even HP) is the regulation around them.  Even the regulatory bodies in this country seem to be confused about who exactly is responsible for regulating PCP/HP to the extent that there is actually a loophole in the new CCR legislation that means Car finance deals won't be initially reported as it requires a legislative change (car finance houses don't all fall under the definition of 'Money Lender').  On top of that they are not within the scope of the Consumer Protection Code.



Given everything that happened in 2008 with the financial regulator and Central Bank falling asleep at the wheel and the relatively large purchase price of a car, they should really be stepping in here. Think I might write to them actually..


----------



## RedOnion

Leo said:


> Sounds good, thanks.
> 
> Toyota's rates are 2.9% for the Aygo and 4.9% or 5.9% on other models.



I've started some work on this, but not finished yet.  Will be the weekend before I get it finished.

Can anyone tell me how do I upload a table to the forum?

I have some HP vs PCP rates below, but I want to format correctly when I do all the calculations of repayments & cost of credit.  I've also got the minimum deposits for all of these (Skoda is 10% on HP, but Peugeot is 30%), and will include in my calculations.

In getting the rates below, I've picked the 'main' rates available for each manufacturer, and ignored where 0% is available on only 1 selected model.

Make Model HP APR PCP APR
Hyundai i40 3.90% 3.90%
Nissan Juke ? 2.90% 
Toyota Aura 8.90% 4.90%
Skoda Rapid 5.90% 3.90%
Skoda Yeti 5.90% 5.90%
Peugeot 3008 3.90% 4.90%
Peugeot 508 3.90% 3.90%


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## Leo

RedOnion said:


> Can anyone tell me how do I upload a table to the forum?



See here.



RedOnion said:


> Nissan Juke ? 2.90%



HP on the Juke is 11%.


----------



## RedOnion

Ok, hope this works.
I've taken example of Hyundai i40.  APR rates are the same for HP & PCP.  I've compared with Cash and Personal loan (gone with KBC 6.9% rate as it's the lowest I could find).
Assumed GMFV finance at personal loan rate after end of PCP term.


*Option**Cash**PCP 3 years, plus 2 Years**PCP 3 years, plus 2 Years.  With HP Min deposit**HP 5 Years**Personal Loan 5 Years**OTR Price*€26,495€26,495€26,495€26,495€26,495*GMFV*N/A€10,333€10,333€0.00€0.00*Initial Term (years)*N/A3355*Initial Rate APR*N/A4%4%4%6.90%*GMFV Term*N/A22N/AN/A*Deposit*N/A€1,854.65€5,299.00€5,299€0*GMFV Rate APR*N/A6.90%6.90%N/AN/A*Initial Monthly*0€455.36€353.82€389.40€523.38*GMFV Repyments*N/A€462.17€462.17n/an/a*Total Cost*€26,495€29,339.47€29,128.46€28,663.05€31,403.02*Total Cost of credit*€0€2,844€2,633€2,168€4,908

Here's also a table of sample rates available for typical models for the brands I selected.  Interesting that a number seem to have dropped the deposit required for HP to be similar to PCP - which makese sense as PCP is literally just a HP deal with a balloon payment.


*Make**Model**OTR Price**GMFV**HP APR**HP Min Deposit**PCP APR**PCP Min Deposit**GMFV / OTR**Finance Provider**Notes**Hyundai*i4026,495.0010,333.003.90%20%3.90%7%39%Bank of IrelandSpecial offer - selected models only*Nissan*Juke19,995.007,997.0011%10%2.90%10%40%AIB*Toyota*Aura24,750.009,652.508.90%7%4.90%7%39%Bank of IrelandMinimum deposit appears to be the same in T&Cs*Skoda*Rapid19,975.007,660.005.90%10%3.90%10%38%Volkswagen Bank0% available on selected Skoda models on PCP*Skoda*Yeti26,295.009,598.005.90%10%5.90%10%37%Volkswagen Bank*Peugeot*300826,712.809,227.003.90%30%4.90%10%35%Bank of IrelandPeugeot, 0% available on HP on 308. *Peugeot*50829,425.0010,150.003.90%30%3.90%10%34%Bank of IrelandDifferent models have different rates, but 3.9% / 4.9% are typical


I'll update shortly with a simple Excel model for calculating each option.

Input cells are highlighted in yellow

Edit. Realised I've no cash being put in for personal loan option. I'll update when I get a chance to be comparable. Will also add version with AIB rates.

Edit: Link to GoogleDocs removed as spreadsheet not maintained.


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## Leo

Nice work RedOnion.

Read this over the weekend, Regulator in UK is concerned with rate of growth of these deals, but this article suggests even a significant drop-off in second hand values won't threaten the banks stability. PCPs are far more popular there and new registrations haven't dropped like they have here this year. So we'll get the benefit of observing issues evolve in the UK before they hit home here.


----------



## RedOnion

Amended version using the Hyundai, but with AIB loan rates (8.45%), assuming 10% cash deposit.


*Option**Cash**PCP 3 years, plus 2 Years**PCP 3 years, plus 2 Years.  With HP Min deposit**HP 5 Years**Personal Loan 5 Years**OTR Price*€26,495€26,495€26,495€26,495€26,495*GMFV*N/A€10,333€10,333€0.00€0.00*Initial Term (years)*N/A3355*Initial Rate APR*N/A4%4%4%8.45%*GMFV Term*N/A22N/AN/A*Deposit*N/A€1,854.65€5,299.00€5,299€2,649.50*GMFV Rate APR*N/A8.45%8.45%N/AN/A*Initial Monthly*0€455.36€353.82€389.40€488.65*GMFV Repyments*N/A€469.46€469.46n/an/a*Total Cost*€26,495€29,514.44€29,303.43€28,663.05€31,968.65*Total Cost of credit*€0€3,019€2,808€2,168€5,474

Also, did a comparison using Skoda Rapid where PCP rate is lower than HP rate (so I'm not accused of bias!)


*Option**Cash**PCP 3 years, plus 2 Years**PCP 3 years, plus 2 Years.  With HP Min deposit**HP 5 Years**Personal Loan 5 Years**OTR Price*€19,975€19,975€19,975€19,975€19,975*GMFV*N/A€7,660€7,660€0.00€0.00*Initial Term (years)*N/A3355*Initial Rate APR*N/A3.90%3.90%5.90%8.45%*GMFV Term*N/A22N/AN/A*Deposit*N/A€1,997.50€1,997.50€1,998€1,997.50*GMFV Rate APR*N/A8.45%8.45%N/AN/A*Initial Monthly*0€329.05€329.05€346.72€368.40*GMFV Repyments*N/A€348.02€348.02n/an/a*Total Cost*€19,975€22,195.67€22,195.67€22,800.71€24,101.67*Total Cost of credit*€0€2,221€2,221€2,826€4,127


----------



## tallpaul

Excellent article in today's Irish Times by Fiona Reddan and Peter Hamilton which goes into great detail on the pros and cons of buying a car on PCP.

http://www.irishtimes.com/business/...t-do-a-pcp-deal-until-you-read-this-1.3148532


----------



## Firefly

tallpaul said:


> Excellent article in today's Irish Times by Fiona Reddan and Peter Hamilton which goes into great detail on the pros and cons of buying a car on PCP.
> 
> http://www.irishtimes.com/business/...t-do-a-pcp-deal-until-you-read-this-1.3148532



It's like turning back the clock to 2007 but instead of houses we now have cars. This has sub-prime written all over it. As many of these plans IMO will fail, it will add even more stock to the 2nd hand market before the 3 years are up

_As the sector is unregulated, there may be scope for loose standards. One concern with PCPs is that it can be so easy to access such a deal. Some finance companies promise that “bad credit history” is not a problem; others allow you to “apply for finance online in under two minutes”._


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## Leo

Firefly said:


> As many of these plans IMO will fail, it will add even more stock to the 2nd hand market before the 3 years are up.



Do you think there will be a significantly higher rate of failure of these PCP deals than there has been with the HP deals? Given current new car registration numbers, it would need to be very significant to have much of an effect. 

Remember, new car finance has always been very easy to get, PCPs just made it sound more attractive to some who really shouldn't be buying new. But sales numbers don't suggest there's a significant bubble.  I'd see a further devaluation of Sterling as a much greater risk to the second hand market here.


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## Firefly

Leo said:


> Do you think there will be a significantly higher rate of failure of these PCP deals than there has been with the HP deals?



I don't think HP was ever popular with the masses here though. PCPs have opened the possibilities of Joe Bloggs buying a new car when he would have previously gone to the Credit Union and bought something 3 or 4 years old. Who knows where it will end and I am speculating for sure as it's a new product. I can just feel it in my bones it's going to cause problems. Yes, imports from the UK are the biggest threat - external factors as it were. In the 2nd hand market there is a chasm in the price difference between importing from the UK and buying here and it's bound to affect values here.


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## demoivre

Firefly said:


> Yes, imports from the UK are the biggest threat - external factors as it were.



Agree and the  numbers support that view ! Number of imported cars increased by 46% in the first half of 2017. If Sterling depreciates further and EUR/GBP heads for parity, as many predict, you would expect the number of imported cars to continue increasing.


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## Leo

demoivre said:


> Agree and the  numbers support that view ! Number of imported cars increased by 46% in the first half of 2017. If Sterling depreciates further and EUR/GBP heads for parity, as many predict, you would expect the number of imported cars to continue increasing.



Yeah, and H1 2017 imports are up more than 80% over 2015 numbers. What I was a little surprised by though is levels of imports as a percentage of all new car registrations has remained reasonably steady. Imports account for 34% of new registrations for H1 2017, this is in line with the previous 5 years where the import percentage has varied from 28% (2015) and 41% (2013). I really would have expected the import ratio to rise after the Brexit-linked drop in Sterling.


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## Pugmister

demoivre said:


> Agree and the  numbers support that view ! Number of imported cars increased by 46% in the first half of 2017. If Sterling depreciates further and EUR/GBP heads for parity, as many predict, you would expect the number of imported cars to continue increasing.



When important numbers are quoted are these solely based on private individuals making a trip over to the UK or are dealers importing cars for resale also included ? I know when i bought my car from Frank Keane it was just brought in from the UK and the dealer said a lot of the second hand stock comes from the UK dealerships


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## Leo

Pugmister said:


> When important numbers are quoted are these solely based on private individuals making a trip over to the UK or are dealers importing cars for resale also included ? I know when i bought my car from Frank Keane it was just brought in from the UK and the dealer said a lot of the second hand stock comes from the UK dealerships



The CSO numbers will include cars brought in by dealers also, they include all new registrations of second hand private cars.


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## PaddyBloggit

Latest article in the Independent here:

http://www.independent.ie/business/...s-are-leaving-buyers-vulnerable-35936735.html


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## Leo

The CCPC are conducting a study and are particularly keen to hear from anyone who has had problems with PCP deals.


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## RedOnion

This is the kind of article that I think causes confusion around PCP.
http://www.independent.ie/business/...s-not-the-only-show-on-the-road-35933049.html

I'm not even sure where to start with the factual errors, so I think I'm better to ignore it, but it's exactly the kind of thing that I was referring to earlier about people over complicating what a PCP is.  (I won't get into the fact that it even contradicts other articles published previously by the same paper).


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## newtothis

Yet another piece on PCPs in today's IT: http://www.irishtimes.com/business/...ubject-of-consumer-protection-study-1.3159322

These all seem to be re-hashing the same arguments.


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## Firefly

http://www.independent.ie/business/...f-popular-pcp-car-finance-deals-35957898.html

_Official Ireland has finally woken up to the fact that PCP car financing deals could be about to explode and leave a mess

PCPs make new cars, in particular, affordable. However, if the car's value falls below the agreed amount at the start of the deal, then the equity will disappear. You could end up with no deposit for your next car. In such an instance you can walk away from the deal, but you will have nothing to put towards your next motor, and no car._

I see most people buying the car outright rather than "going again" as the penny will drop for many and walking away with nothing haven driven a new car for the last 3 years will be too much to swallow. Credit Unions and banks will make a few bob.


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## Firefly

Interesting article here...

http://uk.businessinsider.com/uk-car-finance-pcp-mortgage-market-morgan-stanley-2017-7


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## 24601

http://www.independent.ie/life/moto...eller-as-newcar-sales-dip-again-35989297.html

Car sales are continuing to fall year-on-year here so it would appear that notwithstanding the potential risks inherent in the product that 2nd hand car values should sustain at levels well in excess of the GMFV for most cars in the next 2-3 year window. The glut of cars in the UK may have an impact but unless there's a change to VRT that shouldn't massively impact the Irish market - for most people it's still not worth the hassle. 

According to this article:
"Some dealers are reporting that as many as 70 per cent of their new car sales are based on PCP." I can't find accurate stats on this but if it's a case that only "some" are reporting 70% of sales via PCP, it's likely that the average is much below this. I wouldn't be worried about the Irish market just yet, but it's definitely something to be watched closely. Government needs to assign supervisory responsibilities to the Central Bank too as regardless of the macro risks, these are nearly always being mis-sold from a consumer protection point of view!


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## Delboy

The Consumer Watchdog was on Morning Ireland earlier and is asking Politicians to take a look at PCPs as she has some concerns.

1/3 of all new car purchases are now done with PCP's and they were worth €800m in 2016 (up 65% on 2015) in what is largely an unregulated area. The average PCP is worth €25,000.
While they may suit some consumers, she has worries about the balloon payments and customers who either want to hand back the car and walk away or does that seek to buy it outright.

It's also in today's papers
https://www.independent.ie/business...-firms-offering-pcp-car-finance-36678432.html


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## Delboy

Consumers left with 'staggering amounts' of debt from PCP car sales
					

News from the Irish Examiner's team of reporters




					www.irishexaminer.com
				





> Mr Donohoe replied that the Central Bank's latest data available for the total car finance market in Ireland - which includes both Irish resident banks and non-banks - is to the end of September 2019.
> 
> "At that time, there were 76,153 PCP loans outstanding representing a total outstanding stock of almost €1.457bn," he said.



19.1k per contract/vehicle outstanding


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## Purple

Delboy said:


> Consumers left with 'staggering amounts' of debt from PCP car sales
> 
> 
> News from the Irish Examiner's team of reporters
> 
> 
> 
> 
> www.irishexaminer.com
> 
> 
> 
> 
> 
> 
> 19.1k per contract/vehicle outstanding


So it turns out that leasing an asset, secured against its own future asset value, that depreciates rapidly over the first 4 years of its life is expensive. Who would have thunk it?


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## Delboy

I took out a PCP last year myself, something I never ever though I'd do. I had the cash for the car but the Manufacturer were giving me €1.5k cash back on a 0% loan. I couldn't say no.


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## Newbie88

Are PCP deals potentially a better way to finance a new hybrid car, if there's such big changes in hybrid and electric vehicles technology in the coming years and the PCP deal provides a guaranteed value does this provide a bit of safety on a car that might depreciate faster...?


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## Leo

Newbie88 said:


> Are PCP deals potentially a better way to finance a new hybrid car, if there's such big changes in hybrid and electric vehicles technology in the coming years and the PCP deal provides a guaranteed value does this provide a bit of safety on a car that might depreciate faster...?


A low or zero interest PCP deal is better than conventional finance with a higher interest rate. 

The guaranteed final value does offer protection against massive depreciation, but those values are usually weighted in favour of the dealership. In most cases, the retail value of the car will be higher (perhaps significantly so) than the guaranteed value.


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## jpd

and I would re-read the contract. I would not be surprised to find that there is clause hidden away to allow them to change the guaranteed value  in certain circumstances


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## Leo

jpd said:


> and I would re-read the contract. I would not be surprised to find that there is clause hidden away to allow them to change the guaranteed value  in certain circumstances


Only if you exceed the agreed mileage or there is damage.


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## Gordon Gekko

Isn’t the market value at the time usually far higher?

e.g. my sister did one of these. The car was €50,000. She paid €15,000, then about €500 a month for 36 months, and then the outstanding €17,000 at the end. The Guaranteed Minimum Value was circa €17k. But the car was worth around €34k at that time. Which kind of makes sense so you’ve €17k of ‘equity’ in the car to roll into the next deal.

The trick is to just pay it off. The dealers are quite surprised apparently.


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## Leo

Gordon Gekko said:


> Isn’t the market value at the time usually far higher?
> 
> e.g. my sister did one of these. The car was €50,000. She paid €15,000, then about €500 a month for 36 months, and then the outstanding €17,000 at the end. The Guaranteed Minimum Value was circa €17k. But the car was worth around €34k at that time. Which kind of makes sense so you’ve €17k of ‘equity’ in the car to roll into the next deal.



Yeah, in most cases and if you pay a large deposit, then you're almost guaranteed it will be significantly higher. 

In my experience, they actively discouraged me from paying a higher deposit as I'd have to come up with a similar deposit after the 3 years to trade up to a new model at the same monthly rate. They really want to condition you to that monthly amount so you hand them back a car in good condition and move on to a new one every 3 years.


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## Gordon Gekko

Leo said:


> Yeah, in most cases and if you pay a large deposit, then you're almost guaranteed it will be significantly higher.
> 
> In my experience, they actively discouraged me from paying a higher deposit as I'd have to come up with a similar deposit after the 3 years to trade up to a new model at the same monthly rate. They really want to condition you to that monthly amount so you hand them back a car in good condition and move on to a new one every 3 years.


I’ve heard that too. And I don’t really understand it to be honest. I’d have thought that if you pay a high deposit now, it means you’ve more equity in the car down the line, and therefore need a smaller deposit because it’s made up of the extra equity you have. I know a decent number of people who have gone down the PCP route and it’s made a lot of sense for them. People with share options or lump sums coming to them. But they’re going to just pay it off.


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## Coldwarrior

Gordon Gekko said:


> I’ve heard that too. And I don’t really understand it to be honest. I’d have thought that if you pay a high deposit now, it means you’ve more equity in the car down the line, and therefore need a smaller deposit because it’s made up of the extra equity you have. I know a decent number of people who have gone down the PCP route and it’s made a lot of sense for them. People with share options or lump sums coming to them. But they’re going to just pay it off.


With a high deposit the GMV is still the same but the monthly repayment is lower, so you've the same equity at the end, but to maintain the same monthly repayment on the next car you'd likely need to top up the equity to a level similar to your original deposit.


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## Banemore

What happens if your car is badly damaged in a accident, we say 8k worth of damage and the insurance company say repair the car and won't write it off as often happens. What will the value of your car be then????. What happens if for some reason you have to do more mileage and its well over the limit.????. I would love to see a survey on this pcp finance. Good luck with buying your car but think it over.


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## Leo

Gordon Gekko said:


> I’ve heard that too. And I don’t really understand it to be honest. I’d have thought that if you pay a high deposit now, it means you’ve more equity in the car down the line, and therefore need a smaller deposit because it’s made up of the extra equity you have. I know a decent number of people who have gone down the PCP route and it’s made a lot of sense for them. People with share options or lump sums coming to them. But they’re going to just pay it off.


For the purchaser who wants to pay off the final value and walk away, having more equity makes perfect sense. 

However, the dealer doesn't want you with more equity as most people realising they have significantly more equity then the final value will choose to buy the car outright. The dealer wants you with a car that's worth a little more than the min value so that you'll happily hand that back to them and take out a new PCP deal on a new model. That's the dealer's dream, lots of people on PCP deals who come back every 3 years to that same dealership and drives off with another new car.


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## Leo

Banemore said:


> What happens if your car is badly damaged in a accident, we say 8k worth of damage and the insurance company say repair the car and won't write it off as often happens. What will the value of your car be then????. What happens if for some reason you have to do more mileage and its well over the limit.????. I would love to see a survey on this pcp finance. Good luck with buying your car but think it over.



Then the dealer would be entitled to lower the value of the car below the final value. In that case, you accept that valuation and pay a little extra for your new car, or you pay off the final value to purchase the existing car outright. 

PCP has been in the market here for many years with the level of activity significantly rising in 2014, so there have been hundreds of thousands of such deals done over the years with no coverage that I've ever seen of consumers feeling hard done by in relation to alterations in the final value.


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