Blackrock1
Registered User
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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
They dont as I've shown with my only worked example.
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.
They dont as I've shown with my only worked example.
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?
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.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?
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.
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!).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 !
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.
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
As per my post above, the Joe Duffy example is flawed.
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.
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?
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.
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.