Blackrock1
Registered User
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which is a downside of buying a new car every 2 years rather than PCP
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.
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.
Can this be done ie pay some of the balloon in cash and finance the rest?
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.
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%..
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
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.
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!
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.
perhaps, but its the most sensible way to look at it
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!
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
If you ask me this whole think looks and smells like a pyramid scheme.
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.