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.......
Is PCP a good way to finance a car?
- Thread starter Brendan Burgess
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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.......
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.
Blackrock1
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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
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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
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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.
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
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Ceist Beag
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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
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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
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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.
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.
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.
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.
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.
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
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Blackrock1
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of course like any finance, This post will be deleted if not edited immediately everyone loves the doomsday scenarios on here
Blackrock1
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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
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
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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
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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