Is PCP a good way to finance a car?

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.
 
Bronte said:
This is likely to push values down, meaning many cars bought with PCPs will be below their guaranteed minimum future values.
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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.
 
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!
 
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
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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 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?
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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.
 
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Blackrock1 said:
I'm out now I'm convinced this is a wind up
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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.
 
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.
 
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.
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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 !
 
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.
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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.
 
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.
 
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.
 
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.
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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.
 
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.
 
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.
 
Except in this case the term is only 3 years after which the finance providers can increase their rates
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Or you may sure you have the lump sum payment available
 
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