PCP - good or bad?

[Muttley75]

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

Discuss...

 

[beta]

The increase in the number of car being bought on finance is an interesting area... There has been a massive increase in the number of cars being sold this way and there may be the possibility that some customer might start saying things like "I don't feel like I have been treated fairly" to organisations such as the Financial Services Ombudsman. I'm sure we will see companies falling foul of best practise at some point.

!!Off topic warning!!

looking at the other effects on the market such as the resale values and availability of car vis private sales. I can see a point in the not too distant future where the car manufactures will be offering end to end service and life of all cars. The increase in the number of car on the road that are really owned by the car manufactures via the financial companies that they also own make this more possible. As a car manufacture the last thing you want is cars that last for ever and to keep the factories turning you need to keep making more.

Think about the problems being faced by governments for meeting emission targets. The safety concerns of the next generations of cars where self drive cars are common place.

If I was a car manufacture I would want to supply a car that would last for maybe 5-7 years at the end of which it is taken back in to be recycled and replaced. At same time I would like to supply you as my customer with the energy for your house etc...

 

[opelfruit]

It's called planned obsolescence - where a product is deliberately designed to fail, have a much shorter life than it otherwise would. It's illegal in France with any manufactures of such products facing 300,000 euro fines and up to 2 years in jail.


If it became public knowledge that the motor industry we actively doing this (if they do or start to) then I'm sure it won't be long before other countries start to impose new laws similar to those that have recently been put in place in France.


......and never bought a car on PCP, never will

 

[Scottyg]

Bought my last 5 cars on PCPs. Never gone to the full term of the deal and traded in earlier. I tend to take 4 year deals with a deposit not any more than my monthly payments. I've only lost out on my last car (MINI Countryman) as I had to get into an Auto as my back is gubbed and getting worse. I had neg equity of £1200 on it after 18 months of ownership. Luckily I had some savings that I could dip into to get my A3 deal done.
PCPs have been discussed a lot on here in the short time I've been a member and everyone has different views and opinions on them. If you can work a deal that suits you and not the dealer then they are a great way of getting into a new car. If you have know idea about the packages pitfalls then you could get stung badly as all dealers are out to make as much profit as possible.
The best example I can give you is when I bought my last MINI for my wife. It was a brand new MINI ONE 3rd gen bought before the car had been delivered to dealers and order books had just opened. The first deal offered was to take her current mini back and settle PCP. £259 dep and £259 per month. I knocked the offer back and left it a few weeks and got another offer, then another then another. I finally went in on launch day of the Cooper/S and D models and signed a PCP on £199 dep £199 per month. Got loyalty bonus so the dep was paid for by mini finance. We will only keep it 3 years and do the same again, probably with MINI but maybe not. The last deal was a saving of £2400 over the course of deal from the first offer.
If you can wait and haggle you can get the deal that suits. If not walk away and go to another dealer or make and see what they can do.
Play them at their own game. Some will win and others will shake on the first deal offered!!

 

[Muttley75]

From my point of view, I don't have £26k burning a hole in my ISA for my new A3 but I can easily afford £3k deposit plus £278 p/m x 48 on PCP.

As long as I don't go over the mileage limit (did 8k last year so putting 9k down on the forms to give a little wiggle room) what other pitfalls are there? It will be immaculate when I hand it back in 4 years so won't be any penalties on condition either. The PCP is a reasonable 5.5% so.... What could possibly go wrong..?

 

[Scottyg]

Don't worry about mileage. Go as low as you can. I know plenty people who use your above way of buying new cars and never simply 'hand' the car back. It's either traded in for another car from same brand or you go to another dealer who will settle your finance to get you into their new car deal. All my PCPs have been on 6k apart from BMW/Mini who now only go as low as 8k. Going to 5k will bring your monthly payments down and give you a better GFV.

 

[Muttley75]

GAP insurance... Anyone bother with this...?

 

[Scottyg]

Never had it on any of my car finance adventures. However, you can get non-dealer GAP for buttons compared to what they offer it at!

 

[BobbyCS3]

Personally I think it is the best way to purchase a car. Iv also had 5 cars on PCP over 36 months terms at 10k per annum and never kept a car for longer than 18 months.

My thoughts is you are only paying the depreciation on the car which you would with any car so why do you need to own it in full?

People say to but you wouldn't rent a house - "yes, a house appreciates a car doesn't"

Also they say but you don't own the car, yet not one person has come back to me with a reason why I need to own a car in full. I find it easier to budget having a brand new car with a set monthly payment no large outlay and any issues is covered under warranty and given a courtesy car so always on the road. With all my last 5 cars I have included 3 years free servicing so not paid out for that.

Also I have found the best time to change is 18months 3 of the 5 cars have given me back the deposit I put in, i.e. £4500 deposit on a octavia vrs, and at 18 months I had £4500 equity so only cost me the monthly payment, 2x tyres on the front and 6 months road tax due to 12months road tax with the car.

Also the milage is something to reasonable about but not essential, an example of this:

A good friend bought a Polo GTI said he would do 5k per year, had it 3 years and ended up doing 20k per year due to a job change, he's just swapped the car for a new Polo GTI and the dealer called it square on the car and just paid the outstanding finance so he could start a fresh with the new car.

Also GAP Insurance, I go with ALA Gap Insurance, they are very helpful and can carry the policy over if you get a new car, also cheap £136 for our new S3 over 3 years.

 

[DrEskimo]

My thoughts is you are only paying the depreciation on the car which you would with any car

I certainly agree with this, and on a new car PCP makes sense if you can get a good deal (discount, good rate, extra incentives), but my issue is the new car bit! I appreciate that a lot of people prefer a brand new car, but the depreciation is just to hard to swallow for me personally...

I guess that becomes a new debate about new vs used cars though

 

[BobbyCS3]

I certainly agree with this, and on a new car PCP makes sense if you can get a good deal (discount, good rate, extra incentives), but my issue is the new car bit! I appreciate that a lot of people prefer a brand new car, but the depreciation is just to hard to swallow for me personally...

I guess that becomes a new debate about new vs used cars though

Buy it through 'Carwow', normally cheaper than a pre registration car. I could not find a cheaper pre reg S3, all were atleast £1800 dearer than what iv paid, and for same price im talking 14 plate. I appreciate there probably space for bartering and I am one for getting something as cheap as possible but with these types of cars im not sure you can get a nearly new for cheaper than what you can shopping around.

 

[Scottyg]

I like buying new. Don't know why but I like being the first to drive it and take care of it.
I think depreciation hits more with normal finance or paying cash. You drive out the forecourt and 20% Vat disappears there and then. You'll take the same hit with a PCP but as has been said at around 18-24 months you break even or are up in the equity stakes. Straight back into a new car. It's a no brainer for me given I like to change cars every 18-24 months.
I think buying cash then going to trade in 2 years later to be told your 34 grand car is now worth 18 is a hard pill to take. Especially if you're still paying a bank loan.
My next will be PCP and the next and the next.

 

[DrEskimo]

Buy it through 'Carwow', normally cheaper than a pre registration car. I could not find a cheaper pre reg S3, all were atleast £1800 dearer than what iv paid, and for same price im talking 14 plate. I appreciate there probably space for bartering and I am one for getting something as cheap as possible but with these types of cars im not sure you can get a nearly new for cheaper than what you can shopping around.

Oh yes definitely with regard to nearly new or pre reg cars. Would always advise to go new using sites like Carwow. When I say used I am referring to up to 3 year old models through Audi Approved used with <30k on the clock. Those are generally the cars I tend to go for. Of course that has its own pitfalls (possible issues after 12month warranty, more servicing items, finding the right spec), but the costs are generally much lower.

When I was looking at getting a new A5 I think I worked out the car was depreciating at an average of around £6k per year over 3 years, compared to my used model only around £1.5k per year...!

 

[BobbyCS3]

Oh yes definitely with regard to nearly new or pre reg cars. Would always advise to go new using sites like Carwow. When I say used I am referring to up to 3 year old models through Audi Approved used with <30k on the clock. Those are generally the cars I tend to go for. Of course that has its own pitfalls (possible issues after 12month warranty, more servicing items, finding the right spec), but the costs are generally much lower.

When I was looking at getting a new A5 I think I worked out the car was depreciating at an average of around £6k per year over 3 years, compared to my used model only around £1.5k per year...!

Thats fair enough, yes I agree a 3yr + car will be cheaper to run, I just wouldnt like a potential unexpected £600 bill for something which an argument could be well save the extra you dont spend on a new one. Suppose its all down to personal preference. I like my cars, I dont drink a lot, I dont smoke, holidays and cars are what I like to spend my money on, and like a new car.

 

[BobbyCS3]

I like buying new. Don't know why but I like being the first to drive it and take care of it.
I think depreciation hits more with normal finance or paying cash. You drive out the forecourt and 20% Vat disappears there and then. You'll take the same hit with a PCP but as has been said at around 18-24 months you break even or are up in the equity stakes. Straight back into a new car. It's a no brainer for me given I like to change cars every 18-24 months.
I think buying cash then going to trade in 2 years later to be told your 34 grand car is now worth 18 is a hard pill to take. Especially if you're still paying a bank loan.
My next will be PCP and the next and the next.

Totally agree

 

[DrEskimo]

Thats fair enough, yes I agree a 3yr + car will be cheaper to run, I just wouldnt like a potential unexpected £600 bill for something which an argument could be well save the extra you dont spend on a new one. Suppose its all down to personal preference. I like my cars, I dont drink a lot, I dont smoke, holidays and cars are what I like to spend my money on, and like a new car.

I tried to use the argument that repair bills would make up the shortfall between the used and new car cost...but fortunately (or unfortunately as I was trying to convince my mrs that I wanted a brand new car!!) Audi have been very good with fixing things! I have had the oil consumption issue and window regulators both fail while I was out of warranty and while the invoices were around £5k, I ended up paying the sum total of £120, which was just the cost to diagnose the window regulator. Having bought approved used and maintained FASH has really helped it seems...

Of course there are many other things that could go wrong that Audi won't be as kind to contribute towards so it still is definitely a valid argument. And of course, this is summed costs over 3 years. Having to pay £500 plus in unexpected repair bills might be unfathomable to some, and thats where PCP and fixed monthly payments gives you the stability.

No argument against the new car feeling either. Never done it, but it must be like christmas when your a child again..!

 

[Muttley75]

Personally I think it is the best way to purchase a car. Iv also had 5 cars on PCP over 36 months terms at 10k per annum and never kept a car for longer than 18 months.

My thoughts is you are only paying the depreciation on the car which you would with any car so why do you need to own it in full?

People say to but you wouldn't rent a house - "yes, a house appreciates a car doesn't"

Also they say but you don't own the car, yet not one person has come back to me with a reason why I need to own a car in full. I find it easier to budget having a brand new car with a set monthly payment no large outlay and any issues is covered under warranty and given a courtesy car so always on the road. With all my last 5 cars I have included 3 years free servicing so not paid out for that.

Also I have found the best time to change is 18months 3 of the 5 cars have given me back the deposit I put in, i.e. £4500 deposit on a octavia vrs, and at 18 months I had £4500 equity so only cost me the monthly payment, 2x tyres on the front and 6 months road tax due to 12months road tax with the car.

Also the milage is something to reasonable about but not essential, an example of this:

A good friend bought a Polo GTI said he would do 5k per year, had it 3 years and ended up doing 20k per year due to a job change, he's just swapped the car for a new Polo GTI and the dealer called it square on the car and just paid the outstanding finance so he could start a fresh with the new car.

Also GAP Insurance, I go with ALA Gap Insurance, they are very helpful and can carry the policy over if you get a new car, also cheap £136 for our new S3 over 3 years.

Agreed. Although with your house analogy PCP would be comparable to a mortgage rather than renting - deposit plus monthly payments plus interest. Only the super rich don't need a mortgage. On a somewhat smaller scale, only the reasonably rich can afford to pay cash for a car. My Mrs has a bad vibe about PCP and wanted me to lease. After paying a similar sized deposit, a 2 year lease on the same spec A3 worked out a lot more expensive than a four year PCP (assuming it would need 2 x 2 year leases and two deposit payments over the same term). It seems a no brainer to me. Basically, if you want a new car every few years but never pay for more than 50% of it, PCP is the way forward.

The only down sides that I can see are excess mileage costs (only a problem if you don't do your research to begin with) and ultimately, if you decide PCP is not for you any more, you have no real equity and have to start again from scratch.

 

[Scottyg]

Excess mileage is only an issue if you hand the car back. Trade it in for another and it doesn't matter a jot!! That's why I always go for PCP with around 6k per year. I don't do much more than that anyway but I always finish the deals earlier so no need to worry!
Go get your car on a PCP and worry not.

 

[AngryAudiFace]

PCP is ideal for me, as I like to change cars A LOT.

I'm only 10 months into my current A3 sportback on PCP and i'm already going to be trading it in for another A3 sportback in black with bigger engine, or an A1 sportback in the next 1-3 months. The negative equity I have is negligible at this stage which is pretty rare for a car in it's first year of infancy.

I'd go for longer term PCP deals with small deposit as you never end up going the full term anyway, the option to part exchange for a new car is ALWAYS there at any point.

If you're confident that you are gunna stick with Audi for the long run, go for a tiny mileage limit too as others have mentioned. The limit only really factors into it if you decide to hand the car back and cut your ties at the end.

PCP works if you use it properly and stick to a realistic monthly budget.

 

[Simon91]

PCP is great if you only stay in your car for two years ish. By that point you're usually in a little bit of equity and you can simply trade in and get another. You have the benefit of always having a warranty should something go wrong.