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PCP - 36m vs 48m

RK10 May 15, 2018

  1. RK10

    RK10 Member

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    Hi guys,

    Ordered my first Audi a couple of weeks ago! :)

    Just wanted some advice on the PCP term, at the mo I’ve opted for 48m and the dealer is often saying how you can change out by 24m into a new car but in reality that’s not actually the case is it?

    I’m assuming I can still decide on the PCP term seeing as I haven’t signed the finance paperwork yet.

    In reality, I don’t expect to stay in for the full 48 months and would look to change out early...so is it better to opt for a shorter term to make it easier to change out of?

    Sorry if this sounds really dumb, I’m new to the PCP world lol
     
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  3. Jcbmally

    Jcbmally Started with nothing & still have most of it left. Team Ibis Audi S3 quattro Sportback S tronic

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    Shorter term will mean higher monthlies, so on that count it would depend on what your preference is.
    As for trading up in 2 years, it will all depend on what's on offer from the dealer but I have heard of people getting half decent deals after a couple of years.
     
  4. Timi8888

    Timi8888 Well-Known Member Team Daytona Audi S3 S tronic

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    Audi are keen for you to renew into another one of their cars and will always give slightly better discount.
     
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  5. Chris43

    Chris43 Well-Known Member Team Nano Grey Audi A3 S-line owners group

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    If you're certain you'll change the car in 2 years have you considered a personal lease. It may work out cheaper than a PCP
     
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  6. RK10

    RK10 Member

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    Yeah I did shop around but it seemed to be working out more expensive because of my mileage
     
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  7. TYb

    TYb Well-Known Member TFSI Owners Group Team Navarra Audi S3

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  8. RK10

    RK10 Member

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  9. DrEskimo

    DrEskimo Well-Known Member

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    You're better off going for the term that you actually want to keep the car for. Of course the dealer wants you to go for a longer term because then they make more money off you in interest. Same reason they want you to put in a lower deposit.

    Think of it just like any other loan. The longer the loan term, and the more you borrow, the more expensive it is. PCP is just a loan with a different repayment structure.

    I wrote a rather lengthy, long-winded post about finance in general in this thread post #39. Maybe it will be of interest to you as well :)
     
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  10. Cooper82

    Cooper82 Member

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    I am also going for a 48 month agreement but would like the option to change the vehicle after 36 months without an additional payment to be made. My understanding is that after 36 months on a 48 month agreement you could switch to a different agreement but you may have additional fees depending on whether or not you have negative equity on the vehicle. I assume Voluntary Termination would be an option regardless once I reach 36 months but not sure what the dealer thinks about it as he only suggested terminating the agreement by paying any additional fees based on the value of the vehicle before the end of the agreement.
     
  11. msdmjb

    msdmjb Well-Known Member

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    As a wise man above says it is simply about the maths.
    There is always the cheapest way but it so depends on your situation, think of it as a contract for the PCP term and if you end it early you maybe penalised more than if you took out a shorter PCP in the first place. Realistically with all of these good value lease deals around what is the value of your Audi after 4years and 80kmiles, it might be better to do a rolling 24month and 40k miles as more people would be comfy buying a car with 40k miles than 80k miles. I say might as some cars will be more expensive on a shorter lease but play around with the figures (or ask the dealer to :))

    That R deal look a spanker, total cost = 12905.53 for three years. In my mind that is less than you would lose buying the car outright in simple depreciation........but looking at the figures the mileage will play a large factor in the costs.

    The dealer is there to make money not be your friend, there is an obvious middle ground but he is paid by his dealer to make money, his dealer is paid by the importer to make money.

    I can't wait for France to catch up with low cost leasing as cars are still waaaay to expensive over here.
     
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  13. TYb

    TYb Well-Known Member TFSI Owners Group Team Navarra Audi S3

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    You can VT once you have paid 50% of the agreement, which doesn’t necessarily align to months.

    Providing you have adhered to the terms there is no cost to VT’ing but you will obviously lose any equity you may have accrued if any that is.

    I’m moving away from PCP once my current deal expires, either buying 2nd hand or leasing, the lease deals are very strong at the moment.
     
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  14. TYb

    TYb Well-Known Member TFSI Owners Group Team Navarra Audi S3

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    I see, 20k will write a lot of deals off then, they are competitive up to about 10k usually.
     
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  15. Cooper82

    Cooper82 Member

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    Yep, I calculated the 50% amount payable reaching on the 36th month. My concern is the equity left if any as I went for a diesel car. I was thinking of leasing but for the vehicle I wanted it ended up almost the same without factoring the road tax charge. Any reason for not going into another PCP agreement?
     
  16. TYb

    TYb Well-Known Member TFSI Owners Group Team Navarra Audi S3

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    I’ve had 5 in a row, it’s worked mostly well for me but my mileage is going to drop considerably after this year so going to look out for a good lease or pick up a 2nd hand boxster c2008 model and run that for a few years, with my mileage it wouldn’t lose much value.
     
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  17. AudiNutta

    AudiNutta Well-Known Member Team Racing Blue Mica Audi RS3 quattro Sportback

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    Once you are say 60-70% of the way through term, you can normally change and be in some equity. You can change whenever you like, even after a couple of months but face a huge bill of negative equity if you aren’t putting in a big deposit. If you are putting in a £10k deposit, chances are you will never be in negative equity but when you change early.. that £10k lump is gone forever. So change a car after 6 months, it’s cost you £10k plus your payments.

    Pay in £1000 and change after 6 months, there will be negative equity but it won’t amount to £9000... very unlikely unless you are buying an RS3 haha.

    So on a 36 month expect to be in equity around or just before 2 years, having paid more on monthlies.

    On a 48 month you probably won’t see any equity until over 2.5 years through, but will have had lower payments.
     
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  18. Cooper82

    Cooper82 Member

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    I making a £10k+ deposit so including interest I would reach 50% of the total amount payable in month 36. Wouldn’t equity be dependant on the market value of the vehicle when you wish to trade in?
     
  19. AudiNutta

    AudiNutta Well-Known Member Team Racing Blue Mica Audi RS3 quattro Sportback

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    If your car was £25k and you put £10k down, you would be financing £15k and the payments would be lower but would not bring the 50% forwards because the gain from this is lower the monthly outgoing, spread across the same time.

    If you put £1k down you would be financing £24k, monthlies would be higher across the same time span.

    But the difference is the equity. If in a year your car is worth £18k and you only financed £15k before you even take any payments into account you are £3k in positive equity. If you put £1k down before taking any payments into account you are £6k in negative equity. In my eyes it’s chepaer to put down a smaller deposit and front the bill if you have to change early, it’s like a late deposit.

    Equity does depend on the value of the car yes, if the value has plummeted you will be in negative equity chances are regardless of precautions taken. This is why PCP is good, if the market for diesel cars totally falls on its backside in 3 years and the car is only worth £2k but your GFV is £6k, the finance company lose that £4K not you. If at the end the car is worth £8k, you get £2k in your pocket as the car was worth more than the GFV. The car should always be worth more than the GFV, that’s how the dealers calculate it so you have a deposit to go into another one but for whatever reason if it wasn’t you are protected.

    50% of the agreement isn’t directly split down the middle, so it wouldn’t be month 24 on a 48 month agreement. From my understanding you have to pay the interest first (how the agreements are always set out), then once the interest value has been paid you then start paying the 50% of the money you actually borrowed... (from my understanding)
     
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  20. Simonb1975

    Simonb1975 Guest

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    I always go for a small deposit. I know that increases the monthlies but i dont want to folk out 10k in a lump sum every 3 or 4 years to keep in a similar sort of car. I would also echo some others that if you keep a car for say 2 years dont go gor a 4 year pcp.
     
  21. Cooper82

    Cooper82 Member

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    What sort of % of total payable amount (excluding contributions) would you go for as a deposit?
     
  22. DrEskimo

    DrEskimo Well-Known Member

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    If the GFV is accurate, you will never be in positive equity. Since every quarter the PCP deals are revised, and the GFV is lowered, there is a strong chance that current market conditions mean that positive equity is a thing of the past....

    After all my ranting, and still the misconception about deposits...! I'm disappointed AN..:p

    S3 = £35,800 - £2,780 deposit contribution
    Made up valuation after 6months = £25,000 (really doesn't matter what this number is, it could be anything)

    Total paid with £1k deposit = £1,000 + 6 payments of £505.98 = £4,035.88
    Settlement figure = £30,262.85
    Equity = (£25,000 - £30,262.85 ) = -£5,262.85
    Total paid = (£4,035.88+£5,262.85 =) £9,298.73

    Total paid with £10k deposit = £10,000 + 6 payments of £224.09 = £11,344.54
    Settlement figure = £22,615.75
    Positive equity = (£25,000-£22,615.75) = +£2,384.25
    Total paid = (£11,344.54-£2,384.25 =) £8,960.29

    You have saved £338.44 in interest charges by putting the £10k deposit down, as apposed to a a £1k deposit.

    This idea that the deposit is 'gone', but some how monthly repayments and negative equity payments aren't really does confuse me...It's all gone...cars depreciate regardless of how you buy them, and borrowing money costs interest. A PCP is just a high interest loan!

    Except in most instances over a 48months period you have paid the finance company around £4k+ in interest charges, so you haven't saved anything...
     
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  23. Cooper82

    Cooper82 Member

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    I assume that’s why they encourage you to put a lower deposit as they can get more interest from the monthlies.

    I am still undecided whether or not pay the full amount within 2 weeks or leave the PCP agreement as it is. I can still benefit from the dealers contribution but no interest payable however not sure how much a diesel car may depreciate over the next few years.
     
  24. DrEskimo

    DrEskimo Well-Known Member

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    Most likely, but to be fair you can always increase your deposit at any time. You can't take money out.

    Work out the total interest you will be paying, and unfortunately you just have to make an educated guess at what the values will be like in the future. If you are that worried, jus don't buy a diesel? If you think the depreciation is going to be so high, surely this will offset any savings in fuel (by quite a margin, although will depend on mileage)?

    Better yet, buy a used car that will depreciate much less....
     
  25. Cooper82

    Cooper82 Member

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    Too late for that. The car ian arriving within 2 weeks. Doing 18k miles per year.
     
  26. Simonb1975

    Simonb1975 Guest

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    2k max. If the monthlies are then 2 high then look for another car.
     
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  27. S32B

    S32B Well-Known Member Audi A5 S tronic Coupe

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    I had my S3 on a 4 year PCP, changed cars after 2 years and 7 months and was just over even, but that was down to selling the car privately and saving a couple of months interest, as I'd paid the finance off whilst I waited for the new car to arrive. The new car is over 36 months as I know I'll want to change at that time, 4 years (for me was too long), plus unless you extend the warranty it's alway in the back of your mind "What if it goes wrong in year 4".

    Have it in your mind that you will be handing the car back at the end and starting all over again, that way if there is equity in the car great, if not you won't be disappointed.

    Same here, there are some cracking deals around if you look, this springs to mind: https://www.seatwarrington.co.uk/newcars/details/seat/leon-hatchback/20-tsi-cupra-300-5dr-dsg/17258/

    On the finance figures it says total amount payable, it's 50% of that figure you have to pay back. But!!! depending on the discount you get up front you may never reach it! 50% of mine is £18,034 yet my payments are 35 x £388 = £13,580 :) So I'm in mine the full term, the finance guy said he'd never seen it work like that before, it was due to the amount of discount I received 21.4% and a high GFV ;) So the chances are I'll just be handing it back, as I know the GFV's dropped before I picked mine, up! They gave me the chance to move over to the 1/4's lower APR% rate, but it worked out about £15 per month more because of the lower GFV, 35x£15=£525 and the GFV had dropped by about £500, so it wasn't worth changing.
     
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  28. RK10

    RK10 Member

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    didn’t realise my thread would cause quite the discussion! Sorry if I’ve brought skeletons out of the closet posting this :)

    Thanks everyone for your replies! Definitely a lot of food for thought and things to consider! Have asked about shorter terms and will see how much my monthlies go up by :)
     
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  29. DrEskimo

    DrEskimo Well-Known Member

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    Ha, not at all. Forums are all about sharing information! Great thing about them is that you get a wealth of experience and knowledge that is typically completely impartial.

    No need to wait for the dealer, you can use the online calculator to look at figures yourself! Just tailor the deposit so that the "Total amount of credit" part is the amount you are borrowing (the discounted price - minus your deposit).

    The GFV will be set on the mileage and term for you.

    https://www.audi.co.uk/explore-models/finance-calculator.html#/ranges?range=A3
     
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  30. S32B

    S32B Well-Known Member Audi A5 S tronic Coupe

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    lol I always mention about this forum when looking at a new deal, the salesperson always looks glum! They know we all share information/prices/discount etc and we know what we can get :)
     
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  31. Cooper82

    Cooper82 Member

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    The calculator gives you an indication but the pricing given on the website are inflated compare to carwow or drivethedeal.
     
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  32. RK10

    RK10 Member

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    Nice one, didn’t think of doing that! Cheers Doc.

    What do you guys make of (don’t laugh!) the additional add ons - i.e. cosmetic repair cover, alloy wheel repair etc? I’ve read a lot that it’s a waste of money but curious to see if anyone’s got their monies worth out of it, if they have opted for them.

    I’m looking at ordering GAP insurance via ALA at the mo.
     
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  34. Cooper82

    Cooper82 Member

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    I went for Smart Cover and claimed on a few scratches I got when parked. Not from the dealer as it was too expensive but directgap.
     
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  35. DrEskimo

    DrEskimo Well-Known Member

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    Ha yea....doesn't do their pressure sales any favours when you get 50 odd forum members pouring over the figures with a fine tooth comb...!

    Yea very true. What I do is just increase the deposit amount to reflect the discount.

    So if my S3 with options has a RRP of £40k, and I get 13% discount, then my discounted price is £34,800. If I am putting £10k deposit then I am financing £24,800.
    I just need to put in whatever amount in the deposit section to make sure the total amount of credit is equal to £24,800 on the Audi Calculator.

    As long as the total amount of credit is correct, the monthly figure will be correct :thumbs up:
     
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  36. KenL

    KenL Well-Known Member

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    Unless you have a lot of money in the bank I don't see the point of putting down a big deposit on a PCP.
     
  37. DrEskimo

    DrEskimo Well-Known Member

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    It really doesn't make any difference, as you pay roughly the same amount either way. Whether you pay it upfront without interest, or over the term with interest is up to you.

    But, personally, if I had £10k earmarked for a deposit on a car (i.e. don't need it for other things), I wouldn't keep £9k back on purpose, as I am just paying extra interest that will be higher than any interest I could make from any savings accounts.

    In other words, it's pointless having savings in your account earning 1%, if you are paying debts at 6%. You are at a net loss of 5%....
     
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  38. Simonb1975

    Simonb1975 Guest

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    Although, if you want the same sort of car again in say 4yrs, You'll need another 10K to keep the monthlies the same.
     
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  39. S32B

    S32B Well-Known Member Audi A5 S tronic Coupe

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    Exactly what I do to get my sums :)

    I just use man maths, I set a figure of how much I wish to lose each month on a car (£400) and set the deposit to get that figure, on both the S3 and the A5 a £1,000 deposit got my payments in the £380's :)

    This is a decent deal as well:

    vwa.jpeg
     
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  40. DrEskimo

    DrEskimo Well-Known Member

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    You just put the amount you save each month by putting in a higher deposit in a savings account.

    In my example above you save about £282 per month by putting in £10k rather than £1k. So saving the £282 over 35months will give you £9,870 for your next deal. Basically the extra £9k deposit you put in, plus around £870 in saved interest.
     
  41. Simonb1975

    Simonb1975 Guest

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    Thats great in theory. But after a man maths attack i only pay monthlies that I'm happy with. After 4 years i wouldn't drop a 10k lump sum on a car. Unless of course i didn't need the money. It's the same either way as you point out but when that big lump sits there i could probably think up lots of sensible uses for it.
     
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  42. terminator x

    terminator x Well-Known Member Team Nardo Audi RS4

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    Imho PCP only turns in your favour during final 6 months, before that you will owe them if you try to extract yourself from it. As for there being a balance left to return the deposit for another car :tearsofjoy:

    TX.

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  43. Thundercliffe81

    Thundercliffe81 Well-Known Member Team V6 Audi S4 Audi Avant Owner Group

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    ^^^^ this.

    I got Audi to send me my full projection and forecast of all my payments left. With separate capital/interest payments shown. You can calculate your settlement at any point then by estimating your mileage and getting an online valuation.

    Unless you put in a pretty big deposit, you're looking at last 6-9months for equity. Trust me, I've bent over backwards with man math trying to settle early


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