Facelift To lease again or not, that be the question

[Thundercliffe81]

Equally if interest rates go up and people stop buying brand new cars on PCP and start buying second hand then manufacturers might be in for a shock too. Not disagreeing with you by the way, it will be a nasty shock for PCP owners too, just adding that I think there might be some compromise to keep these high new car sales up to some degree. I was in a meeting at work the other day where some of the crazy discount prices coming from BMW and to a smaller extent Audi were being discussed, due to the sales decline in the UK and it was clear to see that sales volume is still being pushed over profit per vehicle.

For my preferences, PCP was a clear winner when it came to purchasing my A3. Buying outright would meant putting down my house deposit money on the car (and therefore not buying my house which is an appreciative asset as opposed to the car which is most definitely a depreciation asset). It would have meant trying to find a seller in 3 years time who wants to pay 20k-ish for a second hand car from a private seller (not as easy as it sounds, people want warranty's included and go to trade sellers or want to PCP). Then id have to make up the extra 10k to buy another one again. Even if I held on to it longer (which I would hate, I dont like having the same car for too long) id still find it a bad choice. For me it's buying the car that is very, very much the false economy. Buy appreciative assets, rent appreciative ones.

That's a fair point that actually.


Sent from my iPhone using Tapatalk

 

[RGBARGEE]

So my PCH lease is up in 10 months and the company said i can buy it now for £29K (plus 3k to get out of contract early)..so lets say i let the lease finish and i assume since im paying for their depreciation the car will prob be around 26-27K by the end of it.

Now that would be the most ive ever spent on a car and even the payments not spread over a stupid amount of years will still be quite hefty, so my dilemma is do i put myself 27K in debt for several years but own the car, or do i spend that amount leasing again (i could lease my s3 for another 5 years with the amount of money i would spend on buying it outright)

What would you guys do in that situation?

I'm debating that on my new RS4. It depends on the interest rates. audi want 50% down and 6.2 Apr which over 3 years means most of the £200 a month is interest . I'm paying cash on this occasion but at 1-2% APR I would protect myself and go PCP. If there are Audi contributions I would go PCP too and withdraw from the agreement in first few days, keeping Audi deposit. All legal but they don't like it. Good luck.


Sent from my iPhone using Tapatalk

 

[Thundercliffe81]

I'm debating that on my new RS4. It depends on the interest rates. audi want 50% down and 6.2 Apr which over 3 years means most of the £200 a month is interest . I'm paying cash on this occasion but at 1-2% APR I would protect myself and go PCP. If there are Audi contributions I would go PCP too and withdraw from the agreement in first few days, keeping Audi deposit. All legal but they don't like it. Good luck.


Sent from my iPhone using Tapatalk

Cash?! Too rich for my blood. PCP gives me options. Namely, having a car I'd really like. The point made about Appreciative and depreciative assets is a good one.

If the **** ever hits the fan and car has to be handed back, there's enough in the bank to get something solid with cash.

Cars are my only main vice. My passion. So, I try to enjoy it. My dealer is great with the mileage allowance and I'm going back for my third car soon.

This can all be summed up like this...different strokes for different folks


Sent from my iPhone using Tapatalk

 

[RGBARGEE]

It depends on your financial position as with most things. I'm ******** if I can see any reason to pay Audi 6.2% APR on a pcp. Talk to Halifax who do a PCP scheme at about half the interest rates or personal loans etc. PCP is easy, Audi PCP if there isn't an Audi contribution is expensive.


Sent from my iPhone using Tapatalk

 

[Thundercliffe81]

It depends on your financial position as with most things. I'm ******** if I can see any reason to pay Audi 6.2% APR on a pcp. Talk to Halifax who do a PCP scheme at about half the interest rates or personal loans etc. PCP is easy, Audi PCP if there isn't an Audi contribution is expensive.


Sent from my iPhone using Tapatalk

Yeah I've done really well on contribution and I get a 10% discount on top of contributions and trade in. About £10k each on last two cars.

I'm paying 3.9 on my B9 S4. 6.2 for a brand new car seems well high. Might speak to lloyds and see what they can offer. Don't want to move my bank account just for PCP. Car Finance 24/7 are pretty good too. 5% etc. On a used car that's good enough for me. Base rate is 9-11% on Audi used PCP APR No chance...


Sent from my iPhone using Tapatalk

 

[RGBARGEE]

Yeah I've done really well on contribution and I get a 10% discount on top of contributions and trade in. About £10k each on last two cars.

I'm paying 3.9 on my B9 S4. 6.2 for a brand new car seems well high. Might speak to lloyds and see what they can offer. Don't want to move my bank account just for PCP. Car Finance 24/7 are pretty good too. 5% etc. On a used car that's good enough for me. Base rate is 9-11% on Audi used PCP APR No chance...


Sent from my iPhone using Tapatalk

The A4/S4 have low Apr and audi deposit contributions on top. 15% Discount possible last autumn but not any more. RS4 is 6.2 and no contribution.


Sent from my iPhone using Tapatalk

 

[Thundercliffe81]

The A4/S4 have low Apr and audi deposit contributions on top. 15% Discount possible last autumn but not any more. RS4 is 6.2 and no contribution.


Sent from my iPhone using Tapatalk

All about 'exclusivity' for the Audi Sport brand now. They know they're going to sell regardless.


Sent from my iPhone using Tapatalk

 

[RGBARGEE]

All about 'exclusivity' for the Audi Sport brand now. They know they're going to sell regardless.


Sent from my iPhone using Tapatalk

Suits me if the residuals hold up as they have on my RS3.


Sent from my iPhone using Tapatalk

 

[Thundercliffe81]

The A4/S4 have low Apr and audi deposit contributions on top. 15% Discount possible last autumn but not any more. RS4 is 6.2 and no contribution.


Sent from my iPhone using Tapatalk

All about 'exclusivity' for the Audi Sport brand now. They know they're going to sell regardless.


Sent from my iPhone using Tapatalk

 

[Jassyo06]

Equally if interest rates go up and people stop buying brand new cars on PCP and start buying second hand then manufacturers might be in for a shock too. Not disagreeing with you by the way, it will be a nasty shock for PCP owners too, just adding that I think there might be some compromise to keep these high new car sales up to some degree. I was in a meeting at work the other day where some of the crazy discount prices coming from BMW and to a smaller extent Audi were being discussed, due to the sales decline in the UK and it was clear to see that sales volume is still being pushed over profit per vehicle.

For my preferences, PCP was a clear winner when it came to purchasing my A3. Buying outright would meant putting down my house deposit money on the car (and therefore not buying my house which is an appreciative asset as opposed to the car which is most definitely a depreciation asset). It would have meant trying to find a seller in 3 years time who wants to pay 20k-ish for a second hand car from a private seller (not as easy as it sounds, people want warranty's included and go to trade sellers or want to PCP). Then id have to make up the extra 10k to buy another one again. Even if I held on to it longer (which I would hate, I don't like having the same car for too long) id still find it a bad choice because I'm paying upfront for the whole value of a car that I'm only using for a portion of its life. For me it's buying the car that is very, very much the false economy. Buy appreciative assets, rent depreciative ones.

Well you nailed that in one mucker.....lol

 

[Jassyo06]

Suits me if the residuals hold up as they have on my RS3.


Sent from my iPhone using Tapatalk

Your RS3 is still for sale is it not, or is it off the market,RS4's are not going to that way no more.......Far more expensive and that means far more depreciation,the new RS3 will depreciate more than the last car because of its stupidly high RRP and also because Audi will run the production of them even longer,as its a world car now,just like the new Focus RS......and residuals are still through the roof with the old RS Focus,world cars,the old one was just for the European market....yer deluded,plus the engine Porsche/Audi developed aint breaking any RS lovers hearts.....it sounds gash......keep yer pre face lift RS3..... until whenever Audi reveal the performance version and buy the performance version when it arrives with 500 bhp

 

[RGBARGEE]

Your RS3 is still for sale is it not, or is it off the market,RS4's are not going to that way no more.......Far more expensive and that means far more depreciation,the new RS3 will depreciate more than the last car because of its stupidly high RRP and also because Audi will run the production of them even longer,as its a world car now,just like the new Focus RS......world car,the old one was just for the European market....yer deluded,plus the engine Porsche/Audi developed aint breaking any RS lovers hearts.....it sounds gash......keep yer pre face lift RS3..... until whenever

I may well do that. The RS4 is a completely different proposition to an RS3. The 3 has lost only £3-4K a year whereas I anticipate the 4 will be double that. I reckon a 4 year old RS3 will still be worth £25k plus if reasonably well spec. No delusion here!


Sent from my iPhone using Tapatalk

 

[Jassyo06]

I may well do that. The RS4 is a completely different proposition to an RS3. The 3 has lost only £3-4K a year whereas I anticipate the 4 will be double that. I reckon a 4 year old RS3 will still be worth £25k plus if reasonably well spec. No delusion here!


Sent from my iPhone using Tapatalk

But in isolation the RS4/RS5 have not been received particularly well stunning looking cars but...... Audi should have done better with power outputs and engine sound, torque is up, yeah less weight is there but it's not making the waves it should have done, the face lift RS3 car is just as fast and sounds better.... there's not the performance gap for the additional dosh.....all newly released Audi sport cars are now so similar in power and performance.....but in price they're miles apart...... Mate the Rs performance versions will happen quicker than you know it, Mercedes AMG are wiping the floor with the big Audi RS cars and Audi won't have that

 

[RGBARGEE]

But in isolation the RS4/RS5 have not been received particularly well stunning looking cars but...... Audi should have done better with power outputs and engine sound, torque is up, yeah less weight is there but it's not making the waves it should have done, the face lift RS3 car is just as fast and sounds better.... there's not the performance gap for the additional dosh.....all newly released Audi sport cars are now so similar in power and performance.....but in price they're miles apart...... Mate the Rs performance versions will happen quicker than you know it, Mercedes AMG are wiping the floor with the big Audi RS cars and Audi won't have that

Agree in part . But the FL RS3 even with sports exhaust doesn't sound as nice as my pre FL Standard system. £60k for RS4 vs £44 for RS3. Doesn't seem too bad. RS4 seems to be getting better feedback than RS5. Whatever, what other 450PS 600Nm reasonably sized estate is there?


Sent from my iPhone using Tapatalk

 

[4K]

But in isolation the RS4/RS5 have not been received particularly well stunning looking cars but...... Audi should have done better with power outputs and engine sound, torque is up, yeah less weight is there but it's not making the waves it should have done, the face lift RS3 car is just as fast and sounds better.... there's not the performance gap for the additional dosh.....all newly released Audi sport cars are now so similar in power and performance.....but in price they're miles apart...... Mate the Rs performance versions will happen quicker than you know it, Mercedes AMG are wiping the floor with the big Audi RS cars and Audi won't have that

True, but the numbers are getting silly now. I mean, why even bother putting more than 400bhp now in a small family hatchback (RS3). It's pointless, and at some point it needs to stop, as it's just coming down to a willy waving contest.

If they put as much effort into building something which actually makes you feel something when you're driving, that would be better, rather than a numb detached sensation.

 

[DrEskimo]

Equally if interest rates go up and people stop buying brand new cars on PCP and start buying second hand then manufacturers might be in for a shock too. Not disagreeing with you by the way, it will be a nasty shock for PCP owners too, just adding that I think there might be some compromise to keep these high new car sales up to some degree. I was in a meeting at work the other day where some of the crazy discount prices coming from BMW and to a smaller extent Audi were being discussed, due to the sales decline in the UK and it was clear to see that sales volume is still being pushed over profit per vehicle.

For my preferences, PCP was a clear winner when it came to purchasing my A3. Buying outright would meant putting down my house deposit money on the car (and therefore not buying my house which is an appreciative asset as opposed to the car which is most definitely a depreciation asset). It would have meant trying to find a seller in 3 years time who wants to pay 20k-ish for a second hand car from a private seller (not as easy as it sounds, people want warranty's included and go to trade sellers or want to PCP). Then id have to make up the extra 10k to buy another one again. Even if I held on to it longer (which I would hate, I don't like having the same car for too long) id still find it a bad choice because I'm paying upfront for the whole value of a car that I'm only using for a portion of its life. For me it's buying the car that is very, very much the false economy. Buy appreciative assets, rent depreciative ones.

With the greatest respect mate, there is some serious misinformation here...

You don’t have to find a private seller if you buy a car outright anymore than you do if you used a PCP? You can trade it in for exactly the same price as someone who got it on PCP....?! If you buy a S3 on PCP or with cash, it will depreciate exactly the same amount. The advantage of buying cash is you don’t have to worry about settling outstanding finance, so have the option to sell privately more easily. It’s not a requirement though!

Since depreciation is the same, the only difference is you pay about £3500 on the PCP in interest for borrowing the money to buy the car (a PCP is just a car loan..nothing more, nothing less) whereas you pay £0 if you pay cash.

Earning £3500 on a £30k investment over 3yrs is a gross rate of return of about 5% per annum. Please tell me where I can invest £30k and guarantee a *gross* return of 5% interest? You will probably get about 6% return on a simple fund in the stock market, but you would need a hell of a lot longer than 3yrs to ride out any dips, and it’s certainly not guaranteed!!

So why is it a false economy?

Also, why does the phrase ‘buy a appreciating asset, rent a depreciating one’ apply to cars? What do you gain? It’s certainly not cheaper, and it’s certainly not more flexible and it’s certainly not less risky financially speaking (don’t need to cough up a massive negative equity charge that you might not have access to if you suddenly need to change cars early), so why?! What’s the advantage?? I swear it’s just something that gets repeated enough times that people just accept it without even thinking if it makes any logical sense!

 

[RGBARGEE]

With the greatest respect mate, there is some serious misinformation here...

You don’t have to find a private seller if you buy a car outright anymore than you do if you used a PCP? You can trade it in for exactly the same price as someone who got it on PCP....?! If you buy a S3 on PCP or with cash, it will depreciate exactly the same amount. The advantage of buying cash is you don’t have to worry about settling outstanding finance, so have the option to sell privately more easily. It’s not a requirement though!

Since depreciation is the same, the only difference is you pay about £3500 on the PCP in interest for borrowing the money to buy the car (a PCP is just a car loan..nothing more, nothing less) whereas you pay £0 if you pay cash.

Earning £3500 on a £30k investment over 3yrs is a gross rate of return of about 5% per annum. Please tell me where I can invest £30k and guarantee a *gross* return of 5% interest? You will probably get about 6% return on a simple fund in the stock market, but you would need a hell of a lot longer than 3yrs to ride out any dips, and it’s certainly not guaranteed!!

So why is it a false economy?

Also, why does the phrase ‘buy a appreciating asset, rent a depreciating one’ apply to cars? What do you gain? It’s certainly not cheaper, and it’s certainly not more flexible and it’s certainly not less risky financially speaking (don’t need to cough up a massive negative equity charge that you might not have access to if you suddenly need to change cars early), so why?! What’s the advantage?? I swear it’s just something that gets repeated enough times that people just accept it without even thinking if it makes any logical sense!

Absolutely agree Dr E. trouble is many seem to have been conditioned to take certain views on major issues without exposing the facts as you have.
Others include
1. Votes for x political party because y are ****
2. Voting for Brexit because xxxx
3. Getting a car on a PCP because it's a deprecating asset and it's only £600 a month.

People need educating about the facts before making life changing decisions rather than being conned by the media and/or duplicitous politicians.


Sent from my iPhone using Tapatalk

 

[Thundercliffe81]

Absolutely agree Dr E. trouble is many seem to have been conditioned to take certain views on major issues without exposing the facts as you have.
Others include
1. Votes for x political party because y are ****
2. Voting for Brexit because xxxx
3. Getting a car on a PCP because it's a deprecating asset and it's only £600 a month.

People need educating about the facts before making life changing decisions rather than being conned by the media and/or duplicitous politicians.


Sent from my iPhone using Tapatalk

Most people don't have £50-60k lying about to buy a Performance car outright from new. Even half of that used. It's nothing more than a lifestyle choice. As long as that person isn't struggling or over reaching, I genuinely don't see the problem.

People to seem to be taking this very personally. When that's just it...it's different for everybody. Perhaps people should just stop trying to apply facts and opinions to this because ultimately, we're on this forum because we love A) Cars and B) Audis Get the car you really like and find a balance between head and heart. Nipped


Sent from my iPhone using Tapatalk

 

[RGBARGEE]

Most people don't have £50-60k lying about to buy a Performance car outright from new. Even half of that used. It's nothing more than a lifestyle choice. As long as that person isn't struggling or over reaching, I genuinely don't see the problem.

People to seem to be taking this very personally. When that's just it...it's different for everybody. Perhaps people should just stop trying to apply facts and opinions to this because ultimately, were on this forum because we love A) Cars and B) Audis Get the car you really like and find a balance between head and heart. Nipped


Sent from my iPhone using Tapatalk

Absolutely. I remember the days of car loans and big bills causing problems. PCP is a great scheme if you can cope with the monthly payments. My input I think in summary is to say I have no intention of PCPing half a car paying 6.2% APR.


Sent from my iPhone using Tapatalk

 

[Thundercliffe81]

Absolutely. I remember the days of car loans and big bills causing problems. PCP is a great scheme if you can cope with the monthly payments. My input I think in summary is to say I have no intention of PCPing half a car paying 6.2% APR.


Sent from my iPhone using Tapatalk

If I had the cash, I'd buy the B8 RS4 I'm going for outright, enjoy it for a bit, sell it and just keep flipping to enjoy a multitude of different cars. Maybe 1 year at a time or something. That'd be awesome.

Cash is the best way. If you've got it.


Sent from my iPhone using Tapatalk

 

[RGBARGEE]

If I had the cash, I'd buy the B8 RS4 I'm going for outright, enjoy it for a bit, sell it and just keep flipping to enjoy a multitude of different cars. Maybe 1 year at a time or something. That'd be awesome.

Cash is the best way. If you've got it.


Sent from my iPhone using Tapatalk

Cash is best. The B8 RS4 was to me a bit of a letdown after the B7, just seemed a bit podgy to me. Who knows what reputation the new B9 will end up with!


Sent from my iPhone using Tapatalk

 

[Thundercliffe81]

Cash is best. The B8 RS4 was to me a bit of a letdown after the B7, just seemed a bit podgy to me. Who knows what reputation the new B9 will end up with!


Sent from my iPhone using Tapatalk

Got an idea. So as not to keep hijacking threads


Sent from my iPhone using Tapatalk

 

[Thundercliffe81]

Cash is best. The B8 RS4 was to me a bit of a letdown after the B7, just seemed a bit podgy to me. Who knows what reputation the new B9 will end up with!


Sent from my iPhone using Tapatalk

B9 RS4 vs The Rest...and the S

https://r.tapatalk.com/shareLink?sh...-vs-The-Rest...and-the-S.359638/&share_type=t


Sent from my iPhone using Tapatalk

 

[RGBARGEE]

B9 RS4 vs The Rest...and the S

https://r.tapatalk.com/shareLink?sh...-vs-The-Rest...and-the-S.359638/&share_type=t


Sent from my iPhone using Tapatalk

I will let you know!


Sent from my iPhone using Tapatalk

 

[wab172uk]

With the greatest respect mate, there is some serious misinformation here...

You don’t have to find a private seller if you buy a car outright anymore than you do if you used a PCP? You can trade it in for exactly the same price as someone who got it on PCP....?! If you buy a S3 on PCP or with cash, it will depreciate exactly the same amount. The advantage of buying cash is you don’t have to worry about settling outstanding finance, so have the option to sell privately more easily. It’s not a requirement though!

Since depreciation is the same, the only difference is you pay about £3500 on the PCP in interest for borrowing the money to buy the car (a PCP is just a car loan..nothing more, nothing less) whereas you pay £0 if you pay cash.

Earning £3500 on a £30k investment over 3yrs is a gross rate of return of about 5% per annum. Please tell me where I can invest £30k and guarantee a *gross* return of 5% interest? You will probably get about 6% return on a simple fund in the stock market, but you would need a hell of a lot longer than 3yrs to ride out any dips, and it’s certainly not guaranteed!!

So why is it a false economy?

Also, why does the phrase ‘buy a appreciating asset, rent a depreciating one’ apply to cars? What do you gain? It’s certainly not cheaper, and it’s certainly not more flexible and it’s certainly not less risky financially speaking (don’t need to cough up a massive negative equity charge that you might not have access to if you suddenly need to change cars early), so why?! What’s the advantage?? I swear it’s just something that gets repeated enough times that people just accept it without even thinking if it makes any logical sense!

^^^^ This !

Part of the reason car prices have gone silly these days is partly due to PCP / Lease deals. If people are happy paying £600+ a month for a performance car, with a good chunk of that being interest, then the car manufacturers are going to take advantage, and push up the prices.

I can honestly see PCP deals being the next bubble to burst, just like the 100% mortgages did.

Maybe I'm just old school, where if you pay X amount every month, or pay in cash, you are actually buying something to own. I see PCP deals like renting a house. You are paying a lot of money every month, have nothing to show for it, and someone else is benefitting from your money.

If we went on the "buy on appreciating asset and rent a depreciating asset", we wouldn't buy anything ever again. Your new Telly? Less now that what you paid for it. Sofa, Computer, Ipad, clothes .......... and the list goes on. But how many people on PCP deals would then walk into Brighthouse Monday morning and pay X amount every week/month for a new telly, sofa or washing machine? I'd guess no one on this site.

And as DrE states, if you own a car outright, you can sell it by any means you want. trade-in, private etc. And if you like the car, or can't afford to change, then you have that choice to keep it. Anyone wanting to keep the car after a PCP deal will be in for a shock, as they still own more than half the cars value. So you have to walk away from it, as buying it becomes even more expensive.

 

[RGBARGEE]

There are lots of people handing back PCPs now as the cost to buy is more than the value. Historically dealers would play around with PCP figures to give a cost per month that the customer could afford. Today predicted residual values are on the floor for many cars especially Diesels and the Dealer Finance Companies are becoming nervous. I would only ever recommend going into such a deal if you are fully aware of the risks.

 

[AGAG]

With the greatest respect mate, there is some serious misinformation here...

You don’t have to find a private seller if you buy a car outright anymore than you do if you used a PCP? You can trade it in for exactly the same price as someone who got it on PCP....?! If you buy a S3 on PCP or with cash, it will depreciate exactly the same amount. The advantage of buying cash is you don’t have to worry about settling outstanding finance, so have the option to sell privately more easily. It’s not a requirement though!

Since depreciation is the same, the only difference is you pay about £3500 on the PCP in interest for borrowing the money to buy the car (a PCP is just a car loan..nothing more, nothing less) whereas you pay £0 if you pay cash.

Earning £3500 on a £30k investment over 3yrs is a gross rate of return of about 5% per annum. Please tell me where I can invest £30k and guarantee a *gross* return of 5% interest? You will probably get about 6% return on a simple fund in the stock market, but you would need a hell of a lot longer than 3yrs to ride out any dips, and it’s certainly not guaranteed!!

So why is it a false economy?

Also, why does the phrase ‘buy a appreciating asset, rent a depreciating one’ apply to cars? What do you gain? It’s certainly not cheaper, and it’s certainly not more flexible and it’s certainly not less risky financially speaking (don’t need to cough up a massive negative equity charge that you might not have access to if you suddenly need to change cars early), so why?! What’s the advantage?? I swear it’s just something that gets repeated enough times that people just accept it without even thinking if it makes any logical sense!

No have to disagree with you here. You've focused on very specific examples rather than the main point.

I agree you don't have to find a private seller, but that's often the big saver when it comes to owning the car... that you can get better prices selling privately.

I'll put it simpler then. What it comes down to is where do you want your money?

You feel you might save £3500 by not going PCP. But not really, because you're going to buy another car at the end of the day. You're going to pay upfront and you're not going to see any savings vs PCP until you actually sell that car... until the point you go and put it all into another one. You're only saving money on paper here, until maybe eventually you stop buying nice cars. That's why it's not an advantage. Nevermind not having the money to play with but just having to rely on "I've got more money I just have to sell my car".

And why doe sit apply to cars? Because no one wants bad assets on the portfolio. It is definitely less risky financially, their is a GMV with PCP. If there's a temporary crash in the market, or electric vehicles hit sales of older ICE cars then that assets could drop in value. Whereas a PCP buyer would just wait until the end and hand it back. Lets say situation changes and you urgently need cash, you've now got the hassle of selling and possibly selling at a bad time as it's now urgent for you. There is definitely more risk.

You calculate all your facts on buying and then selling, as though that money is going to be in your pocket and no straight back to them on another car.

 

[AGAG]

There are lots of people handing back PCPs now as the cost to buy is more than the value. Historically dealers would play around with PCP figures to give a cost per month that the customer could afford. Today predicted residual values are on the floor for many cars especially Diesels and the Dealer Finance Companies are becoming nervous. I would only ever recommend going into such a deal if you are fully aware of the risks.

Was there ever anyone buying after a PCP? Surely the point of getting a PCP is you don't want to buy, you just want a new version of the same thing for the same price instead. If you wanted to buy it you'd have bought an older one to begin with or bought it from the start.

Hey I'm not a PCP salesman or something, just like being devils advocate when it comes to people touting the old way as though that's always the best.

 

[RGBARGEE]

Was there ever anyone buying after a PCP? Surely the point of getting a PCP is you don't want to buy, you just want a new version of the same thing for the same price instead. If you wanted to buy it you'd have bought an older one to begin with or bought it from the start.

Hey I'm not a PCP salesman or something, just like being devils advocate when it comes to people touting the old way as though that's always the best.

If the PCP residual value is £15k and the car is worth £20k BUY IT...and sell or px. Is this a serious question? If so I suggest you go and find a tame accountant to explain.


Sent from my iPhone using Tapatalk

 

[AGAG]

If the PCP residual value is £15k and the car is worth £20k BUY IT...and sell or px. Is this a serious question? If so I suggest you go and find a tame accountant to explain.


Sent from my iPhone using Tapatalk

What PCP is going to leave you 5k up!? You're lucky to have any residual at the end never mind 5k. If people were getting 5k up you wouldn't be trying to tell me why PCP is so bad would you...

And even if it magically was... part exchanging the car with them is exactly what a PCP does, you dont buy the car to do that. They don't keep the residual, it goes towards your next car with them. Which is exactly what I'm saying.

 

[wab172uk]

No have to disagree with you here. You've focused on very specific examples rather than the main point.

I agree you don't have to find a private seller, but that's often the big saver when it comes to owning the car... that you can get better prices selling privately.

I'll put it simpler then. What it comes down to is where do you want your money?

You feel you might save £3500 by not going PCP. But not really, because you're going to buy another car at the end of the day. You're going to pay upfront and you're not going to see any savings vs PCP until you actually sell that car... until the point you go and put it all into another one. You're only saving money on paper here, until maybe eventually you stop buying nice cars. That's why it's not an advantage. Nevermind not having the money to play with but just having to rely on "I've got more money I just have to sell my car".

And why doe sit apply to cars? Because no one wants bad assets on the portfolio. It is definitely less risky financially, their is a GMV with PCP. If there's a temporary crash in the market, or electric vehicles hit sales of older ICE cars then that assets could drop in value. Whereas a PCP buyer would just wait until the end and hand it back. Lets say situation changes and you urgently need cash, you've now got the hassle of selling and possibly selling at a bad time as it's now urgent for you. There is definitely more risk.

You calculate all your facts on buying and then selling, as though that money is going to be in your pocket and no straight back to them on another car.

PCP is good if you never want to own the car, and are happy to pay considerable interest for the privilege of having something new and shiny every 3 years. And yes, I fully understand that PCP allows average Joe to drive around in something normally out of their wage structure.

Guys on here paying £600-700 a month to drive an RS3 around. While it's a huge amount, and probably more than their mortgage payments, £700 a month would never buy you an RS3 from scratch. It would take over 6 years to buy with the conventional HP / Bank loan route.

Each to their own, and if you can afford it, then why not? It gets you some tasty metal. I just think the surge in retail prices, has been on the back of these PCP deals.

 

[AGAG]

PCP is good if you never want to own the car, and are happy to pay considerable interest for the privilege of having something new and shiny every 3 years. And yes, I fully understand that PCP allows average Joe to drive around in something normally out of their wage structure.

Guys on here paying £600-700 a month to drive an RS3 around. While it's a huge amount, and probably more than their mortgage payments, £700 a month would never buy you an RS3 from scratch. It would take over 6 years to buy with the conventional HP / Bank loan route.

Each to their own, and if you can afford it, then why not? It gets you some tasty metal. I just think the surge in retail prices, has been on the back of these PCP deals.

I agree with you there, when you hit the £600-700 mark its a lot of money to be paying a month but equally I agree it's just as huge an amount to be paying the upfront prices for those cars. Both the monthly and list price aren't for average Joe there really, not unless it's their only outgoing. I'm only paying for an A3 not even an S3, so I'm not paying interest levels on anything near a £50/60k car .... that would be considerably a lot more interest to factor in decision wise.

Out of interest, do many people who buy new cars keep their cars much longer than 3 years still? 3 years feels a long time to me, I would never contemplate more than 5 at most.

The surge in retail prices is definitely down to PCP style deals, no doubt about it. It has been a bit of a win-win as average Joe gets in a car they might not be able to or want to buy upfront and manufacturers and retailers get a lot more sales. Is it sustainable? Maybe not, but I think there's enough protection (as much as you can without them being idiots anyway) in the deals to protect the customers from any kind of crash ... the only issue would be they might not be able to get another PCP next time and would have to go back to the cash or loan route. What it would mean to the car manufacturers would be interesting though, with fewer sales.

 

[Thundercliffe81]

I agree with you there, when you hit the £600-700 mark its a lot of money to be paying a month but equally I agree it's just as huge an amount to be paying the upfront prices for those cars. Both the monthly and list price aren't for average Joe there really, not unless it's their only outgoing. I'm only paying for an A3 not even an S3, so I'm not paying interest levels on anything near a £50/60k car .... that would be considerably a lot more interest to factor in decision wise.

Out of interest, do many people who buy new cars keep their cars much longer than 3 years still? 3 years feels a long time to me, I would never contemplate more than 5 at most.

The surge in retail prices is definitely down to PCP style deals, no doubt about it. It has been a bit of a win-win as average Joe gets in a car they might not be able to or want to buy upfront and manufacturers and retailers get a lot more sales. Is it sustainable? Maybe not, but I think there's enough protection (as much as you can without them being idiots anyway) in the deals to protect the customers from any kind of crash ... the only issue would be they might not be able to get another PCP next time and would have to go back to the cash or loan route. What it would mean to the car manufacturers would be interesting though, with fewer sales.

Riding the wave in the used RS market for as long as physically possible now


Sent from my iPhone using Tapatalk

 

[Ormesome]

I wonder, considering the question, if peoples views are different regarding petrol vs diesel? Personally I would probably go PCP style route if I was getting a diesel but perhaps something different for petrol or hybrid as I know it would be a car that I would keep for longer perhaps...

 

[DrEskimo]

I’ll try and address all your points in turn so they aren’t lost

No have to disagree with you here. You've focused on very specific examples rather than the main point.

Not sure I follow? Pick any car with any amount of discount and work out the cost on any PCP agreement (different deposits with different term lengths and different mileage’s) and you will see the exact same pattern. It costs more money than cash or personal loan...? The interest costs are high because the principle amount doesn’t fully decrease over the term because of the GFV. What main point am I missing...?

I agree you don't have to find a private seller, but that's often the big saver when it comes to owning the car... that you can get better prices selling privately.

This is true of any situation, regardless of how you personally financed the car....? You can sell a car on PCP for more money if you wanted. The point is it’s easier if it’s owned outright compared to PCP because some people don’t want to fuss with settling finance before hand.

You tried to imply that you had to sell it privately and that it meant it was a false economy. You don’t and it’s not. A PCP will cost you more money every time. There is no false economy.

You feel you might save £3500 by not going PCP. But not really, because you're going to buy another car at the end of the day. You're going to pay upfront and you're not going to see any savings vs PCP until you actually sell that car... until the point you go and put it all into another one. You're only saving money on paper here, until maybe eventually you stop buying nice cars. That's why it's not an advantage. Nevermind not having the money to play with but just having to rely on "I've got more money I just have to sell my car".

Again this doesn’t make any sense. It’s not a paper saving at all, it’s a very real and material saving!

If you buy a car on PCP, then trade it in in three years time to buy another new car, it will cost you £3500 more than if you bought the same car with cash, then traded it in 3yrs later to buy another one. If you buy a £30k car rather than use a PCP, on say £400per month deal, you have £400 more from your income each month than the person paying that to Audi Finance. After 36months, the cash buyer has £14,500 saved up again. He now can put the £19k trade and £11k he has saved of his £14,500,and buy a another new car. He can put that £3500 extra away for something else. The PCP person has given that £400 to Audi and it’s all gone. They have nothing from trade in as it settles the outstanding finance. See. Not paper at all. A physical £3500 sitting in there bank after 3yrs.

And why doe sit apply to cars? Because no one wants bad assets on the portfolio. It is definitely less risky financially, their is a GMV with PCP. If there's a temporary crash in the market, or electric vehicles hit sales of older ICE cars then that assets could drop in value. Whereas a PCP buyer would just wait until the end and hand it back. Lets say situation changes and you urgently need cash, you've now got the hassle of selling and possibly selling at a bad time as it's now urgent for you. There is definitely more risk.

I see your point here. I used to think the GFV was the only positive thing about PCP that provided protection for buyers in cases of extreme depreciation. With the future of EVs, and people buying diesels, you might have a point. However you need to remember two things:

1/ this GFV protection is not free. You are paying the £3500 extra, as outlined above, to have this protection. Therefore the only economic advantage comes from cars that have depreciated more than £3500 than the set GFV. That’s a hell of a drop! So if the GFV for the S3 is £19k, it would have to be worth £15k trade before you see just £500 more in your pocket than if you bought cash....a rather unlikely scenario. Again, maybe this could happen with diesels in the near future, but you would have to be a bit nuts to still be buying brand new diesels at this stage IMHO...

2/ you are completely ignoring a far far greater and far more probable risk that comes with getting finance on a heavily depreciating asset. A huge myriad of things can and frequently does happen to people between signing up for their PCP, and in the 4yrs before their PCP ends, that means they want/need to get out the agreement. Insurance premium rises due to a accident making the car unaffordable, wanting to save for a house, having a baby and needing more income liquid, losing their job, changing careers, etc etc etc. I have seen hundreds of threads and sale ads for nearly new cars stating this.
Now what happens if you get a PCP with a small deposit and a long term agreement of 48months. You will be in heavy negative equity. There is the massive risk that when things change (and they do often) you are stuck with a huge level of negative equity to clear to exit the agreement because you have tried to spread the costs out and put down as little capital as possible to make the new car ‘affordable’. It’s not affordable. It’s financial planning based on a philosophy of ‘it won’t happen to me’ and hoping that everything will be fine and nothing will change. It’s nuts! People then start rolling that debt into another new car, because they still need a new car and will have been paying the PCP meaning they can’t save any additional money, which will have its own debt if needed to exit early, and so on. Soon enough so much debt is rolled in, that people are paying ridiculous monthlies on basic cars, and paying interest multiple times on a same chunk of money year after year after year.

Your idea that PCP is less risky than cash if you can’t afford to keep it is completely backwards. The cash buyer has no need to sell the car because they don’t have a monthly payment. They have bought the car when they can afford it in the most truest sense. If they need to release funds for any reasons, they can. They don’t have to though and shouldn’t have put £30k down if they needed the money for other things. If you lose your job and you have PCP, you HAVE to sell the car as you can’t physically pay the monthlies. Then pay off any of the outstanding balance (which you may have to loan and take on more debt) and now you have no car. The risk is entirely with the PCP, not cash buyer. The PCP has the debt, not the cash buyer!

Now it’s possible to circumvent this financial risk by putting at least 25-50% of the value of the car down upfront on the PCP. That way you are never in negative equity and you have paid the heavy depreciation. If you get in trouble, you can trade it in and not worry about settling negative equity as well. You have taken responsibility to sort out the financial debt upfront when you can afford it, rather than risk trying to pay it in a situation where you can least afford it. But then if you are putting 50% down up front, you might as well just get a personal loan for the rest and save a shed load on interest charges!

And of course, if you ever trade at any time other than the final day of your agreement with the exact mileage (or less) than stipulated on the deal, the GFV means absolutely nothing.

To me, as the only advantage to PCP, it’s seriosuly limited and generally the economic advantage is outweighed by the high interest costs it has to service it.

You calculate all your facts on buying and then selling, as though that money is going to be in your pocket and no straight back to them on another car.

As I’ve explained above, this is not true. If you save the monthly PCP payment you were going to pay after buying the car outright, you will have the extra money in your account when you trade in.

I don’t really mind if people want to PCP, but it’s the way they are used that are massively risky that worries me. It doesn’t help that dealers actively encourage people to get the PCP on the longest term possible, with the lowest mileage limit possible and with the lowest deposit possible. No one accounts for the negative equity they are required to pay if/when they want/need to get out early. It’s a ‘hidden’ cost that is never explained or factored in...all that is focused on is the monthly payment.

After rather extensive research I’ve just reached the conclusion that PCP is a really poor financial product. For those where they can only use it by making it as risky as possible (and by that I mean they will face the largest negative equity bill should the need/want to trade early) its a financially destructive decsion. For those that use it responsibly, I think it’s a poor choice and there are far cheaper ways to achieve the same thing. As long as you don’t concentrate on the monthly payment. As THAT is a false economy (.....providing you don’t bug a diesel...!)!

If you really are worried about value from EVs, then lease a car or buy a really used one where it will have depreciated so much already that it doesn’t matter!

This doesn’t even hit on the other negatives, such as limited mileage uses, being almost forced to take dreadful trade in prices with dealers or that you are constantly on the merry go round buying very expensive new cars with very expensive finance products. Coming out and trying to go used becomes almost impossible as you typically left with £0 at the end, since it has no value at trade, and you can’t save much more due to the PCP payments taking all your income. I know, it’s exactly where I was left after my first and last PCP. Thankfully I just don’t need a car, but if I did, my options were seriosuly limited that a PCP or lease were really my only options...that or buying a very cheap used car, or buying a used car with 100% personal loan that I am also not advocating (for similar reasons above, as the car may depreciate quicker than I am paying the finance on it).

My £20s worth...

 

[Flowrider99]

The trouble is that there is no handing back a PCP financed car without financial loss no matter how big a deposit is put down. Most people tend to put down the minimum deposit they can with the longest term possible in order to keep monthly payments low, this in itself is a recipe for disaster should you have to get out of the 48 month deal within the first 3.5 yesrs.

 

[Jassyo06]

I’ll try and address all your points in turn so they aren’t lost



Not sure I follow? Pick any car with any amount of discount and work out the cost on any PCP agreement (different deposits with different term lengths and different mileage’s) and you will see the exact same pattern. It costs more money than cash or personal loan...? The interest costs are high because the principle amount doesn’t fully decrease over the term because of the GFV. What main point am I missing...?



This is true of any situation, regardless of how you personally financed the car....? You can sell a car on PCP for more money if you wanted. The point is it’s easier if it’s owned outright compared to PCP because some people don’t want to fuss with settling finance before hand.

You tried to imply that you had to sell it privately and that it meant it was a false economy. You don’t and it’s not. A PCP will cost you more money every time. There is no false economy.



Again this doesn’t make any sense. It’s not a paper saving at all, it’s a very real and material saving!

If you buy a car on PCP, then trade it in in three years time to buy another new car, it will cost you £3500 more than if you bought the same car with cash, then traded it in 3yrs later to buy another one. If you buy a £30k car rather than use a PCP, on say £400per month deal, you have £400 more from your income each month than the person paying that to Audi Finance. After 36months, the cash buyer has £14,500 saved up again. He now can put the £19k trade and £11k he has saved of his £14,500,and buy a another new car. He can put that £3500 extra away for something else. The PCP person has given that £400 to Audi and it’s all gone. They have nothing from trade in as it settles the outstanding finance. See. Not paper at all. A physical £3500 sitting in there bank after 3yrs.



I see your point here. I used to think the GFV was the only positive thing about PCP that provided protection for buyers in cases of extreme depreciation. With the future of EVs, and people buying diesels, you might have a point. However you need to remember two things:

1/ this GFV protection is not free. You are paying the £3500 extra, as outlined above, to have this protection. Therefore the only economic advantage comes from cars that have depreciated more than £3500 than the set GFV. That’s a hell of a drop! So if the GFV for the S3 is £19k, it would have to be worth £15k trade before you see just £500 more in your pocket than if you bought cash....a rather unlikely scenario. Again, maybe this could happen with diesels in the near future, but you would have to be a bit nuts to still be buying brand new diesels at this stage IMHO...

2/ you are completely ignoring a far far greater and far more probable risk that comes with getting finance on a heavily depreciating asset. A huge myriad of things can and frequently does happen to people between signing up for their PCP, and in the 4yrs before their PCP ends, that means they want/need to get out the agreement. Insurance premium rises due to a accident making the car unaffordable, wanting to save for a house, having a baby and needing more income liquid, losing their job, changing careers, etc etc etc. I have seen hundreds of threads and sale ads for nearly new cars stating this.
Now what happens if you get a PCP with a small deposit and a long term agreement of 48months. You will be in heavy negative equity. There is the massive risk that when things change (and they do often) you are stuck with a huge level of negative equity to clear to exit the agreement because you have tried to spread the costs out and put down as little capital as possible to make the new car ‘affordable’. It’s not affordable. It’s financial planning based on a philosophy of ‘it won’t happen to me’ and hoping that everything will be fine and nothing will change. It’s nuts! People then start rolling that debt into another new car, because they still need a new car and will have been paying the PCP meaning they can’t save any additional money, which will have its own debt if needed to exit early, and so on. Soon enough so much debt is rolled in, that people are paying ridiculous monthlies on basic cars, and paying interest multiple times on a same chunk of money year after year after year.

Your idea that PCP is less risky than cash if you can’t afford to keep it is completely backwards. The cash buyer has no need to sell the car because they don’t have a monthly payment. They have bought the car when they can afford it in the most truest sense. If they need to release funds for any reasons, they can. They don’t have to though and shouldn’t have put £30k down if they needed the money for other things. If you lose your job and you have PCP, you HAVE to sell the car as you can’t physically pay the monthlies. Then pay off any of the outstanding balance (which you may have to loan and take on more debt) and now you have no car. The risk is entirely with the PCP, not cash buyer. The PCP has the debt, not the cash buyer!

Now it’s possible to circumvent this financial risk by putting at least 25-50% of the value of the car down upfront on the PCP. That way you are never in negative equity and you have paid the heavy depreciation. If you get in trouble, you can trade it in and not worry about settling negative equity as well. You have taken responsibility to sort out the financial debt upfront when you can afford it, rather than risk trying to pay it in a situation where you can least afford it. But then if you are putting 50% down up front, you might as well just get a personal loan for the rest and save a shed load on interest charges!

And of course, if you ever trade at any time other than the final day of your agreement with the exact mileage (or less) than stipulated on the deal, the GFV means absolutely nothing.

To me, as the only advantage to PCP, it’s seriosuly limited and generally the economic advantage is outweighed by the high interest costs it has to service it.



As I’ve explained above, this is not true. If you save the monthly PCP payment you were going to pay after buying the car outright, you will have the extra money in your account when you trade in.

I don’t really mind if people want to PCP, but it’s the way they are used that are massively risky that worries me. It doesn’t help that dealers actively encourage people to get the PCP on the longest term possible, with the lowest mileage limit possible and with the lowest deposit possible. No one accounts for the negative equity they are required to pay if/when they want/need to get out early. It’s a ‘hidden’ cost that is never explained or factored in...all that is focused on is the monthly payment.

After rather extensive research I’ve just reached the conclusion that PCP is a really poor financial product. For those where they can only use it by making it as risky as possible (and by that I mean they will face the largest negative equity bill should the need/want to trade early) its a financially destructive decsion. For those that use it responsibly, I think it’s a poor choice and there are far cheaper ways to achieve the same thing. As long as you don’t concentrate on the monthly payment. As THAT is a false economy (.....providing you don’t bug a diesel...!)!

If you really are worried about value from EVs, then lease a car or buy a really used one where it will have depreciated so much already that it doesn’t matter!

This doesn’t even hit on the other negatives, such as limited mileage uses, being almost forced to take dreadful trade in prices with dealers or that you are constantly on the merry go round buying very expensive new cars with very expensive finance products. Coming out and trying to go used becomes almost impossible as you typically left with £0 at the end, since it has no value at trade, and you can’t save much more due to the PCP payments taking all your income. I know, it’s exactly where I was left after my first and last PCP. Thankfully I just don’t need a car, but if I did, my options were seriosuly limited that a PCP or lease were really my only options...that or buying a very cheap used car, or buying a used car with 100% personal loan that I am also not advocating (for similar reasons above, as the car may depreciate quicker than I am paying the finance on it).

My £20s worth...

You need to lighten up mate, there is no doubt in my mind you know all this guff inside out but *** ....... Live and let live and l thought the Jeohovah Witness where bad lol its a car forum not a Martin lewis money matters forum

 

[DrEskimo]

You need to lighten up mate, there is no doubt in my mind you know all this guff inside out but *** ....... Live and let live and l thought the Jeohovah Witness where bad lol its a car forum not a Martin lewis money matters forum

Haha hang on I’m not exactly creating loads of threads telling people that pcp is the devil! I’m responding to a post about car finance,
that I had fundamental disagreements with, in a thread about car finance...!

But fine. For you matey, I’ll promise from this day forth, I’ll never post again about car finance. Just for you I’ll be dead quiet though...!

Interesting though isn’t it. If I posted a way that you could all get £3500 extra discount on new car orders, you would all stand to attention like meerkats! Just saying....

 

[AGAG]

I’ll try and address all your points in turn so they aren’t lost



Not sure I follow? Pick any car with any amount of discount and work out the cost on any PCP agreement (different deposits with different term lengths and different mileage’s) and you will see the exact same pattern. It costs more money than cash or personal loan...? The interest costs are high because the principle amount doesn’t fully decrease over the term because of the GFV. What main point am I missing...?



This is true of any situation, regardless of how you personally financed the car....? You can sell a car on PCP for more money if you wanted. The point is it’s easier if it’s owned outright compared to PCP because some people don’t want to fuss with settling finance before hand.

You tried to imply that you had to sell it privately and that it meant it was a false economy. You don’t and it’s not. A PCP will cost you more money every time. There is no false economy.



Again this doesn’t make any sense. It’s not a paper saving at all, it’s a very real and material saving!

If you buy a car on PCP, then trade it in in three years time to buy another new car, it will cost you £3500 more than if you bought the same car with cash, then traded it in 3yrs later to buy another one. If you buy a £30k car rather than use a PCP, on say £400per month deal, you have £400 more from your income each month than the person paying that to Audi Finance. After 36months, the cash buyer has £14,500 saved up again. He now can put the £19k trade and £11k he has saved of his £14,500,and buy a another new car. He can put that £3500 extra away for something else. The PCP person has given that £400 to Audi and it’s all gone. They have nothing from trade in as it settles the outstanding finance. See. Not paper at all. A physical £3500 sitting in there bank after 3yrs.



I see your point here. I used to think the GFV was the only positive thing about PCP that provided protection for buyers in cases of extreme depreciation. With the future of EVs, and people buying diesels, you might have a point. However you need to remember two things:

1/ this GFV protection is not free. You are paying the £3500 extra, as outlined above, to have this protection. Therefore the only economic advantage comes from cars that have depreciated more than £3500 than the set GFV. That’s a hell of a drop! So if the GFV for the S3 is £19k, it would have to be worth £15k trade before you see just £500 more in your pocket than if you bought cash....a rather unlikely scenario. Again, maybe this could happen with diesels in the near future, but you would have to be a bit nuts to still be buying brand new diesels at this stage IMHO...

2/ you are completely ignoring a far far greater and far more probable risk that comes with getting finance on a heavily depreciating asset. A huge myriad of things can and frequently does happen to people between signing up for their PCP, and in the 4yrs before their PCP ends, that means they want/need to get out the agreement. Insurance premium rises due to a accident making the car unaffordable, wanting to save for a house, having a baby and needing more income liquid, losing their job, changing careers, etc etc etc. I have seen hundreds of threads and sale ads for nearly new cars stating this.
Now what happens if you get a PCP with a small deposit and a long term agreement of 48months. You will be in heavy negative equity. There is the massive risk that when things change (and they do often) you are stuck with a huge level of negative equity to clear to exit the agreement because you have tried to spread the costs out and put down as little capital as possible to make the new car ‘affordable’. It’s not affordable. It’s financial planning based on a philosophy of ‘it won’t happen to me’ and hoping that everything will be fine and nothing will change. It’s nuts! People then start rolling that debt into another new car, because they still need a new car and will have been paying the PCP meaning they can’t save any additional money, which will have its own debt if needed to exit early, and so on. Soon enough so much debt is rolled in, that people are paying ridiculous monthlies on basic cars, and paying interest multiple times on a same chunk of money year after year after year.

Your idea that PCP is less risky than cash if you can’t afford to keep it is completely backwards. The cash buyer has no need to sell the car because they don’t have a monthly payment. They have bought the car when they can afford it in the most truest sense. If they need to release funds for any reasons, they can. They don’t have to though and shouldn’t have put £30k down if they needed the money for other things. If you lose your job and you have PCP, you HAVE to sell the car as you can’t physically pay the monthlies. Then pay off any of the outstanding balance (which you may have to loan and take on more debt) and now you have no car. The risk is entirely with the PCP, not cash buyer. The PCP has the debt, not the cash buyer!

Now it’s possible to circumvent this financial risk by putting at least 25-50% of the value of the car down upfront on the PCP. That way you are never in negative equity and you have paid the heavy depreciation. If you get in trouble, you can trade it in and not worry about settling negative equity as well. You have taken responsibility to sort out the financial debt upfront when you can afford it, rather than risk trying to pay it in a situation where you can least afford it. But then if you are putting 50% down up front, you might as well just get a personal loan for the rest and save a shed load on interest charges!

And of course, if you ever trade at any time other than the final day of your agreement with the exact mileage (or less) than stipulated on the deal, the GFV means absolutely nothing.

To me, as the only advantage to PCP, it’s seriosuly limited and generally the economic advantage is outweighed by the high interest costs it has to service it.



As I’ve explained above, this is not true. If you save the monthly PCP payment you were going to pay after buying the car outright, you will have the extra money in your account when you trade in.

I don’t really mind if people want to PCP, but it’s the way they are used that are massively risky that worries me. It doesn’t help that dealers actively encourage people to get the PCP on the longest term possible, with the lowest mileage limit possible and with the lowest deposit possible. No one accounts for the negative equity they are required to pay if/when they want/need to get out early. It’s a ‘hidden’ cost that is never explained or factored in...all that is focused on is the monthly payment.

After rather extensive research I’ve just reached the conclusion that PCP is a really poor financial product. For those where they can only use it by making it as risky as possible (and by that I mean they will face the largest negative equity bill should the need/want to trade early) its a financially destructive decsion. For those that use it responsibly, I think it’s a poor choice and there are far cheaper ways to achieve the same thing. As long as you don’t concentrate on the monthly payment. As THAT is a false economy (.....providing you don’t bug a diesel...!)!

If you really are worried about value from EVs, then lease a car or buy a really used one where it will have depreciated so much already that it doesn’t matter!

This doesn’t even hit on the other negatives, such as limited mileage uses, being almost forced to take dreadful trade in prices with dealers or that you are constantly on the merry go round buying very expensive new cars with very expensive finance products. Coming out and trying to go used becomes almost impossible as you typically left with £0 at the end, since it has no value at trade, and you can’t save much more due to the PCP payments taking all your income. I know, it’s exactly where I was left after my first and last PCP. Thankfully I just don’t need a car, but if I did, my options were seriosuly limited that a PCP or lease were really my only options...that or buying a very cheap used car, or buying a used car with 100% personal loan that I am also not advocating (for similar reasons above, as the car may depreciate quicker than I am paying the finance on it).

My £20s worth...

Woah! That's one very long thought out post. I'll reply with a smaller, less thought out one because a) I don't want to continue to hijack this thread and b) I'm quite lazy and like things easy (perfect PCP customer ).

By picking specific examples I meant my example of if you sell privately, it was meant as an example not saying this is the only way to sell at all. It was not the point I was making and quite a lot of focus was on that.

The point I'm making is that (using your £30k car example with a £400 monthly, which is a similar level to my own A3 so a very valid thought process for me) that with paying with cash id be paying £30k upfront so that cash is out of my reach whilst I keep that car. Then I'm also saving up the £400 a month that I would have been spending on a PCP for the next car, so during those 3 years I'm not seeing any costs saving ... for 3 years I'm down the full initial investment plus saving for the next one.

Now when it's time to change, yes you are correct, id be £3500 (give or take depending on variables) up vs PCP. But then id be starting the process again of saving up so I'm ready for the next one. The new car in my experience is often going to be more expensive too, and could easily be £3500 more expensive due to a new model/facelift and inflation. I've lost most if not all the money I've saved because I want a new car again, and it took 3 years of hvaing my money locked away and monthly saving to get there in the first place. Yes the PCP equivalent would go up too, but it would essentially be a repeat of when I bought the first car again.

I do see your point, I just believe it works in theory and not in practice. I want to be using my money, not having it locked into a car, and for me it would be worth paying a bit extra to have that.

I find the risk part of it this very interesting and definitely see your point. People buying PCPs that stretch them to their limits is a huge risk. For me I stick to keeping monthlys below 15% of monthly income as a rule to mitigate this risk, so the cars I'm buying are very much affordable. My point about suddenly needing money (maybe a £10k vet bill for example) and it being bad if you have bought the car is that I would still have large cash savings from not buying the car in the first place. If you bought the car and that was your savings, you'd be looking at a loan possibly.

Your example is also entirely valid, especially if they do not have savings from not paying upfront and have stretched themselves. I think losing your job is probably more risky for the PCP buyer, although once again in my case there are savings to cover that from not buying until I get a new job.

Either way, buying within your means with both ways of paying is the way to do it with minimal risk (never "no risk").

Sorry once again for the thread hijack, although someone may be reading this and finding both points of view of interest.

 

[Daveotto]

Lighten up guys... seems everyone was a bit bored and did not have much to do on a cold and wet/snowy January weekend... tbh TV was a bit rubbish last night

Moderator rant over