Explain PCP to an idiot...

Honest John Back Room » Motoring discussion
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Tue 23 Feb 2016 23:01
Explain PCP to an idiot... - BobsyourUncle

So yeah, I'm the idiot! :)

I've spent the best part of 4 months looking for my "perfect" used car now. It isn't happening, so I'm casting an eye at buying new.

I get the idea of PCP and what/how you pay, but I'm stuggling with what happens at the end... If I put down a big deposit to keep payments low, it looks like I'm essentially paying around £16k to either get a much smaller deposit or b***** all back (if I give it back and walk away after 3 years). This doesn't seem like a good deal to me - I'd rather pay £16k now and keep the not-quite-so new car for 10 years before I'm left with b***** all.

While I'm moaning, how the hell did 2.5-year-old cars get so expensive in 9 years? I paid £9k in 2007, the equivalent now appears to be a minimum of £14k! Clearly there's been no recession in the used car market...

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Wed 24 Feb 2016 07:38
Explain PCP to an idiot... - oldroverboy.

Esssentially with PCP you are "renting the car" unless you pay what is owing at the end of the rental period.

Hire Purchase is where you put down a deposit and pay the balance over a fixed term, then the car is yours.

There are some deals where the manufacturer helps, but best way to go is through a broker to get discount AND finance.

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Wed 24 Feb 2016 07:41
Explain PCP to an idiot... - Bromptonaut

If you're looking for a 'keeper' PCP may not be ideal. It's largely pitched at those wanting a new car every three years and budgetting on cost per month. If you need to refinance the baloon payment at the end you may be better looking at personal loan or other finance arrangements.

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Wed 24 Feb 2016 08:25
Explain PCP to an idiot... - craig-pd130

Keep an eye out for interest-free finance from dealers, there's usually a few such deals floating around.

We were recently shopping for a new Corsa, and at the time Vx were doing interest-free deals. £2K deposit and the rest over 4 years: we also got a genuine grand off the list price because our son works part-time at Waitrose, which is one of a LONG list of companies that GM group counts as a 'partner', which entitled us to a discount.

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Wed 24 Feb 2016 09:25
Explain PCP to an idiot... - Avant

"I'd rather pay £16k now and keep the not-quite-so new car for 10 years...."

That's what it comes down to - a personal choice of what you do with your money. With low interest rates or 0% deals you may prefer to keep your £16k in the bank. Fortunately, unlike a mortgage, these contracts are at a fixed rate of interest and you don't get any nasty surprises if rates go up.

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Wed 24 Feb 2016 09:38
Explain PCP to an idiot... - jc2

Bank loan??

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Wed 24 Feb 2016 11:03
Explain PCP to an idiot... - DirtyDieselDogg

Our son bought himsel a Hyuandai I20, 1.2 petrol, brand new for about £11,000.00, he still seems to feel he made the right choice.

with his ridicously low milage he should get 10 or 15 years out of this car, fingers crossed.

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Wed 24 Feb 2016 11:30
Explain PCP to an idiot... - Wackyracer

It is often better to organise your own finance at a lower interest rate unless the dealers are doing it interest free.

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Wed 24 Feb 2016 11:52
Explain PCP to an idiot... - daveyjp

PCP is no more than a type of HP agreement where a higher proportion of the capital amount is deferred until the end of the agreement.

With a HP agreement the last monthly payment secures your ownership. With a PCP the 'bubble' payment secures ownership, or you hand the car back, leaving you needing to pay a new deposit, unless the car is worth more than the guaranteed value.

PCPs are cheaper due to the deferred capital element not being repaid every month, interest is paid on the whole loan, but ther is a need to think about the end and whether you need to pay the bubble or find another deposit.

If you do look at PCP don't forget the various "admin fees". £150-300 isn't unusual.

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Wed 24 Feb 2016 12:46
Explain PCP to an idiot... - slkfanboy

Are used car expensive?

That’s quite simple. Used car value have slowly slide as cheap PCP deals appear attractive to many. So for example a Ford that held 50% of it value in 2007 now only holds 40% of it value. While new car inflation roars away so a 14K is most likely now 20K hence the second hard car has gone up in cost but has never been better value for money.

PCP has caused a glut of very good value 2nd hand cars to be on the market as some see the £200 a month adverts as a bargins without realising the negatives.

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Wed 24 Feb 2016 12:51
Explain PCP to an idiot... - RT
PCPs are cheaper due to the deferred capital element not being repaid every month, interest is paid on the whole loan, but ther is a need to think about the end and whether you need to pay the bubble or find another deposit..

I'd suggest that's reworded as "PCPs have lower monthly payments due to ..." - the total interest is higher than straight HP as the average capital balance is higher in a PCP and the interest charge is based on that,

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Wed 24 Feb 2016 17:22
Explain PCP to an idiot... - slkfanboy

>'d suggest that's reworded as "PCPs have lower monthly payments due to ..." - the total >interest is higher than straight HP as the average capital balance is higher in a PCP and >the interest charge is based on that,

Yes PCPs are just like those mortgages many had in the 90s that effectively got banned. HP interest is charged the entire balance which reduces every month. PCP interest is charged on the total balance. PCP payments are less because you never pay off the full balance only the interest + depreceation and not foget the deposit you put down. So low monthly payment but high cost as new every three years else very large payment to own.


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Wed 24 Feb 2016 18:58
Explain PCP to an idiot... - Wolfan

The best thing to do is to buy a high mileage ex-fleet vehicle with full service history that is 18-24 months old, go on body and interior condition. Pay cash or get a bank loan. You will have the balance of the manufactures warranty so any problems that show up will be rectified under same. A high mileage vehicle will have spent most of it's time on long journeys so there will have been fewer cold starts and most of the driving will have been done in the highest gear. I am now retired, a low mileage driver and keep my daily drivers untill they drop. Over the last 35+ years I have bought all them like this and have yet to be mugged. Why loose money by getting a new car let the original purchaser and the taxman bear the depreciation you will be laughing all the way to the bank.

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Wed 24 Feb 2016 20:32
Explain PCP to an idiot... - BobsyourUncle

Mmmm, ok. Having looked at sales figures over the years, I think I need to wait until mid March to improve my chances of finding what I want.

It's not surprising I can't find much and supply seems to be dwindling... worst sales are in Feb. I'm guessing there's likely to be a bit of a rush of used fleet & PCP motors onto the market in the next month, as there was a 11x increase in March over each of the last 3 years.

Play the waiting game I s'pose... and hope the ol' girl's DMF doesn't explode on me before then!

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Wed 24 Feb 2016 21:17
Explain PCP to an idiot... - RT

Fleet cars, of all types, have little seasonal fluctuation - it's the dealer-demo's and retail that are influenced by the new registration - and dealers are savvy enough not to reduce prices any more than they have to!

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Wed 24 Feb 2016 21:20
Explain PCP to an idiot... - daveyjp
March is new reg time, hence the increase.
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Wed 24 Feb 2016 22:47
Explain PCP to an idiot... - Wukl

I think the way it works is:

When I'm drunk, PCP deals look very, very tempting and oh so affordable. When I'm sober, PCP deals look massively profligate and I retreat to buying from savings!

I suspect that won't help.

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Thu 25 Feb 2016 08:45
Explain PCP to an idiot... - RT

I think the way it works is:

When I'm drunk, PCP deals look very, very tempting and oh so affordable. When I'm sober, PCP deals look massively profligate and I retreat to buying from savings!

I suspect that won't help.

Don't be blind to additional manufacturer incentives only available when you take the manufacturers finance.

I was ready to buy an expensive SUV from savings, having negotiated a good fleet deal but found that the manufacturer offered an additional £5000 discount to use their PCP - so I bought on PCP, requested a settlement figure after 14 days, and then settled in full. The total of charges and interest was about £300, so my net additional saving was £4,700.

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Our honest used car pricing is a little bit different to all the others. You can get to our values through make or model - you don’t have to follow a prescribed route. Plus, it’s live, which means we can react to changes in the market quicker than any printed price guide.

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