PCP? - Rottiesforever

Hi

For the past 5yrs i have been saving for a car and in the next 10 months will be have saved £11,500 to use on the car but am unsure which path to go down , i have been told to go down the PCP route as many of my family have a car this way and the idea of it appeals to me but there is one thing i dont get and that at the end you have 3 options the option i would choose is to excange it but im not sure if my understanding is correct , my understanding is that if you choose to go into another car then they use the OFP to put down on a new car so the car im looking at has a OFP of £15k so my understanding is they use the OFP of £15k onto your next car.

I would prefer to just buy a decent second hand car outright but i have 2 issues one i need a car that has really good sound proofing as i have a condition that a noisy cabin can make worse so a quiet cabin is important and i know most are expensive and could only afford through PCP. The second issue i have is i dont know if i can afford repairs were on PCP they pay as its under warranty , not sure if theres a warranty i can take out for used cars.

I also worry if i brought it outright that if died on me i can afford to save again as it will take years again.

Not sure what to do

PCP? - Bromptonaut

Last car we bought on PCP was our first Berlingo, a 1.8D, in 2005.

Paid a deposit of a thousand plus then regular monthly payments. The agreed final value at the end of 3 years was, IIRC, £3,000.

At the end of three years we could

  1. Return it and owe nothing (except any adjustment for condition/mileage)
  2. If we were lucky it was worth more than £3k at 'trade in' in which case the excess over £3k could be deposit on a new vehicle
  3. Pay £3k and own the car outright.

As we'd gone waay over the 27k miles in the PCP, the car had a few battle scars and was absolutely perfect as our family car we went for 3 and kept it another 7 years.

Whether, at the end of the PCP, there's any 'equity' over an above the final payment is a matter of luck and how much you've actually paid over the period of the PCP.

PCP suited us at the time with growing kids and Mrs B's teaching limited to part time/supply so not much cash to spare.

Never been tempted again. Last three cars, one new and two s/h from the make's franchised dealer have been cash. It can however be advantageous to go for a PCP and settle early to access bigger discounts.

I prefer to own my cars outright but my daughter's in laws who almost certainly could afford to buy outright have been on one PCP after another for 10+ years. I think though as people who look after their cars they've got very good offers on each car they've returned at end of PCP.

PCP? - Rottiesforever

The OFP on the car i like is £15k but unsure about the whole OFP bit does it mean that at the end of the 3yrs they will use the OFP on a new car?

PCP? - Bromptonaut

The OFP on the car i like is £15k but unsure about the whole OFP bit does it mean that at the end of the 3yrs they will use the OFP on a new car?

No, I don't think so. The usual pattern with PCP is that you're effectively borrowing to pay the depreciation over (say) 3 years. I assume OFP is similar to 'Guaranteed Future Value'. It's what the car is notionally worth at the end of the PCP and if you wish to own it outright that's the amount you'll pay.

Unless you pay substantially more than £15k (ie close to list price) over the PCP period that you could expect 'equity' of £15k after 3 years.

You may find however that if you comply with mileage and are lucky enough to avoid bumps/scuffs they might offer say £17.5k as value; provided you use the £2.5k to keep yourself on the PCP Merry go Round that they and their finance arm love. .

Edited by Bromptonaut on 06/03/2021 at 15:56

PCP? - Rottiesforever

The reason im confused is what my family said is not what ive read. My family have told me that the OFP is what they predict the car will be worth in 3yrs time and you use that on your next car. But ive read you dont use the OFP you use what ever is left after they value the car so for example i read if your OFP is £10k and they value the car at £12k then you use the 2k on the new car but yet my family are telling me that thats not right you will have the full 10k to put on your next car?

PCP? - Moodyman

11.5k is a healthy sum for a used car. In many cases you could get into a 3-4 year old approved used and run it for another 10 years.

A monthly PCP payment of say £300 x 36 month equals £10,800. At the end of that period, the car is not yours unless you settle the balloon payment. If you don't have the money, you are forced to a) re-enter another PCP term or b) give the car back and buy used. Either way, you have nothing to show for that £10,800.

PCP? - Rottiesforever

Moodyman- im confused though how option A works my family said i use the OFP to re enter another PCP term so the car im looking at has an OFP of £15k. And my family said i would use the. £15k to go into another car? Is that true? As thats not what i read

PCP? - Rerepo

Your family is wrong.

Use your £11.5k to buy something from Honda or Toyota Used Approved and you'll likely be good for 10 years.

My son in law 'bought' a Tiguan on PCP from VW. 1.5L model that I thought was rather a poor drive actually. He's just handed it back after 3 years. I did the maths on what it cost him and it seemed expensive motoring to me. Worked out around £15k for 3 years. Think the dealer saw him coming (he's a bit 'Tim, nice but dim'). 10k will buy a good used Avensis or Civic.

Edited by Rerepo on 06/03/2021 at 17:43

PCP? - Moodyman

The OFP is the balloon payment. That's what the finance company has said you will pay to own the car outright. If the OFP value is less than the market price of the car you can use the difference as a deposit for your new car. So, OFP value £12k, but market value is £15k, you could use the £3k towards your new car. In reality, the market value could be less than OFP, in which case, you can give the car back and walk away.

The example I gave earlier was to show that PCPs are seldom worth it (financially). There may be other benefits i.e. reduced hassle, servicing, etc and only you can decide if these are worth the premium.

Edited by Moodyman on 06/03/2021 at 16:40

PCP? - mcb100
3 options at the end of a PCP:-

Pay off the final ‘balloon’ payment and keep the car.
Return the car and walk away.
Use the difference between what’s your car is worth and it’s guaranteed future value stated at the beginning of the PCP (the equity) as a deposit or part deposit towards your next car.

£11,500 deposit on a PCP is huge, and doesn’t make economic sense www.buyacar.co.uk/car-finance/1442/car-finance-how...y
PCP? - Rottiesforever

I wanna say i appreciate everyone helping me.

So i know i understand this correctly the £15k OFP on the car i like is not used for a deposit on a new car ( on new pcp term) instead they will value the car and if its still valued at £15k i get no money for a deposit for a new car ( on a pcp plan) but if it was valued for more than the OFP for example £17k i would use the 2k difference as a deposit? Is my understanding now correct

PCP? - Moodyman

Yes

PCP? - Rottiesforever

Thanks everyone , i was not happy really too go down the PCP route as im not one to go into debt and id rather own the car myself as then its mine.

I was thinking of not using the whole £11k and save some for repairs if needed.

Is there any warrantys you can take out for used cars incase i cant afford repairs?

The monthly payments were £389 for what i wanted and to know that my deposit on my next car if im lucky could only be £3k is not appealing when its took years to save my hard earned cash.

And the monthly repayments i could save up for when i do need a new car.

I'll have a think about everything i want and will start a new thread to see what you all reccomend.

PCP? - Rerepo

I was thinking of not using the whole £11k and save some for repairs if needed.

Is there any warrantys you can take out for used cars incase i cant afford repairs?

You can get 'breakdown insurance' (with all the usual get-outs that insurance poliies have). Probably better to save your money. Buy a car that is unlikely to go wrong in the first place - that means Japanese and Korean (but not Nissan which is really Renault now). Stay away from French and Italian unless you like aggro. Avoid diesel unless you do big miles.

Edited by Rerepo on 06/03/2021 at 17:52

PCP? - mcb100
Yes, absolutely.
If you have two thirds of the value of the car as a deposit, go for HP instead.

A dealer who is licensed to offer finance is duty bound to give you the best advice, so listen to them.
PCP? - _ORB_

Just a suggestion.

Use some of that money saved to buy a BRAND NEW Dacia Sandero ...

Or if you want a pcp from £99 a month, up tp 5 years warranty, reasonable serving packs...

PCP? - Rottiesforever

With what i know now does make me wonder why so many people do PCP

PCP? - _ORB_

With what i know now does make me wonder why so many people do PCP

Because it is a "Dream" that is sold, get a presige car on "rental;" for 3 years and then in 3 years get another and carry on..

we used to call it on the never never, because you never own it.

PCP? - Rottiesforever

Do those who go into PCP even realise or know that in 3yrs you might not get enough from the value to stay in the same car though.

Like ive found out i could put 11k down but in 3yrs could be left with £3k so wont be able to stay in the same car as £3k would be much less deposit and would not be able to afford the higer payments

PCP? - Rerepo

With what i know now does make me wonder why so many people do PCP

Because they don't have the cash needed or want to use their cash for something else.- same reason they lease, use HP etc.

However you pay for a car you are basically paying its depreciation, plus whatever charges/interest/fees the financer and dealer add on. PCP and leasing are doing ok at the moment because there is lots of cheap money around to finance this. If interest rates jump up then that will pull the rug from under these schemes.

PCP? - brum

www.thecarexpert.co.uk/car-finance-pcp-explained/

 

Value my car