PCP buyers are in some ways may be better off than cash buyers / HP buyers!
How?
Cash buyer buys car for £16K and expects T/I value of 50% = £8,000
Instead he goes to T/I and is offered £6,000 - i.e. he is £2000 down.
Total cost for 3 yrs = £16K - £6K = £10K + interest he would have got on money
PCP Buyer
Balloon payment at end of lease £8,000 - he just returns car as it is worth only £6,000 and walks away.
Total cost for 3 yrs - £16K-£8K=£8K + Interest he has to pay on the borrowed cash.
2nd hand prices have fallen so everyone loses - just wait to see how many leasing companies go bust or if owned by banks return huge losses due to poor residuals.
Son's X5 diesel new was roughly £40K - 3 yrs later offered £14K as T/I which he refused - a month later the same garage offered him £18K for the car . He said he did not deal with crooks and charlatans!
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Exactly FB, my car is on a bank loan and probably at no point in the term of the loan will I now have "positive equity" in the car. But if I was PCP I could just hand back.
Would be interesting to see how the garages work the aspect of perceived damage to the car at hand back time as the car is theirs unless you pay the final payment. So you hand the car back , they say its got £400 worth of damage to it. How do they get that money out of you? Court action? Its not like a hire car where they have already swiped your credit card and can impose further charges on it? What is normal wear and tear on a 3 year old car? If I tried to purchase a 3 year old car off their forecourt but wanted it looking brand new, the salesman would be the first to tell me you would need to expect some degree of scratches, wear and tear etc?
I think at one point their "insurance policy" would be that the car was always going to be worth more then the guaranteed value and if you handed them the keys and walked away then they would still be OK. However nowadays thats obviously a whole different scenario!
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I think the OFT or some other important body has made some stipulations about the condition of the car when returned. They basically say the finance company cannot expect the car to be perfect and it should be in good condition for a whatever age and mileage car. I think they may have also said minor dings and scratches are expected as is a bit of interior wear but damage above that may be claimable but it could only be the cost in loss of value not the cost of rectifying the car. It was ages since I read about it though. The above seems fair as expecting a car that has been used for 3 years to look like it just rolled off the production line is clearly unrealistic.
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Isn't there another option as well with most PCPs that you can use the minimum guaranteed value as a deposit against a new car from the manufacturer.
Don't understand that.
You can't use the GFV for anything. It's the amount you have to pay if you want to keep the car at the end of the term.
PCPs are promoted on the basis that the car will be worth more that the GFV and you can use the excess as deposit on a new car. However values in excess of GFV are rare. This isn't new - my brother's wife had a Fiesta on PCP many years ago and that was worth less than GFV at 3yrs.
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Ex girlfriend had the same situation on a Peugeot 1007. It had a GFV of around £6000 when in reality the car was only worth £4000 so she was a lot better off. But i think times have changed and the GFV of cars on PCP's now are low as they are unsure what the market will bring in the future.
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PCP on the right car at the right rate etc can be the best way to drive a new car.
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I read the Autoexpress article and thought it didn't tell the whole story.
If you took out a PCP before car values took a tumble, the GFV was going to be set reasonably high as the value of the car in 3 years was expected to be more than we now see in the current situation. Therefore repayments are lower. I'm nearly 2 years into a PCP and I bet if I went for the same deal now the GFV would be a grand or two less.
Take out a PCP now and GFV will be set low. I suppose the offset maybe better bargaining due to falling car sales so maybe overall it will work out the same......
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"he just returns car as it is worth only £6,000 and walks away"
...and walks is the operative word, or goes on the bus; whereas the cash buyer has the option of keeping the car for another year at minimal depreciation
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I'm hard pressed to see how you can run a new car cheaper than by paying via PCP.Obviously its all about the deal but with a GFV you have no depreciation worries.
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I'm hard pressed to see how you can run a new car cheaper than by paying via PCP.
Some of the Personal Contract Purchase deals that are on offer at the moment are even cheaper than PCPs
If you can bear it, check out Ling Cars - click on the private car page so the prices include VAT.
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Just leasing a car is the simplest way of getting a new car,no complications,just keep to the contract miles and conditions etc.
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"Some of the Personal Contract Purchase deals that are on offer at the moment are even cheaper than PCPs"
That makes no sense. PCP is Personal Contract Purchase. So how can a PCP be cheaper than a PCP?
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I see Ling's Cars has a sense of humour... want a "hybrid" cheap and do less than 10k miles per annum?
www.lingscars.co.uk/index_makes.php?slug=Sinclair&...s
Edited by rtj70 on 06/01/2009 at 18:26
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My car is on a PCP. First time I have done it, and looks like it may have been good timing. Shopped around and found that different finance houses offer different GFV's so the best interest rate is not always the cheapest deal.
I thought the GFV I got looked pretty generous 2 years ago, but now I cant see the car getting anywhere near that figure, but thats business I guess.
I dont consider myself hard done by as I never planned to keep the car at the end - I usually change every 2 years or so, so my intention was to get a new car, but I now suspect that a new PCP will be to expensive as the retained values will be low.
I wonder if the PCP providers will start offering the cars to customers at reduced rates so they dont get flooded with overvalued stock?
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Ive had a couple on PCP, not because I wanted that particular deal, just that the lease company when asked gave me several options and the cheapest monthly payment turned out to be PCP
who cares about the baloon payment you are usually sick of the car after 3 years anyway
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I bought my Accord on PCP. The GFV is £5900, but as I've done 25k less miles than I thought, that's probably about fair for the car.
I am buying it next month as I know its history (not necessarily good if you know my experiences but I think it's sorted) - it's not misfuelled, thrashed or otherwise mistreated which is worth a lot to me. For £250 I can extend the manufacturers warranty for another year, and I've paid about £1000 less than the RRP even when including the finance costs (£750 less if you include the 4th year warranty costs).
To PCP another Accord would cost more than £130 extra a month, which I wouldn't even consider - I'll run this one into the ground first. Should hopefully be good for well over twice it's current mileage (80k so far).
As far as I can tell, the GFV is purely a guarantee that, if the car is in good condition, you can give it back at the end of the contract and not owe anything. They can't try and recoup the cash is it's worth less than what you still owe. It serves no other function at all and I think it's an irrelevance.
As an aside, I'd not seen Ling's website before - it's hilarious! I'd certainly be tempted to deal with her in the future, I like the approach (although the site is hideous!!).
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Mikey - how do you deduce that any GFV is generous? It makes no difference what that GFV is, you have to pay that figure if you want the car. At that time, you own nothing. If the car is worth more than the GFV, and a dealer is willing to give you that greater figure, then you have some money left over BUT only with someone willing to give you that figure. I understand your desire to change car every 2 years, but you're simply hiring a car that has a mileage restriction on it.
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Gordon - you say you've paid less than the RRP? Can I be nosy and ask what deposit and how much monthly (and for how long) you paid? It must have been very heavily discounted if when you add deposit, payments, interest and GFV, you paid less than RRP.
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Woodster, no problem.
Because I needed a large car for work (my own company) I bought a Honda Accord Tourer (EX spec with the 17" alloys and metallic paint). List was £23,200 (I think - around that, might have been £23,600). I got a massive discount as they were facelifting the model the following month, so 'paid' £19,800 (although annoyingly I found a deal for £19,300 a couple of days later).
£1000 deposit, 36 monthly payments of £438.18, and a float of £5,900. Total paid £22,674. So I misled you slightly, I was only £600 under.
It looked like a bargain then, and frankly it still does. However, I wouldn't do it again. The PCP has no flexibility, and I ended up getting less contribution from the business than I had hoped / expected (ended up just getting 40p / mile). A year old much smaller car would have been far less painful for me.
Saying that, it's really nice having a large, comfy, powerful car, so it's not all bad.
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Thats the idea though,pay minimum deposit,(zero is best),lowest finance rate,loads around under 5% and at the end of the term either hand the car back or sign up for a new one.Many manufacturers will go the extra mile to retain your biz.Why would you want to own the car?
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Not sure of the actual details (personal lease or PCP) but a colleague did far more miles than he anticipated. He had little choice other than to buy it. It had not had problems though... but he still has it now. Not sure that was his original plan but he's probably quids in if nothing major goes wrong. It must be a 5 year old Passat diesel by now though.
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Woodster - it was generous to me in that it was more than I would have expected in PX at that point in time. The GFV's from some lenders varied by as much as £2K which has a massive effect on the monthly payment.
My sole interest was low monthly payments - no desire to keep the car or have any equity at the end of the contract, so as you say, I have in effect rented the car.
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TLucas - >>Thats the idea though,pay minimum deposit,(zero is best),lowest finance rate,loads around under 5% and at the end of the term either hand the car back or sign up for a new one.Many manufacturers will go the extra mile to retain your biz.Why would you want to own the car? >>
I'm honestly not trying to be argumentative, and I well appreciate others spending their money exactly as they wish, but I still struggle to understand how these PCP deals benefit the customer. In my view, they appear to make the unaffordable, affordable. In truth, they fail to achieve this, since the customer owns nothing at the end! Call me old fashioned, but when I spend money, I like to own something. Now, I could be tempted by the deals you describe, and I'm always keen to make my money go further, so, who is offering no deposit, under 5% PCP deals, and on what models?? What mileage limits apply?? 'Zero is best' you say, and I agree, but where exactly??
Edited by Dynamic Dave on 06/01/2009 at 23:52
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Mikey - sorry to keep harping on but you say the PX was generous. Does that mean you traded in a car you owned, as a deposit? If so, again, this makes my point. You gave away the car you owned, made monthly payments, and at the end own nothing. If you wish to sign up again, you need a new deposit, which won't come from the GFV, only any excess value. PCP deals are fabulous for dealers. Sell a car at damn near RRP, charge interest on the payments and guarantee the car (and customer) come back through the door. If the car is returned, GFV is usually lower than the car is worth, so there's further profit in it for the dealer. If it's paid for, the money's already been made on the initial sale. I've seen several colleagues change their cars every 2/3 years getting into ever smaller, cheaper cars, since they would have to massively increase their payments to maintain the same size car.
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Mikey - sorry to keep harping on but you say the PX was generous. Does that mean you traded in a car you owned as a deposit?
Woodster - my poor english / use of terminology! when I said PX what I meant was the GFV was generous - i.e. as much / more than I would have expected if I took the car in to buy a new one. In my case I suspect that the GFV is now more than its worth. For the record I sold my last car, and then entered into a PCP as it suited me at the time, but will most likely buy my next one as PCP rates are going to be poor in a few months when mine goes back.
I got a pretty good deal on the car - bought it through drive the deal so got the benefit of discount, and they organised the PCP for me. Supplying dealer will get no further business from me as although they were very good and helpful they are 400 miles north, and bank of scotland have agreed I can return car to a local dealer at the end of the term.
On the flip side I can easily see how people get poor PCP deals, and end up like hamsters on a wheel entering a new agreement every two years, but as they say, ya pays yer money!
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Making the unaffordable seem affordable is a whole different argument.If you want to own the car you have to make bigger payments,if you just want to pay the depreciation with no residual value worries PCP is the way to go.As for low rates,Peugeot are offering 207 with 2.9% APR and will discount to the same price as any other funding product,cash/hp etc.
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Lings.........lummy, what an awful website. I nearly puked!
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"Some of the Personal Contract Purchase deals that are on offer at the moment are even cheaper than PCPs"
Sorry - brain explosion. Meant Personal Contract Hire.
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I think that is what my colleague may have done (PCH) and would have been very out of pocket due to excessive mileage. So he bought it.
PCP if you walk away might not be that different to PCH???
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Woodster:>>You gave away the car you owned, made monthly payments, and at the end own nothing.
Quite. But then that's the whole "owning a new car" experience, isn't it? It costs a dickens of a lot of money to buy new cars the whole time.
The other trap people fall into is that of reaching the end of a financing deal that has cost them, say £500 per month. At the end of it, they have no further payments, SO have £500 per month burning a hole in their pocket - at which point, buying a further brand new car costing £500 per month "costs them nothing".
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I've noticed one or two drives that used to have nice ornaments parked now have old clonkers bleeding oil on the block pavers as the CC bites and the "owners" hand them back.
"Never a borrower nor lender be" was the way I was bought up
;o)
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PCPs can be very sheap if they are backed by the manufacturer - BIG discounts (40%!) up front to the leasing company means low monthly rates.
PCPs can be expensive so you have to look at each case carefully
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With a car purchase for most people the depreciation is the biggest expense and often an unknown at say 3 years.Manufacturers PCP takes the uncertainty out of that with the GFV.
With a new car on a PCP you know the expenses involved,pay the monthly fee,insure it,fuel it drive it,change it,you dont own it..you dont need to.Often the next owner of a 3 year old car is the one getting the more expensive deal,car outsde warranty,older tyres,batteries,exhausts etc and of course still depreciating well with a 2k mark-up on the price paid to the dealer.
As car buyers we often kid ourselves what our cars really cost us to own.
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I have read the replies and take everyone's points respecting your views. I feel better driving around in something I've paid for and having the choice about when I change it, rather than having to change it. Plus of course I have no monthly payments. But I'm going on a bit aren't I? I promise to give PCP's my full consideration next time!
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Purchased my new Mazda on a PCP, the first time I have obtained a car this way. Managed to get some discount from dealer plus some free extras. More than happy with my monthly payments as well. The GFV quoted looked very low at first and it was well below the used value quoted elsewhere. However, it was pointed out by the dealer that they would almost certainly offer more than this at trade in to allow a deposit for a new car. It was also pointed out that if I was not happy with the dealer offer, I could always sell privately and pocket any difference.
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I was reading another forum tonight and someone posted that Honda CRVs are being handed back in large numbers all on PCP.
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