90% of our cars have been used and good value buys. Never ever though of PCP but reading the Mini PCP thread and looking at Ling's webside has made me realise it could suit our situation for the next three years. Even more so as I love the new Citroen C5 and they are very cheap on contract.
Could dive in and arrange tomorrow but wondered what the trend might be in rates over the next 3-6mths? I've never followed PCP rates to know how they fluctuate over the time of year and in the longer term related to car prices/residuals/etc. Wonder too if the C5 would follow a normanl trend or might have its own pricing foibles.
I must say I get the Ling way of operating and would happily deal with her organisation rather than a straight faced desk/phone jockey.
Edited by M.M on 06/12/2009 at 14:22
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PCP absolutely locks you in for the duration of the contract (or at least until you have paid 50% of the value of the car). The agreement is fixed, including the interest rate, so you have to satisfy yourself you're happy with the rate. it won't change.
You also can't get out of it early, even if you lose your job and can't afford it. That's what happened to me. As it happens I could manage to keep making the payments and it was all fine - the car was eventually a bargain, but it was a bit painful for a while. Beware!
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You can insure your PCP payments against redundancy, sickness etc. but of course it adds to the monthly outlay. We use PCPs for our cars, but for them to be most effective you need to:
- intend to trade the car in for another at or towards the end of the contract: I wouldn't fancy having to pay the 'balloon payment outright, which is what you have to do to keep the car;
- buy a car that holds its value, so that at the end of the contract your car is worth more than the balloon payment thus giving you a deposit on the next car.
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Doubt things will change hugely for the "Average" 1.6/2.0 Diesel car but you might find some subtle adjustments for other cars depending on what Darling does in the Pre-Budget report. If more duty goes on fuel then rates on more fuel hungry cars may well increase as they depreciate more with higher fuel costs.
Out of interest what do you mean the "Ling way of operating"? Having looked round the site a bit what's the difference between that and any other lease company?
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Ahh perhaps I've used the term PCP in error. I mean the contract scheme where you make 3+35 fixed payments to have the vehicle for three years. At the end you hand it back with no baloon payment and no option to buy. It is under warranty for the three years and covered by the makers recovery scheme plus the contact people pay the VED for 3yrs.
The thinking behind this idea is....
Any day soon we collect a 3yr old C3 diesel for her which we've bought from savings. Having a Citroen used car warranty on that means no unexpected repairs for the first year and we should save almost £1000 in fuel each year so that's all good. My car needs replacing between now and next Summer but we'd not really wanted to lay out another big chunk of savings so the 3yr hire/lease seemed a good way to balance out our motoring costs. To be honest I would not want to be left with a C5 out of warranty to maintain at my cost or to sell on so this fixed costs option with handback at end of term has attractions. I would save a further £1000 or so on fuel changing my current Mondeo petrol for a diesel C5.
Useful warning Gordon but I'm in a very unusual situation of a self funded early *retirement* with an old fashioned company pension that kicks in during 2011. So anything I can afford now will only get easier as the lease gets in mid term. The only thing SWMBO thought of was some sort of insurance to cover death might be good so she didn't have to pay for an unwanted second car in that circumstance.
By the Ling way of operating I meant the very lively website and upfront way of presenting the company to customers... I gather some folks have said it might put them off.
Edited by M.M on 06/12/2009 at 22:27
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It could be argued that any lease scheme involves you (the punter) paying all of the actual costs involved plus an element of profit for the leasing company ?
If there's any benefit to you then it's because the leasing company can get the car and its maintenance cheaper than you due to sales volumes and they pass some of this saving on.
The litmus test is whether that profit which you're providing to the lease company is less or more than the savings you could reasonably obtain via elements such as the method by which you finance, source and perhaps maintain the car.
Interest rates are low and likely to remain so for much of the time period you describe, so borrowing the money elsewhere (say via your mortgage) might be a cheap option, getting a second hand car with good warrantee might be another option e.g. the Ford Direct warrantee is excellent and gives 2 years peace of mind from my past experience.
Garages tried to sell us PCP recently, I wasn't interested and probably never will be, but that's a personal choice.
Are your views shaped by having run a company car until your retirement by any chance ? I opted out of my company's scheme for 4 years, it was not the hassle that habitual company car drivers seem to think although I probably wasn't much better off !
Reread your last post, I guess if you've retired then you're not in a company car at present - sorry
Edited by idle_chatterer on 06/12/2009 at 22:45
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Thanks IC... some good thoughts and that's what I need. At the moment the choices are so varied it's hard to get a direction. Historically I've usually run my own good value budget/middle range used cars with a couple of company cars and a couple of own purchase new cars along the line
Here's how I see the comparison for the C5 diesel tourer that interests me....
Taking the Ling contract way my first months payment is £870... which after selling my old car quickly at auction leaves me enough for the first years comp insurance plus the first 1200mls of diesel. Then I make a further 35 payments of £290/mth totalling £10,150. I pay for my servicing but the VED is included and car is under warranty the whole time.
The Hire Purchase comparison to keep the monthly payments within an acceptable range plus not put down a huge deposit would need it to be over 60mths.
This would involve a £4000 deposit so for a start after selling my own car I'd need to chip in almost £3000 from savings on day one to include insurance. Payments would be £323/mth so I'd be down another £1188 over the first three years compared with Ling contracts. And I'd have to pay my own VED so add a further £ 360 over 3yrs.
So after the three years the hire purchase car would have cost me £5678 more. For that I would have the dubious pleasure of owning a C5 out of warranty still with 24 payments to go at a further £7752!
Unless someone can see massive holes in the examples I've given I'd far rather save the £5678 over the Ling contract period and have the freedom to go off and do whatever I fancied next.
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Watch the VAT rise - payments from 2010 will be at least 17.5% not the current 15%
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It could be argued that any lease scheme involves you (the punter) paying all of the actual costs involved plus an element of profit for the leasing company ?
It often not that straightforward.
Citroen's are always heavily discounted anyway, but other manufacturers, particularly the "prestige" brands, often subsidise contract hire (and PCPs) as it's a way of shifting more cars without having to resort to obvious price discounting.
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Thanks for reminding me of the vat FB. I wonder if that means the payments could rise after Jan even if we signed now?
BP that's the impression I got with the C5. On my example the contract hire for one was so much cheaper than hire purchase (even on a discounted from list price) I could only think Citroen are throwing them into the contract people at very very low prices. This must be true as a C5 HDi Tourer is £60/mth cheaper than an Astra CDTi Life Estate.... madness!
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Thanks for reminding me of the vat FB. I wonder if that means the payments could rise after Jan even if we signed now?
Invoicing after 1st Jan will be new rate
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So I should be aware if vat rises to 22.5% in 2011 to offset Gordon's recent spending I'll get that applied!
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It often not that straightforward. Citroen's are always heavily discounted anyway but other manufacturers particularly the
Yes that's certainly my experience, current company 330d which was ordered exactly a year ago in Dec 2008 and has a very cheap monthly lease (for such a car) which pointed to desperate discounting by BMW at the time. The monthly lease cost increased (for new contracts) by nearly £200 by early Jan 2009, has since come down to about £100pcm more than I pay.
So the whole thing is very time critical, in the end you are paying for all of the leasing company's costs plus profit, however if they've got some amazing deal you can benefit provided they pass on the savings.
I'd still look to the costs for buying a car from a broker (so getting some indication of the leasing company's purchase price) or a 1 year old with a good quality warrantee then financing it as cheaply as possible (i.e. not necessarily hp), it's easy to estimate maintenance from service plans and allowing for a few tyres etc. After that you'll know the true difference, an additional benefit is that you'll be insulated from increases in VAT which may even benefit you and not the chancellor in the form of potentially better residuals.
Being more flexible about the car might be a good idea e.g. Mondeos, Vectras, Avensises, Peugeots etc might offer a good quality alternative to your Citroen.
As in any business, people profit from asymmetry of information, you can try to level the playing field by some simple research and playing around with a few spreadsheets....
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The cost of a lease car is determined by a factor called "manufacturer assistance"
This always includes the format of extra purchase discount (for example my Laguna had a discount of 28% on price to dealer - they stupidly left the paperwork in the car when it arrived!)
So its purchase and resale value that provides the pricing basis for lease car costs. Servicing is a factor, but pretty much screwed down to a price by the leasing companies these days.
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Some harsh facts
Interest Rates in the UK are artificially low, the country has massive debts now
I fully expect after the election whoever wins that interest rates will have to climb and the government will have to use inflation to devalue some of its debt
So my predictions are rampant inflation, your savings wont be worth a fraction of what they are now, and significant interest rate rises forcing many to sell up their houses
Its worth noting that the Bank of England has moved the pension fund for its own employees totally into inflation linked bonds, if this doesnt tell you the way things are likely to pan out nothing will
So I think post election next year the whole world of finance will change, for both PCP and hire purchase
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It is true that coming out of the depression we are in at the moment, means that inflation is a danger.
This means that as the economy picks up, interest rates will rise to kill inflation. The increase may be quite dramatic, say a rise to 6% rise a year. This will clearly effect any form of finance involved with the purchase of cars. And pay what you can afford off of your mortagage now - while its at giveaway finance levels
We wont get "rampant inflation" and to say your "savings will be worthless" is an obscene exageration. The high interest rates will mean good money to be made on savings.
Edited by Altea Ego on 07/12/2009 at 15:57
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I assume the contract hire people are working with borrowed money so interest rates increasing would push up the monthly rates??
I must admit our plans for the next 5-10yrs are allowing for things to turn nasty when the banking bail out money is clawed back somehow.
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I'm on the mailing list for Viatura and have just had an email from them saying:
'We have been informed that Citroen Contract Hire rates are set to substantially increase in the new year.'
I don't know if anyone can confirm if that's correct!
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Sterling decline against many currencies.
PCP must go up if
1)list prices go up
or
2)incentive discounts go down
or
3) Prices up and discounts down
PCP rates will rocket
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Just for info the rates have gone up already. In the 2wks since the C5 was delivered the monthly rate for new contracts has risen by £35. £7 of that is the increase in VAT on payments, the rest an increase in the contract itself. Might not seem much but it's £1064 over and above the vat rate rise for the 3yr term.
Seems we got in about right.
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