Print

Please login or register.
1 Hour 1 Day 1 Week 1 Month Forever
Login with username, password and session length

[Field Marshal Dr. Opti]

After reading Jimmy's thread about his forthcoming BMW I wondered if anyone else has personal experience of PCP deals?

[Viral_Jim]

While (as you know) my practical experience with PCP is fairly limited, I can offer some thoughts on the product when I considered it before taking out the BM agreement and SWMBO's skoda yeti agreement.

IMHO the main dis-advantage to PCP is that it can put your supplying dealer at an advantage over you when it comes to the end of the agreement. Most manufacturers tend to be conservative when it comes to the Guaranteed Future Value (GFV) of the car, probably for two main reasons.
1. They wouldn't want you being able to walk away from a £10k car that you owe £15k on, which you could if they were too adventurous with the GFV.
2. By making sure there is a chunk of equity in the car, they have much greater power to keep you within their brand. Taking my BMW as an example, the GFV is £13k plus change. Looking at the classifieds, a 4yo sensibly specc'd M135i with under 50k on the clock cannot be had for under £18k private or £21k on BMW's approved used scheme. The problem is of course, selling a £20k car privately is no mean feat as you are open to a whole array of scammers and charlatans wanting to rip you off.

So, after my agreement is up, I'm faced with either taking out a personal loan to buy the car (not an option for a lot of people), trading it in as the deposit on a new model or walking away and "handing" the dealer my £5k of equity. Clearly, most people take the second option, hence "trapping you" in the brand.

Consequently I think its rather important to decide on your "out" for the agreement before you get into it. At the end of the two car agreements, SWMBO and I need to stump up £22k if we want to but the 2 cars, or walk away from  the best part of £9k's worth of our hard earned. Needless to say we won't be taking the second option! But we need to plan ahead to make it all works out.

My other thought would be around interest, the Skoda pcp was a no-brainer at 0% - anyone would think they'd just been in the grip of a major PR disaster and were struggling to shift cars  . The BMW 5.9% may or may not be competitive depending on you circumstances, for us, it wasn't particularly competitive but I chose to take it as it simplified our finances rather than juggling a loan, 2nd mortgage and a PCP deal. It may be tempting to look at funding a car through other forms of lending, but my only concern here would be making sure the life of the loan and the projected ownership of the car match up. It would be sad indeed to still be paying a loan on the car after you no longer have it!

Sorry if the above musings are teaching everyone to suck eggs, but I thought they may be of use. 

[aaronjb]

The problem is of course, selling a £20k car privately is no mean feat as you are open to a whole array of scammers and charlatans wanting to rip you off.

A friend of mine had a PCP deal on his 911 (997.2) C2S and, if memory serves, had no problem selling it privately at the end of the deal for something like £38k, paying the dealer his cut and walking away with the rest of the equity

[05omegav6]

Standard HP you can walk away after 50% has been paid

[05omegav6]

Standard HP you can walk away after 50% has been paid

[tunnie]

Personally I'd avoid HP like the plague! Too restrictive.

I'd get a bank loan, more flexible on the car and circumstances if miles per year change or other changes in your life.

But best route is buy cash, I've done that with both of my cars and the BMW which was £6.5k at the time.

In a couple of years I'll need a mum bus, I'll get that cash too. Save up and buy what you can afford is my approach.

[05omegav6]

Personally I'd avoid HP like the plague! Too restrictive.

I'd get a bank loan, more flexible on the car and circumstances if miles per year change or other changes in your life.

But best route is buy cash, I've done that with both of my cars and the BMW which was £6.5k at the time.

In a couple of years I'll need a mum bus, I'll get that cash too. Save up and buy what you can afford is my approach.

Not sure why that posted twice... Standard HP is a loan... Deposit from 0% to anything, no mileage restrictions. Only criteria is that if you voluntarily terminate you must have looked after the car, ie maintained it and kept it in good repair. Best way to play the game is to pay a minimal deposit and hand it back at the earliest opportunity. As long as you pay your 50% that can be from day 1.

Cash only works upto 10K due to money laundering laws.

[Entwood]

Personally I'd avoid HP like the plague! Too restrictive.

I'd get a bank loan, more flexible on the car and circumstances if miles per year change or other changes in your life.

But best route is buy cash, I've done that with both of my cars and the BMW which was £6.5k at the time.

In a couple of years I'll need a mum bus, I'll get that cash too. Save up and buy what you can afford is my approach.

Not sure why that posted twice... Standard HP is a loan... Deposit from 0% to anything, no mileage restrictions. Only criteria is that if you voluntarily terminate you must have looked after the car, ie maintained it and kept it in good repair. Best way to play the game is to pay a minimal deposit and hand it back at the earliest opportunity. As long as you pay your 50% that can be from day 1.

Cash only works upto 10K due to money laundering laws.

Not strictly/totally correct ... handing over folding notes .. yup .. but you can pay "cash"  ie .. no credit of any kind, by making a bank transfer for much larger sums very easily. Money laundering rules are obeyed because there are known addresses/account details all "proved" by the bank accounts of both parties.

It's how I paid for the new tin-tent .. which was a fair bit more then 10 grand !

[05omegav6]

Fair point.

Thing is, HP needn't be restrictive, any warranty issues and the repayments can be used as leverage.

PCP is a different animal and is as restrictive as leasing. The ONLY difference being that a PCP allows you to buy the item at the end, where as leasing does not

[tunnie]

I personally will still avoid both, save up before and buy cash. No limit on cash transfers as long as you provide proof of its source, which I had to do moving significant sums for house deposit.

[2boxerdogs]

I personally will still avoid both, save up before and buy cash. No limit on cash transfers as long as you provide proof of its source, which I had to do moving significant sums for house deposit.

.   




Quite agree cash is king, have bought my last 7 cars for cash & always got a good chunk off the asking price.

[tunnie]

I personally will still avoid both, save up before and buy cash. No limit on cash transfers as long as you provide proof of its source, which I had to do moving significant sums for house deposit.

.   




Quite agree cash is king, have bought my last 7 cars for cash & always got a good chunk off the asking price.

It's then done and it's yours 

Don't like idea of paying huge sum every month for 3 years then not having anything to show for it. Unless you wack down a load more money. You still have insurance, tax, service costs in there.

Chap at work just bought a new car, HP "deals" we're just nuts, vastly expensive. He got a bank loan on 3.something % - Half cash and half bank loan, he went best route after 100% cash, IMHO

[05omegav6]

I personally will still avoid both, save up before and buy cash. No limit on cash transfers as long as you provide proof of its source, which I had to do moving significant sums for house deposit.

.   




Quite agree cash is king, have bought my last 7 cars for cash & always got a good chunk off the asking price.

It's then done and it's yours 

Don't like idea of paying huge sum every month for 3 years then not having anything to show for it. Unless you wack down a load more money. You still have insurance, tax, service costs in there.

Chap at work just bought a new car, HP "deals" we're just nuts, vastly expensive. He got a bank loan on 3.something % - Half cash and half bank loan, he went best route after 100% cash, IMHO

Please stop confusing Hire Purchase, effectively a secured loan; with a Personal Contract Plan, effectively a VAT inclusive lease with a purchase option.

They are two very different things, and whilst I appreciate that neither is your preferred route for purchasing, they can both suit different peoples needs and do have a place in the world, as both are useful from a budgeting perspective.

[dbug]

Cash every time - if you can't afford it, don't buy it 

[Viral_Jim]

Cash every time - if you can't afford it, don't buy it 

Overall I don't disagree, after all paying interest on anything is a mug's game. However, I think its down to perception in a lot of cases. For example (unless you are one of a very wealthy minority), you wouldn't consider buying a house on that principle.

I think that as long as you match the finance term to the expected life of the asset in your possession (or ideally less) then it isn't always a bad thing. After all, there is an opportunity cost to tying up large sums of money into assets you can't easily liquidate (or in the case of cars - can't easily liquidate on favourable terms).

Taking my skoda example, you'd have to be bonkers to buy one in cash if only because a) inflation will erode the amount you have to pay off, making the car effectively cost less. b)opportunity cost of tying up the cash c) The 0% interest is factored into the price of the car so buying in case effectively means you are cross subsidising someone else's finance.

Obviously when you're paying interest on the money that shifts the calculation somewhat.