Hi,
I have only ever purchased cars on hp via bank loan and deposit and been caution of pcp. Probably because traditionaly my dad always had cars on hp.
Is there some "golden" rules on looking/negotiating pcp deals? What are the pitfalls?
I think the fact that I'm not physically owning somthing at the end of the term is one of the things that makes me shy away.
I've seen some deals such as a new 520i bmw for 369 deposit 369 a month. What's the catch?
HP has the highest monthly payments but it's fully yours at the end.
PCP it can be yours at the end but comes with a balloon payment, hence very low monthlies.
PCH is totally inflexible but if you want a new car each time can work out beneficial. Usually no ownership option at the end but sometimes it is offered.
Last edited by wileeeeeey; 28th May 2020 at 09:42.
PCP is a great tool to getting a new car that would otherwise be out of reach for most people. Just look at how many 17-21 year olds/first time drivers now drive a brand new A-Class, A1 or 1 Series rather than a 10 year old Fiesta or Corsa.
Essentially with PCP you are renting someone elses asset and you are paying the depreciation. It's up to you as to whether you consider this good or bad.
The main things to consider are the balloon payment, should you be inclined to purchase the vehicle at the end of the term. And the mileage you agree at the start of the contract, there will be a penalty at the end if you go over the agreed miles.
Surely someone has produced a comparison spreadsheet and posted online - that you can bung in approx figs?
Not looked myself - but I’d be surprised if there isnt...
{edit}. Just had a look - can’t find one!
Last edited by blackal; 28th May 2020 at 09:49.
You need to forget about ownership and focus on cost of ownership.
That's the only way to decide the cheapest deal.
The total outgoings (not inc fuel) whilst you had the car.
This only applies to new cars though, apples compared to apples.
A few years back contract hire was very cheap, esp run-out deals etc.
The deals have dried up there a bit in recent times, and I expect our current lease will be the last
And don't forget to include the loss of capital gains whilst your money is tied up in a car, when looking at buying outright
One of my leases was effectively free driving for 2 years, as the money I made on a lump of cash in an ISA covered the cost of the lease.
I think this is the issue and the one I need to get my head around. The cost of ownership. I know "most" people are on pcp deals these days.Originally Posted by demonloop
When looking I presume, you ideally want to put in a little as possible, highest mileage you can get and the highest final payment? Then just hand the car back?
As has been said, you need to look at the cost of ownership, but most costs will be the same (fuel, insurance, servicing - unless you get a great deal on included servicing), so the big ones are depreciation and the cost of having a lump sum tied up in a car (As I recall my A level Economics, that's an 'opportunity cost').
If you bought a car for £30K and it depreciated by £10K over 3 years, that car cost you £10K.
If you can get a deal that is less than 10K on lease or PCP, then it's a good deal, provided you would have bought a brand new car in the first place.
The trick is knowing what a car would be worth in 3 years time - The finance company take a gamble on that, but so do you if you buy or lease, it may always have been better to take the other choice. In many cases, though, the manufacturer has taken a knowing 'hit' and so the lease/PCP costs have been lower than the depreciation rate, this seems to be becoming less common.
I'm just coming to the end of a lease on a VW Golf R estate - It cost me about £10K over 3 years, which was probably about right, but they offered to sell me the car at a price significantly lower than the average forecourt price or the new price less what I'd paid, so I've bought the car (knowing it's been mollycoddled is a benefit too, I probably have one of the very few 3 year old VW Golf Rs that has never been 'launched'!) partly because it's a good price, but mainly because it suits my needs and nothing appealed significantly, certainly at a good price - Lease deals are not what they were, which has already been stated.
That said, these deals are a cheap way into a new car if you'd rather not commit a large chunk of capital in one go.
In my case, it would have been £35K+ tied up for 3 years and, up to, half that lost in depreciation.
Many people taking out these schemes, of course, don't have the money available to spend in one go and are relying on future income to cover lease/PCP/loan costs. For most it works out fine (HP/loans have been the norm for buying cars for decades for most people).
I'm not one who sneers at people who take out loans for big items. To me, it makes sense to keep some assets for a rainy day, rather than spend them to avoid having a loan which will be relatively easy to repay from those assets for a while, if things get hard. Getting a loan to pay for things if you're out of work is far harder than getting a low interest loan when you're employed!
I would consider leasing again, but as I'm not a frequent car changer (I had the last for 11 years), I doubt it will be in the near future.
One thing that people sometimes overlook - Extras are usually fully costed over the least term, so fancy paint, trim, sunroofs, dynamic suspension, etc will be fully charged to the first 'owner' and if you're leasing the benefit on resale isn't reflected in the cost. A friend, though, recently PCP'd a BMW X5 (horrible vulgar thing, imo), but got a high spec, 7 seat one because (he tells me) the PCP cost was lower than a poverty spec model due to a higher residual.
M
Last edited by snowman; 28th May 2020 at 10:33.
Breitling Cosmonaute 809 - What's not to like?
Worth bearing in mind that PCP has led to astonishing increases in list prices over the last decade. I still buy in manufacturer warranty used cars from car supermarkets for cash, but even so the savings are quite small. I just like the flexibility - and it's pretty clear that lots of folk a year into three or four year deals and paying 3 or 4 hundred quid a month for pretty humdrum cars are going to be regretting their decision, sadly.
I've PCP'd my cars last couple of times, historically its been better for me to do that and get the interest on the capital than to put it all into a car purchase (With the markets as they have been thats unlikely to be the case this time around), last car I actually paid the ballon fee and kept it as the ballon was £10800 and the car was worth around £15000 so I ran it another year and a half before selling it privately for £14k. This car (Fiesta on a 2.9% deal) I will likely hand back or sell privately.
There is no quick answer really you need to do the maths and compare your options. For me to even consider a pcp deal I want a decent dealer/manufacturer contribution plus a low interest rate ie less than 4% apr
Its pretty cheap to borrow money elsewhere at the moment ie Nationwide at 2.9% so if you can get a really decent dealer/manufacturer contribution for pcp you can buy the car and then clear the balance with a car loan which can work out cheaper
As Snowman, I was offered the chance to purchase my lease car when the 3 years were up earlier this year, at a significant reduction to the forecourt used price. But, I've taken out another lease (as I decided I want an estate not a saloon) and I'll likely choose to buy this at the end of the term. [When I say I will choose to buy, a friend will buy it and I'll buy it from them - for compliance with HMRC rules.]
What are these HMRC rules!?
Depends what you plans are my Volvo V90 I paid for outright as I plan to keep it for 5 years until youngest is older. I have the wifes RR on PCP as I plan to hand it back and get another; mainly so I am not out stuck with the massive drop.
- - - Updated - - -
Depends what you plans are my Volvo V90 I paid for outright as I plan to keep it for 5 years until youngest is older. I have the wifes RR on PCP as I plan to hand it back and get another; mainly so I am not out stuck with the massive drop.
We've tried a PCP for the first time ever recently. The offer price of the new car on PCP was £1000 less as a starting point and my wife's old car qualified for a £2000 scrappage. Her car was worth £500. The payment over 3 years is on 0% finance. I've stuck the balance due in 3 years into premium bonds. It was the best option this time in my opinion. I've covered the one potential pitfall with gap insurance.
Personally i do what you do op. Purely because I then own the car when the loan is paid off. Also, if I want to sell the car I have cash I can realise for other things. I maintain the same level of debt each time but the value of the car increases every change at around 3-4 years. As such my stake in the car is always increasing. This does require patience though and means not owning brand new cars as I try to minimise my depreciation loss.
As has been highlighted you need to see what works best for your needs. One thing people often forget is with PCP deals you need to save for the next deposit i.e. you can walk away from your current PCP at the end of the term. However if you want to start another you will need capital for the deposit
Sent from my moto g(7) plus using Tapatalk
Exactly what I did except the old banger I traded in for 2k I would have had to have paid to get rid of it! Coming to the end of the 3 years in June and as I don't particularly like the car, trying to figure out what to get next and how. I suppose if I am offered a great deal to buy it I should, as I have barely used it so mileage is low, but then I'd be stuck with it...
Why would you buy a car you don't like?
If its worth more than the balloon buy it and sell it privately
Quite which is why I have not really seriously considered it! Could do, is a service like we buy any car viable? Presumably less hassle than a private sale.
Yep you can use WBAC at the moment to get an idea of price also Evans Halshaw offer a simialr service
Excellent thank you!
Haven't you just provided an answer to your own question?
I must admit I agonised for a while over buying this car - It's a good car, does most things I want really well, but it's not a car I've ever really 'loved'.
In my mind I have half an idea to keep it a few months and then look for something else.
The big problem I have is that very few modern cars are particularly appealing to me - I hate the whole SUV thing, but I need a bit of carrying capacity.
I'd quite like to try a convertible (never had one) or something like a Porsche Cayman, but neither fit my actual needs for a car (and I have a sportscar in the garage that never goes anywhere!).
I though a BMW 420i 5 door might be a nice idea, but when I leased the Golf, I rejected it as having too small a boot and, to be honest, the ones at a similar price and mileage to the Golf were significantly older. I've also never driven one, so didn't want to commit without doing so (my only experience of recent BMWs from the driver's seat is a friend's BMW X3, which I liked the seats in, but disliked pretty much everything else).
In the end, I decided it was worth buying to have a car in these uncertain times and, knowing how this car has been looked after from you, it seemed a better bet than buying something with unknown history.
Lease deals, by comparison to when I took this one out, just looked very expensive.
M
Last edited by snowman; 29th May 2020 at 09:08.
Breitling Cosmonaute 809 - What's not to like?
I usually buy a 6 month old car from a main agent at well below the new price and run it for about 7-8 years and then repeat over again. I always pay cash.
Is this the most efficient way of buying a car ?
It's impossible to offer a generic answer. You will need to do your own sums. What did you pay less what it's worth plus repair costs will give you cost of ownership to compare with say a lease deal
Sent from my moto g(7) plus using Tapatalk
Good question. Rules against money laundering? ;-)
I do the same except keep it 3 to 4 years.
It has always worked out cheaper than pcp or lease.
I went Approved Used from BMW, but with delivery mileage. I saved a third off the retail price, and am funding it with a bank loan at 2.5%. It’s worked out as the best car I’ve owned, and at a lower price than my last three cars.
I did have to collect it from Park Lane in London, which made for a fun road trip home.
Sent from my iPhone using Tapatalk
Posting Permissions
Reply With Quote