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  • PCP Car finance ? Worth considering ?
  • tommygunadam
    Free Member

    Looking to get a new car but only want to use my old car as the deposit and pay the minimum I can get away with each month. Read a lot about about PCP and was looking for some opinions from people who have used it. Haven’t financed a car for more than 10 years so have zero experience of this option. Thoughts appreciated .

    nick1962
    Free Member
    FunkyDunc
    Free Member

    I would say yes if you get a premium brand and put very low deposit in. If its Ford/Vauxhall etc then no

    shotsaway
    Free Member

    If you plan to change your car every two or three years, then yes it is worth considering.

    PCP (Personal Contract Purchase) is a type of HP agreement but where a guaranteed future value (GFV) is set at the start, based on the term of the agreement and your annual mileage. This GFV is deferred until the end of the agreement. The benefit of this is that it gives you lower monthly payments than traditional HP because your are deferring the GFV.

    At the end of the agreement, you have 3 options.

    1) the 1st option is to take the car to ANY dealer (you are NOT tied to the original dealer) and part exchange it for a new car. If the vehicle is worth more than the GFV, the difference here will be your deposit for the next vehicle. For example if the car is worth £5000 and the GFV is £4000, the dealer will settle the PCP with £4000 and the £1000 equity will be your next deposit.
    2) if the dealer value the car at less than the GFV you simple contact the finance company and hand it back. This will be subject to fair wear and tear. If the car is over the agreed annual mileage or if the vehicle is damaged, you may be liable for excess mileage charges or rectification costs.
    3) the final option is to settle the GFV yourself and keep the vehicle. Although before you do this, you would need to get the dealer to value it. If the the car is worth more then pay off the GFV but if the car is worth less than the GFV then go back to option 2.

    The trick to PCP is to put as small a deposit as you can get away with. You don’t want to put in more than 10% deposit as this can lead to deposit erosion. For example a 30% deposit (lets say £3000) may give you a nice low monthly payment today but if you only have £500 equity at the end, your monthly payments on your next car may jump up a bit. For this reason don’t put more than 10% deposit in.

    So if you fancy changing your car every two or three years then PCP is certainly the way to go. If you then decide that you don’t want to change at the end you don’t have to. Just pay off the GFV.

    All PCP’s are tri-party agreements that are regulated by the Consumer Credit Act and the Consumer Credit Directive. These will offer you the same protection you get on a credit card with regard to merchantabilty issues ( from memory it’s called Section 75 in the Act).

    The idea of PCP is to get everybody into option 1, so that they change their cars every 2 or 3 years. This is what the dealers, car manufacturers and finance companies want. Lots of regular repeat business is the idea.

    shotsaway
    Free Member

    Additional info

    Don’t ever accept the 1st quote they offer. Whatever monthly payment they offer, haggle it down a bit.

    stavromuller
    Free Member

    The vehicle must be absolutely pristine when returned or it will cost you dearly. I got stung for £650 when I gave back my old Voyager.

    breatheeasy
    Free Member

    Whats your plans for the future?

    What will happen is you use your old car as deposit, pay the 36 months or whatever, and when it’s time to renew you’ll get nothing above the guaranteed rate for the car, i.e. you’ll have no deposit for a new car. You can’t get a loan to pay for the deposit as you’ll be paying that plus the finance for the next car together.

    If you keep it you’ll still be financing on a 2nd hand car paying top book price for the priviledge.

    Oh, and if you hand it back like I did then make sure they contact the finance section to tell them you’ve handed it back – I ended up with a black mark on my credit record for nonpayment of loan I never realised about until I remortgaged. Quickly resolved once they realised I was a one page article in one of the car magazines expressing my plight that month!

    tommygunadam
    Free Member

    Thanks for info above. Definitely food for thought. Can’t claim to be great at keeping a car in pristine condition as mountain biking and keeping a car spotless generally don’t mix that well. Fling in a couple of young kids and who have zero sense of value then I could be facing an unexpected bill. Maybe just lower my sights somewhat ……. Thanks again

    couldashouldawoulda
    Free Member

    It’s very very specific to your circumstances – it can be cheaper or dearer than a used car.

    My wife does this for a few reasons and has never ever had a complaint.

    For her:
    1- she needs a reliable for work “newish” car with warranty, breakdown
    2- to take cash out of her savings was more than the “interest rate” that bmw charged on a new pcp
    3- she has 15 years ncd – never dented or scratched a car in her life.

    So for her it works – about £220 a month to drive a new car every 3 years. Every time – about 6 months before expiry they persuade her to get a new one. Always the same monthly rate – otherwise she walks – and the call back a few days later.

    I’m not a fan – but for her it works out cheaper for a new car. She could drive an older car (possibly just still under warranty), but she gets courtesy cars, collect from home, no hassle trading in,….

    But – big but: she is probably their target market. They never quibble over a mini scratch / dent,

    Your options in 3 / 4 years time possibly/ probably dictate their reaction to kids puke marks etc.

    br
    Free Member

    Before you sign up consider what would happen if you got laid off during Month 2 of a 47 month deal…, as a friend of mine just has 😳

    tommygunadam
    Free Member

    I have investments that mature every 3 to 5 years but am in limbo at the moment with them as next one isn’t due for another year and my current car is starting to cost me money in repairs. Will have spent almost half the value of the car keeping it on the road by the end of the year. So would have the cash for another deposit but it’s a welcome reminder.

    bruneep
    Full Member

    Look at m & s car loans.

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