• This topic has 68 replies, 34 voices, and was last updated 1 week ago by andy4d.
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  • PCP experiences
  • molgrips
    Free Member

    Cars, not drugs. Specifically used cars.

    Considering this for a potential EV purchase. The internet says that you can effectively “sell” the car or trade in for something else if you want to change, but how does this go? Do you get rinsed? Is it a hassle?

    I appreciate you can’t simply hand it back early, but is there a “change in circumstances” clause if you lose your job or something?

    sc-xc
    Full Member

    I sold a PCP lease early (Nissan Leaf). It’s just like any loan, you can call them any time to get a settlement figure.

    weeksy
    Full Member

    Do you get rinsed?

    Of course you do, that’s why they offer it 🙂

    However, that doesn’t make it difficult or complicated, just expensive.

    the-muffin-man
    Full Member

    It’s just like buying a car with a normal loan. The only difference is a large chunk of that loan isn’t due until the end of the deal where you either pay it off, hand car back or trade in for another model.

    You are responsible for the whole loan, not just the 3/4 years of lower payments bit.

    If you do go PCP make sure the final payment isn’t a stupid amount or you could end up with a car worth less than this payment. You can give it back of course.

    molgrips
    Free Member

    It’s just like buying a car with a normal loan.

    Except they own the car, not you.

    If you do go PCP make sure the final payment isn’t a stupid amount or you could end up with a car worth less than this payment. You can give it back of course.

    Well this is a risk with buying any car – I could borrow the whole lot myself and the value of the car could still drop below the outstanding finance. The difference with PCP is that I have one chance to get out of negative equity at the end of the term.

    the-muffin-man
    Full Member

    Except they own the car, not you.

    With any car loan the finance company has an interest in the car until the finance is paid – depends if you class that as them owning it. The V5 on a PCP/loan will be in your name – but don’t pay and they’ll soon be at your door with a car transporter. You can sell or part-ex the car at any time.

    The only difference is with a lease where you are just renting the car long term and it’s never owned by you.

    martinhutch
    Full Member

    Cars, not drugs. Specifically used cars.

    Powered by Angel Dust?

    binners
    Full Member

    *eagerly awaits the ‘I have dismantled my PCP car on my drive and now I don’t know which bits go where’ thread*

    😀

    TheFlyingOx
    Full Member

    Depending on the deal it can be a great thing. I was always a firm believer in owning a car rather than leasing and it’s unlikely I’d have current one if it weren’t for a crazy PCP deal. Just over £300/month when the same car was upwards of £800/month with other dealers – no idea why the offer was so good but it was a Toyota main dealer, not an indy.

    Was 48 monthly payments and a final payment of ~£22k although this was at Jan 2022 interest rates – pretty strong residuals so I figured it would likely make sense to pay that at the end and own the car outright. When I got the car I set up monthly savings to cover half this amount on that basis. I figured it would be a cheap(ish) way test if I could live with the car knowing I could hand back the keys after 24 months and walk away with no penalties.

    uggski
    Full Member

    Also a good idea to take out gap insurance in case you have an accident and the car is written off as you may not get the full value paid out. Gap insurance will pay the difference.

    airvent
    Free Member

    Never really understood it, who suddenly has a 22k final payment sat waiting to cover off the final payment? If you hand the car back or trade it in you might as well have leased the car as it’s usually cheaper per month than PCP. The APR is usually really high as well and I’m fairly sure it is applied to the final payment as well, so if you need to loan money again to pay the final payment, you’ve paid interest twice.

    TheFlyingOx
    Full Member

    APR on mine was stupidly low as I said, that’s why I was finally tempted. Car was £34750, I paid £1k initial contribution and then £311 x 48 months and slighty less than £22k at the end, making for a grand total cost of ~£2000 interest on a £34k loan over 4 years. Interest was about 2% iirc, which was really low even for pre-Trussonomics Britain.

    And if the final payment hits you “suddenly” you’re not doing it right. Mine was going to be half paid for by the savings I was putting away to cover it. It’s a decent enough car that it would be worth borrowing another ~£10k at the end to buy it. But I’d have ~£10k of savings available for something else if I decided not to.

    I’d say PCP maybe isn’t for everyone, but it lets folk drive about in newer, nicer, safer cars than they would otherwise be able to afford.

    doomanic
    Full Member

    We bought my wife’s car on PCP. At the end of the term we were offered significantly less than the GFV despite the car being very low mileage and absolutely pristine so all the flannel about using the equity to fund the deposit on a new car was utter bollocks. Fortunately, we had opened a savings account specifically to cover the balloon payment so we payed off the balance and still have the car now, 7 years later.

    molgrips
    Free Member

     If you hand the car back or trade it in you might as well have leased the car as it’s usually cheaper per month than PCP

    Yeah but you can only lease brand new cars, which means you are paying for massive depreciation. However you can PCP used cars.  A new Hyundai Ioniq 5 is north of £800/mo to lease, but a used one with the same mileage allowance on PCP is £350.  That offer was for 4 years 15k/year with a final payment of I think £12k, which I could borrow unsecured or save up for.  Essentially if you borrow for the balloon payment you’re just getting a longer term loan, if you save up for it during the period you’re just creating a much more flexible loan.

    iainc
    Full Member

    At the end of the term we were offered significantly less than the GFV despite the car being very low mileage and absolutely pristine so all the flannel about using the equity to fund the deposit on a new car was utter bollocks.

    think this depends entirely on the market and timing.  I sold my Audi Q5 back to Audi, 3 and a bit years into a 4 yr PCP last summer, and got £6k into my bank account.

    boomerlives
    Free Member

    My local dealer is doing PCP’s on nearly new Renaults for £3000 down and 36 x monthly payments of £0!

    I’m sure all affordability criteria are being met…?

    And if a balloon payment is a shock after running a car for nowt for 3 years you shouldn’t be behind the wheel.

    airvent
    Free Member

    That can’t be right, so you can have a nearly new Renault for 3 grand then hand it back after 3 years and walk away?

    TheLittlestHobo
    Free Member

    Not all PCP’s are the same.  Some have a balloon payment, some have a guaranteed future value.  There is a difference.

    Balloon payment, you either settle the balance, trade it in or sell it.  One way or another you are paying the finance company that final payment.  Residual values plummet – tough shit.  Cant afford it – tough shit.   Some think they are getting a good trade in when the dealer ‘offers’ them enough to settle final payment or even more but in reality they are usually just putting it into the new metal.

    Guaranteed future value is different and we as a dealership (Commercial) have even taken to using it on demonstrators we dont feel entirely comfortable running.  New expensive model with no track record….put it on PCP over 12 months and let the manufacturer take the depreciation risk.  EV’s with huge depreciation risk but we are obliged to run…..put them on PCP’s and smile when handing them back to the manufacturer who has fields full of them and put them back on dealer auction for less a few weeks later.

    The EV market is currently so difficult to predict i wouldnt want to HAVE to make that final payment if i didnt want to.  I would want the option to hand the keys back and walk away OR if it suited me, make the payment if I CHOSE to.

    the-muffin-man
    Full Member

    My local dealer is doing PCP’s on nearly new Renaults for £3000 down and 36 x monthly payments of £0!

    Link please! 🤣

    molgrips
    Free Member

    If the car is only predicted to depreciate £2k then yes. Seems low, but ok.

    ashhh
    Full Member

    If it was a good deal for the consumer, the dealer/manufacturer wouldn’t offer it preferentially over HP..

    franksinatra
    Full Member

    Guaranteed future value is good if you think the car might suffer from a lot of depreciation, like an EV might

    My wife had a Merc on quite good value PCP. At the end of the term we sold the car via Motorway, cleared the finance and got £7k cash that was used for deposit on next car.

    Kramer
    Free Member

    I’m pretty sure that if the car is going to depreciate a lot, then PCP is a good deal, because the manufacturer swallows the depreciation. Conversely, if it’s not going to depreciate a lot, then PCP is a bad deal because you end up paying more than you needed to.

    Also, if you keep rolling over from one deal to another, I think you can end up owing quite a bit of money to the finance company when the music stops, but I’m not sure about that.

    molgrips
    Free Member

    I would not want to change the car at the end of the deal, unless it turned out to be way over the odds.  I keep cars for a long time.  I would view it as a way to be able to afford a more expensive car i.e. an EV.

    tonyf1
    Free Member

    If you do go PCP make sure the final payment isn’t a stupid amount or you could end up with a car worth less than this payment. You can give it back of course.

    The dealer will tell you you’ll have plenty of equity left over from the Guaranteed Future Value which is the final payment. Usually a load of flannel.

    If you are going to walk away it’s actually better if the GFV it high compared to the actual value of the car as you’ll have saved that difference if you’d bought outright. Dealer takes the loss in this case.

    droplinked
    Full Member

    @TheLittlestHobo I think you mean not all finance agreements are the same. The guaranteed future value is the distinguishing feature of PCP agreements, without that it would probably be marketed as a Hire Purchase or Conditional Sale agreement.

    Hire Purchase is a kind of regualted finance where you ‘hire’ the vehicle for set period and then have the option to hand the car back or purchase the vehicle at the end. You are still liable for all payments including any balloon payments, even if handing it back.

    Conditional Sale is similar but you don’t have an ‘option’ to purchase, instead you automatically own the vehicle at the end once all payments have been made.

    Agreements can have various payment terms. Some have low/no deposits, some have balloon payments – there’s nothing regulating/governing this.

    All PCP agreements are Hire Purchase Agreements, but have an additional feature where the future value of the vehicle is guaranteed in the contract (Guaranteed Future Value / “GFV”) and the dealer is contractually obligated to buy the vehicle back from you at that price. This is what ‘handing the car back’ means in practice.

    If this GFV is not enough to settle the remaining outstanding balance you will still have to pay the difference. Never take out a PCP where the GFV is lower than the balloon payment, but most are priced so that they’re about equal or the GFV is higher. Without the GFV you wouldn’t have the option to ‘hand it back and walk away’ without paying the balloon payment.

    In theory they give consumers more choice and flexibility with less risk. If the car depreciates more than the GFV they can ‘hand it back’ and walk away without paying balloon payment, and if the car depreciates less than the GFV then they can pay the balloon and keep the car (or sell it on at a ‘profit’).

    The cheapest way to finance a car is usually an unsecured personal loan (assuming you have a good credit rating and qualify for the headline APR).

    molgrips
    Free Member

    The cheapest way to finance a car is usually an unsecured personal loan (assuming you have a good credit rating and qualify for the headline APR).

    It is, and that’s what I’ve always done, but you can usually only borrow so much and only over 5 years, which makes the payments big – and you are gambling on the future value of the car – if for example you need to change it for some reason or sell, and you are in negative equity then you are stuffed.  If you were able to find a loan longer than say 5 years then that increases the chances of negative equity.

    I am a bit ahead on one of my cars; the other I think I am probably a little bit ahead as well but only because I bought it quite cheap.  Of course, as I get closer to the end of the loans I will become better off as when the loans reach zero the car should still have some value left.

    FunkyDunc
    Free Member

    I would not want to change the car at the end of the deal, unless it turned out to be way over the odds.  I keep cars for a long time.  I would view it as a way to be able to afford a more expensive car i.e. an EV.

    Then a PCP is a ‘risky’ way of getting the car then. IMO PCP is designed for people who want a car they cant necessarily afford at the time and want to swap fairly regularly, and thats more important that the actual cost of ownership.

    We have used PCP when we have wanted ‘cheap motoring’ for a couple of years between cars that we want. ie £250 deposit £150 per month. I would never buy a very expensive car on PCP that I intended to keep.

    What figures are you looking at ? ie deposit and monthlys, and final payment?

    I wouldnt buy any EV today and keep it more than 5 years the tech is moving that quick. Hopefully in another 5 years there will be a better tech to replace battery.

    andy4d
    Full Member

    I have just signed up for my 4th PCP deal. It has worked well for me and give  me a new car with hassle free/no big bills (other than tyres), motoring. I have moved between dealers, all but the first one were on 0% so cheaper than bank loans etc. I had about 5k in equity in each car at the end of the deal and just used that for the next car. This time was a tougher decision. I was going to keep the car and pay the final payment but due to higher interest rates I was looking at about a 10% increase in my monthly payment to keep the car. The final payment was 15k but I am getting 27k as trade in and I am jumping on the EV bandwagon, reducing my monthly payment by 25% due to the huge equity I now have in the car plus saving a load in running costs. At the end of this deal I reckon I will be lucky to have any equity due to the used EV market but the savings over 3years make it worthwhile.

    molgrips
    Free Member

    Then a PCP is a ‘risky’ way of getting the car then.

    Risky how?

    Hopefully in another 5 years there will be a better tech to replace battery.

    There might be, but the current tech is good enough.

    I have a specific requirement (towing) and the best option is the Ioniq 5, which are around £24k now at three years old.  PCP deals advertised on Autotrader for 4 years/15k miles were something like £1500 down and £376/mo.  Borrowing the money even if I could get a favourable rate it’d be about £450 ish over 5 years but the key issue would be risk – even if I lose my job and I can’t keep the car, or its value tanks I’d still be on the hook for the money.

    matt_outandabout
    Full Member

    My local dealer is doing PCP’s on nearly new Renaults for £3000 down and 36 x monthly payments of £0!

    Link?

    sc-xc
    Full Member

    Yeah but you can only lease brand new cars

    You can lease used cars…I’m look at all options at the moment and noticed this the other day.

    airvent
    Free Member

    Borrowing the money even if I could get a favourable rate it’d be about £450 ish over 5 years but the key issue would be risk – even if I lose my job and I can’t keep the car, or its value tanks I’d still be on the hook for the money.

    With the PCP you’ll be in negative equity until a couple of months before the end of the 4 years most likely, and if you lost your job you’d still be on the hook for it as even voluntary termination requires 50% of the loan to be paid off, and that 50% is the total amount including any interest, fees and the balloon payment value.

    If you financed it yourself, you’d be paying more off each month and into positive equity much faster so would be able to sell the car whenever you chose to and likely be left with some cash.

    sc-xc
    Full Member

    ^ you can sell the car any time during the agreement and pay it off. I have done this. I just phoned the Nissan finance people, got a settlement figure and sold the car privately.

    airvent
    Free Member

    You’re allowed to but it’s not going to cover the outstanding loan amount on a PCP deal, the monthly payments are almost always less than the depreciation until somewhere around year 3 or 3.5 so it doesn’t offer the protection molgrips suggests.

    finephilly
    Free Member

    Speaking as an ex-car salesman, there is no way I would buy a personal car on finance. They are depreciating assets.

    We could get more commission from finance arrangements than selling the actual car.

    molgrips
    Free Member

    there is no way I would buy a personal car on finance

    So what should I do? Save up £23,000?

    simondbarnes
    Full Member

    So what should I do? Save up £23,000?

    I find that saving up is the best way to buy shiny things.

    tjagain
    Full Member

    PCP?  phenylcyclohexyl piperidine?  angel dust?

    Never tried it myself

    molgrips
    Free Member

    With the PCP you’ll be in negative equity until a couple of months before the end of the 4 years most likely

    I was about to say that graph looks like it applies to new cars.  But if there’s less depreciation on a used car that would factor in, wouldn’t it? I think that same curve would apply regardless.

    Given how the prices of this particular car are falling, it might soon drop to the point where we could buy using a standard unsecured loan.  Given we already have two that would require selling those two cars probably first and clearing those loans, which would be mildly inconvenient but as you say, it could work out better.

    This is an interesting discussion thanks all.

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