car buying crazy ..

[flearider]

so took the wife down to buy her new car ..well new a 2014 model last day and all that .. so guy comes out with a nice figure and I'm like yeah not bad .. Honda civic se 1.8 so after going thru most of the paper work I'm like whats that there then ..

and he said that's your pcp ???? which is whats left at the end ..well whats that for ?? he said it's what you have to trade in in 3 yrs ?? so I said no I wanted a 5yr 0% interest hp deal ..he said we can't don't do that now ..




so after a while talking your pcp is whats left that you owe so you can 1) take out a loan on that to pay it off 2) use it for a deposit on another car .. 3)give the car back ..

a win win for them and a lose lose for you ..

after saying no another gent came out and started what could only be described as good cop bad cop .. he got told to go away




strange way to sell cars these days .. low payments seem great till you reach the end ..your basically leasing the car nothing to show for it in the end ..
there creating bubble finance in the long run the bubble always burst

winds me u

[Guy]

Depends on your circumstances and use(s) for the car.
For some PCP'ing is a great way to have fairly hassle free motoring. You can budget for the majority of costs then at the end of the term you've got a few options. Who's to say circumstances haven't changed so you'd need something different, or you've put plenty of miles on it and don't fancy the gamble of something older/higher mileage/out of warranty.
'Cheapist' way to get people into new cars, plus puts plenty of used stock back into the system...

To counter that no it's not for everyone. But no one is forcing you to go down the PCP route
Unless the manufacturer directly is doing some sort of deal at the time you'd be VERY hard pushed to get 0% on a HP deal unless you're putting a hefty lump down (50% +). Doesn't mean rates can't be haggled. See what sort of APR you'd get on a loan and use that as a starting point. Not forgetting seeing what price the brokers can get for the car as you'd be surprised at the thousands you can save. I've often found that it can be cheaper to actually order brand new compared to 'nearly' new.

My next car will be a lease, as if you're not picky plenty of good deals to be had. Plus by the time I'm done with it/the mileage I'll be putting on I'm not sure it'd make much financial sense to keep it!

[Butcher]

PCP isn't a new thing, and it doesn't appear to have created a bubble so far. It is sort of leasing with an option to buy at a fixed price at the end, but not quite. If the car is worth more than the final value you get to pocket the difference, unlike with an actual lease. If the car is worth less, you hand it back and the dealer takes the hit.

Still a bit odd that they wouldn't do you an HP deal (oh missed the 0%; yeah not surprised they wouldn't do that, they are losing money hand over fist on 0% finance).

[flearider]

so you put 5k down on a car drive it for 3 yrs paying monthly = 12.5k and now the cars worth 10k or less and you still have 8k pcp to pay which you will pay interest on ..
so you lose your 4k deposit and still have a massive debt unless you start again how long can that go on for your running into neg equity all the time ..
at least with hp your paying slightly more monthly over 5 yrs but have a car with a pos equity at the end

forgot to add you get a set mileage if you go over that you get charged yet again 7.5p per mile .. ??

and for car companys to be making money off this it means the cars are well over priced to begin with
the last car was 0% was up for 14k at the time got it for 10k owe 3k on it could easly sell it for 5.5k

[Butcher]

At the end of the 3 years you can give the car back and walk away, you don't owe anything at that point, regardless of whether the equity is negative or positive. Because of that the dealers don't tend to aim for you to be in negative equity, quite the opposite. It's in their interest for you to be in positive equity because then you have effectively paid more than the cost of leasing you the car. At that point you can either stump up the cash and buy the car, or sell it and pay off the outstanding equity, keeping the difference as a deposit for a new car (or just as cash if you prefer). If the outstanding amount is more than the car's worth you walk away, and have effective got a cheap lease, since you have paid less than the depreciation on the car. By contrast on HP if the car value tanks you're stuck having ploughed in the cash and with a car worth buttons.

[Butcher]

As a quick example, take a car worth say £15k, on PCP with a £6k lump sum after 3 years vs HP over 5 years. We'll say 0% interest for both to make things easier (it doesn't make a huge difference with interest) and a £3k deposit.

On HP you pay £7.2k over 3 years, and have £4.8k left on the loan agreement after 3 years. On PCP you pay £6k over 3 years and have £6k left to settle as the lump sum.

If the car has held it's value and is worth £7.5k you have £2.7k of equity on your car with HP, whereas with PCP you only have £1.5k, but you've paid £1.2k less so you have £1.2k extra cash. Financially you're in much the same position.

If the car's value hasn't held up and it's worth £4.5k you have -£300 equity on your car with HP, whereas with PCP you had the car back, you have zero equity, but you still have your £1.2k that you didn't spend. So you're now £1.5k up relative to having taken HP.

So generally you're no worse off with PCP, so I'm not sure how it's such a lose lose for you.

Also, the mileage issue only comes up if you hand the car back; if the car is worth more than the settlement amount the mileage is not an issue since you just sell the car and give them the money. The mileage is negotiable when you take out the PCP to boot, so as long as you state your mileage accurately it's not a problem. People run into problems when they say "oh yes I only do 5k miles a year" to reduce their payments when they actually do twice that.

It does tend to favour changing car every 3-4 years due to the way the terms work, but for many people it works out cheaper than taking out HP finance for a car.

[KeyboardDemon]

I found this article, I don't know if it will help the OP, but it certainly made things a bit clearer to me. I had no idea what PCP was before.

[DanceswithUnix]

if the car is worth more than the settlement amount the mileage is not an issue since you just sell the car and give them the money.

I thought the car belongs to the finance company at that point (hence you can just hand it back) so that means it isn't yours to sell and would come up on an HPI check as such.

I don't think PCP is any worse than the other options, but seeing your sizable deposit become possibly nothing at the end of three years does kind of drive home the financial nonsense of buying a brand new car. I also looked at lease as the up front deposit is way smaller but someone told me their insurance is way higher on a lease car as you are not and never will be the owner in a lease agreement.

I was wondering if it would get me out of the cycle of having to pay £800 service bills, but at £300 a month to get something comparable to my current old car I am paying that sort of money every 3 months so I would actually be 4 times worse off. For what? Modern cars don't rust, and at 10 years old it is still reliable specially with only 70K miles on the clock. I expect my next car will be used again.

[Butcher]

I thought the car belongs to the finance company at that point (hence you can just hand it back) so that means it isn't yours to sell and would come up on an HPI check as such.

It's not quite as straightforward as they own it. Legally you both (the purchaser and the finance company) have an interest in the car, so both parties consent is required to sell it. So they can stop you selling it if they want to. Generally they're fine with part-exchanging it against a new vehicle, and some are fine with you privately selling it and paying them the balance (effectively you're acting as their agent in that situation). If you have the liquid cash you can always settle the lump sum and immediately sell it of course.

I was wondering if it would get me out of the cycle of having to pay £800 service bills, but at £300 a month to get something comparable to my current old car I am paying that sort of money every 3 months so I would actually be 4 times worse off. For what? Modern cars don't rust, and at 10 years old it is still reliable specially with only 70K miles on the clock. I expect my next car will be used again.

A new car is absolutely the worst way to save money on car ownership. Depreciation is far higher than any running costs on anything but the biggest money-pit lemon out there. I sold my last car at 9 years old with 90k on the clock and it was mechanically sound; I'd expect it to run for double that time/mileage really.

That said I do have a new car, but I didn't buy it to "save money", I bought it because I wanted it and accepted the costs as part of that.

[flearider]

if your a car salesman .. and a pcp customer comes in with a car say the car is worth 13k and his pcp is 10k .. how much are you actually going to give him ? 11k? I asked this question this morning to someone on another forum he lol'ed and said I'm there to make money and make the seller believe I'm doing him a good deal

[Ttaskmaster]

That said I do have a new car, but I didn't buy it to "save money", I bought it because I wanted it and accepted the costs as part of that.

This is the only time I'd ever buy a new car and, TBH, I'd only ever go in with all the money up front. All I got from reading the various guides on car finance were a load of TLAs and a general impression that I will be screwed by the dealership whatever I choose.

Happily every motorcycle and every car I'm interested in (and could ever afford) is an old model (as in roughly 1978-1996), so can be had cheap as chips if you look in the right places.

[kalniel]

if your a car salesman .. and a pcp customer comes in with a car say the car is worth 13k and his pcp is 10k .. how much are you actually going to give him ? 11k? I asked this question this morning to someone on another forum he lol'ed and said I'm there to make money and make the seller believe I'm doing him a good deal

You'd be a very bad salesman if you wanted to give the customer money at the end of a PCP! The customer is the one giving you money to keep the car, otherwise (s)he just hands it back with no money changing hands.

[DanceswithUnix]

Happily every motorcycle and every car I'm interested in (and could ever afford) is an old model (as in roughly 1978-1996), so can be had cheap as chips if you look in the right places.

I think this was my deciding factor too in the end. I am sure I could scrape the money together to get a new car (just) with a bit of sacrifice, but tbh I can't see a single car out there that I really want to buy. You know you got it right when you find yourself glancing over your shoulder at a car with a big grin as you walk away from it after a drive, if I thought I was going to get that then I would be tempted. I don't get that from my current car (and suspect I never will from any other diesel either) but that is OK from a cheap option.

[Butcher]

if your a car salesman .. and a pcp customer comes in with a car say the car is worth 13k and his pcp is 10k .. how much are you actually going to give him ? 11k? I asked this question this morning to someone on another forum he lol'ed and said I'm there to make money and make the seller believe I'm doing him a good deal

If the salesman is going to lowball you by 2k he can do that regardless of how the car is financed. You could just as easily say, if a customer who owns the car outright comes in with a car worth 13k, how much are you actually going to give him? 11k? There's no compulsion to take the first deal presented to you, nor to trade your car to some shyster who wants to rip you off.

[DanceswithUnix]

If the salesman is going to lowball you by 2k he can do that regardless of how the car is financed. You could just as easily say, if a customer who owns the car outright comes in with a car worth 13k, how much are you actually going to give him? 11k? There's no compulsion to take the first deal presented to you, nor to trade your car to some shyster who wants to rip you off.

I think most of us get very little practice at haggling over things like this. A house every decade, a car about every 7 years for me. I think that makes sites like carwow rather enticing.

[scaryjim]

... You know you got it right when you find yourself glancing over your shoulder at a car with a big grin as you walk away from it after a drive ... I don't get that from my current car (and suspect I never will from any other diesel either) but that is OK from a cheap option.

I have a similar assessment, but mine is the width of my grin as I pull down a sliproad on to the motorway. Last weekend I had a Fiat 500L 1.6 diesel, and was very, VERY, pleasantly surprised. Then I looked up the spec and details online, and discovered that buying new would be around £20k. I need to stop judging potential future car purchases on my experience of driving hire cars

That said, in 5 - 10 years time, if I'm looking for a second hand car, I know that a 2014 Fiat 500L diesel just might do the trick for me