PCP to buy a new car

IM

Morning all,

Went to trade my car in at a large 'supermarket' at the weekend.

I commute Manchester to Leeds every day, and am finally getting around to getting a diesel.

Unfortunately, the trade-in I was offered has made me re-think. Essentially the message was that there is no market for high-mileage cars, with the consequence that not only would this purchase be more expensive than I'd hope, but that I'd be in the same position in a few months if I bought another second-hand car.

(As a side issue, my car is just over 3 years old and has 45K on the clock. If 'average' mileage is 12K/year, I don't see 15K/year as that dramatic...).

Anyway, the fella's recommendation was to buy a new car on a PCP deal, and just give the (by then low value) car back after 3 years to start again.

Based on the depreciation I've seen whilst I've had my current car, I reckon I've effectively been 'spending' £312/month - so I'm not far off what a PCP would cost.

I've always they were to be avoided in the past, but given my mileage, I'm re-thinking. Any pointers/warnings/observations on PCPs?

abomb1969

sell it on ebay, get more for it. £7 to list and give it a try. Buy privately off Autotrader, bargain and save a fortune over the moneygrabbing car supermarkets.

Basil_Hume

PCP (or any finance arranged by the dealer) would usually get the hard sell. With PCP, the future value of the car is set artificially low, so as to encourage you to buy the car at the end, or effectively "sell" the car to the finance co. at the low price, or form part of a deposit for another finance deal. Each way, the finance co. / dealer win. However, if you can get the new car discounted sufficiently to start with, you can close the gap a little.

I'm looking myself at either a lease or PCP. The important thing to note is that a car that depreciates slowly / is discounted heavily to the finance firm will have the lowest monthly rental or payment.

The cheapest possible car to buy is the one that has the best balance of depreciation and future reliability - almost all new cars will outright cost more in comparison to used cars over a given period due to the depreciation. This would especially be true of used cars that would give small repair bills.

Like me, you may find that you're prepared to pay more for a new car due to the utility or equipment a newer car may offer - but it's unusual that a new car costs less over, say, 3 years as opposed to a wise used buy.

Likewise, diesel power may not be the way forward. A petrol car that depreciates more slowly could be more cost-effective, although of course most diesels these days depreciate more slowly than their petrol brethren.

misiudad

Sorry to hijack this thread but I too am looking at a new car and would appreciate advice on the use of PCP and contract hire.

The car I am after is the new Audi TT. It is not out yet so 2nd hand is not an option. Purchase price is approx £25000 and the projected retained value after 3 years is 60%. On this basis, my car would be worth £15000 in 3 years time. This got me thinking of alternatives.
I have never thought of PCP or contract hire but I think this may be the way to go. I have a quote of £274 + VAT a month on contract hire. If I add on the 3 months as a deposit and the arrangement fee, I am looking at a cost of £12457 inc VAT. A bit higher than the cost of depreciation. However, I have the cash to buy the car so if I simply left it in a saving account for 3 years I could earn £3000 in interest. My net cost of contract hire would then be £9457. So if I only plan to keep the car for 3years, then the cost of contract hire - interest from savings would be less than the depreciation I would have if I bought the car outright. I also don't have the hassle of actually having to sell the car.

PCP seems to work out worse for me with higher quoted monthly payments. For me contract hire seems the way to go.

Please advise if my logic is fundamentally flawed - I am new to PCP and contract hire and probably don't know all the pitfalls.

DealDrivers_company_representative

PCP is 'personal contract purchase' - it means you have a 'balloon payment' at the end (a guaranteed future value) which you can choose to pay at the end of the 2-3 years (on top of the monthly amounts you'll have been paying - and at that point you own the car, but not until. If you don't want to pay it/don't want to keep the car then you simply hand the car back to the funder or agree a sale process with them without ever paying that balloon amount.

Contract hire is a method used by companies who run vehicles, it means you never own it and so its depreciation is of no consequence nor matter to you - you are literally just 'hiring' the vehicle and it is never yours..the contract hirer always owns the vehicle and takes the depreciation risk.

That's it in a very small nutshell!

misiudad

So with contract hire, as long as I can cope with the terms of the agreement and the fact that I don't actually own the car, I just pay the rental instead of the similar cost of depreciation and away we go. In the meantime, I can invest the money I have set aside as opposed to tying it up in the depreciating car.

Cheers - CH it is.

pianeet

the other thing to remember with gfv is you are tied into the contract,a few years back when a customer wanted to trade his car up early,at a garage where my brother worked he was only offered £6,500,but if he kept it for another year the gfv was £7000,he could not believe it when the bloke still traded it in even though he would have gained £500 and free use of the car for another year.

but that is unlikley to happen now as they value the cars really low.