Personal Contract Plan for a new car

py6km

I'm not sure if this is the correct forum, but I couldn't find one that was more relevant - MODs, please let me know if this is in the wrong place.

I need some advice with regards a personal contract plan for a new car. My wife and I went to our local Honda dealer with a view to getting a new CR-V today.

The car is £25,000, and would have a guaranteed minimum future value (gmfv) of £10,000 (all figures give or take a little). Am I right in thinking therefore that the amount of money that I will pay any interest on is £15,000 (i.e. car price - gmfv), becuase the gmfv is the optional payment at the end if I decide to keep the car, and is not therefore subject to interest? I think this is how they woek....the idea being you keep the monthly payments low which we need to do for a while.

We want a 4 year PCP deal, and they said the lowest that it would be is £470 per month (this is without me putting any payments down at the start).

Now, £470 per month for 4 years means that I will be paying about £7,500 in interest on £15,000 over that period. This is just crazy, or am I working this out incorrectly?

I simply couldn't believe it, and we just walked out - they didn't put up much of a fight to keep us there either, which I would have thought they would do.

Does anyone have any ideas what I can do, becuase we really want the car. I do intend to put some deposit in, but only after I can get down to a sensible monthly figure in the first place.

GunJack

I think you'll find the interest is charged against the full amount, and stops when you give the car back at the end of the 4 years. Remember, you're effectively borrowing the full amount over the 4 yrs, and only "pay it all off" when you hand the car back.

As an alternative, you could just get a loan and buy a used CR-V, your £470 pm over 2 yrs would give you rather a lot of buying power, and you'd actually own the car

py6km

That could explain it - I thought the interest was only payable on the the difference between the price and the gmfv.

Unfortunately there are no second hand ones yet, as its the new model which officially comes out 20 Jan.

I might wait for 6 months, and try and get a nearly new one for less.

Pretty dissapointing.

py6km

GunJack wrote:

I think you'll find the interest is charged against the full amount, and stops when you give the car back at the end of the 4 years. Remember, you're effectively borrowing the full amount over the 4 yrs, and only "pay it all off" when you hand the car back.

As an alternative, you could just get a loan and buy a used CR-V, your £470 pm over 2 yrs would give you rather a lot of buying power, and you'd actually own the car

Actually, I'm not sure that can make sense -- £470 pm for 4 years gives a total of about £22,500, which is less than the value of the car.

If the interest is charged on the full amount and not the car price - gmfv, wouldn't the monthly payment be such that over 4 years it would turn out to be more than the price of the car, i.e. price of car + interest ?

py6km

... unless you mean that the interest applies on the car price (£25,000), and the monthly payments are on the car price - gmfv but with the interest applied on the whole amount ?

So, price + interest over 4 yrs = total

then monthly payment = (total - gmfv)/48

:think:

But that still means that I would be paying about £7500 interest on a £25,000 'loan', i.e. about 30% !?

GunJack

The total payable under these plans is what you pay over the term PLUS the gfv - you pay it, you keep the car. If you don't, they get the car back and sell it.

I personally would never touch one of these plans, total rip-offs. Also, don't forget the reductionin the gfv if you do more mileage than is contracted.

OverlandLandy

I'm now on my 3rd PCP so may be able to help.

A few pointers -

Get some quotes from some of the bigger PCP suppliers such as Lombard,HSBC,Freeway or ARVAL. (there are lots of others around).

If it is via your employer they may have a 'special deal' with some nominated suppliers.

Often the 'PCP' suppliers will in turn have special deals with different manufacturers.

Give a realistic estimate of the miles that you will cover over the 4 years - as it is Cost price- depreciation + Interest type calculations that go on behind the scene. Ie if you do low miles the depreciation is less than if you do lots of miles, thus you pay less

Decide now if you want to Buy at the end (as a second family car perhaps) or walk away? If you want to walk away go for the lowest depreciating vehicle that suits your needs. IE - if you wanted a small runaround a Mini is good value as the £per month is quite cheap.


If you want a Maintenance package included - these will vary in a BIG way between suppliers. If you go for a BMW Diesel for example they may throw in free service for a while. You need to watch what is included from each PCP supplier (car tax? New Tyres etc....? or JUST normal service costs). You also need to make sure that you book the car in for a service at the correct time/service window or it could invalidate your contract!

So
Get the car you want as CHEAP as you can.
Get as LOW an %APR as you can.
Treat a PCP like a 'cash deal' when talking to a main dealer - as they don't care where the cash comes from!
If you have a personal plate - check you can put it on BEFORE the car is registered, and that you will retain title to it.

One final 'tip' is to get a price comparison over say 2 3 or 4 years.
Generally cars with 'unlimited' warranty are cheaper per month as it would cost the PCP supplier less if something goes wrong. Also look at a pre-reg car or an ex Demo - as this scrubs off some of the depreciation (which is steepest in the 1st year).

My own car was cheaper (per month) over 2 years vs 3 years: this was down to the fact that as a higher mileage driver it would be out of warranty in just over 2 years.
The PCP provider would then need to take additional cover.....which you end up paying for!

Hope this helps


BTW - the cheapest /month cars i found were: 1: Mini Cooper 2:Seat Altea 3:Skoda 4x4 4:CRV 2.2 SE Diesel.
The Audi TT was also very cheap/month due to low depreciation - but was no good for my job! The BMW estate was also pretty decent but the 'extras' were a real rip off!

OverlandLandy

GunJack wrote:

I personally would never touch one of these plans, total rip-offs. Also, don't forget the reductionin the gfv if you do more mileage than is contracted.

Each to their own....however....
Sorry - I have to disagree - it all depends how you negotiate. I got my car at a good APR, cheap maintenance package and almost £2500 below list.

I sold my last car back to the dealer it came from, for a profit vs what i had to pay for it - this more than covered my Interest payments. And in the meantime my money was sitting in my bank and being offset against my mortgage for 3 years!

They have already said that they will give me £1800 more than I have to pay for it when my contract ends in December this year -the reason being it came from them and has a full service history with only 1 driver. They will still make a few quid on it to as I got it built to my spec with a good few extras.

If not trading in, I could sell it privately and make around £2.5k - but this depends on the deals that are around at the time.

You need to view a PCP as a 'possible' option - and take a 'Big Picture view' of the whole deal.

GunJack

The point is, though, it has cost you £x to "borrow" a car for 2/3/4 yrs. Hardly money saving...

Phoenix79_2

GunJack wrote:

The point is, though, it has cost you £x to "borrow" a car for 2/3/4 yrs. Hardly money saving...

You'll lose money if you purchase a car with the depreciation etc. Cars cost money....whatever way you look at it.

Phoenix79_2

py6km wrote:

I'm not sure if this is the correct forum, but I couldn't find one that was more relevant - MODs, please let me know if this is in the wrong place.

I need some advice with regards a personal contract plan for a new car. My wife and I went to our local Honda dealer with a view to getting a new CR-V today.

The car is £25,000, and would have a guaranteed minimum future value (gmfv) of £10,000 (all figures give or take a little). Am I right in thinking therefore that the amount of money that I will pay any interest on is £15,000 (i.e. car price - gmfv), becuase the gmfv is the optional payment at the end if I decide to keep the car, and is not therefore subject to interest? I think this is how they woek....the idea being you keep the monthly payments low which we need to do for a while.

We want a 4 year PCP deal, and they said the lowest that it would be is £470 per month (this is without me putting any payments down at the start).

Now, £470 per month for 4 years means that I will be paying about £7,500 in interest on £15,000 over that period. This is just crazy, or am I working this out incorrectly?

I simply couldn't believe it, and we just walked out - they didn't put up much of a fight to keep us there either, which I would have thought they would do.

Does anyone have any ideas what I can do, becuase we really want the car. I do intend to put some deposit in, but only after I can get down to a sensible monthly figure in the first place.

I just quoted this up from Lex:

Honda Cr-v 2007 2.0 i-VTEC EX [ACC/CMBS/HID/AFS] 5dr Auto
Quote Number 910970393
Contract Period: 48 months Annual Mileage: 10,000
Price
£444.40
per month
Price Breakdown
First Monthly Payment £1,135.00
This Includes
Your Deposit : £1,000.00
Credit Acceptance Fee : £135.00
Monthly Payment : £0.00
Followed by 47 monthly payments of : £444.40
Optional final payment of :
Should you wish to retain the vehicle at the end of your agreement this is the amount you pay.
£10,239.60

Payment breakdown based on £444.40 per month
Finance : £442.45
GAP Insurance : £1.95
Maintenance :
This includes £0.00 VAT at 17.5%
£0.00

Your car finance is based on the following
List Price : £26,416.00
Cash Price :
This includes all discounts and road fund licence for the duration of your contract
£25,797.32
Contract Type : PCP
Credit Amount : £24,799.27
APR : 9.3%
Total Amount Payable : £32,261.40

So the figure you were quoted of £470 with no deposit seems to be about average