PCP duration?

largeloins

Can anyone give me an answer to this question.

I want to PCP a new car but change it around 2 - 2 1/2 years. Is it financially better for me to PCP it over 36 or 42 months.

Many thanks
Ian

motorguy

largeloins wrote: »

Can anyone give me an answer to this question.

I want to PCP a new car but change it around 2 - 2 1/2 years. Is it financially better for me to PCP it over 36 or 42 months.

Many thanks
Ian

"it depends"

You wont save much putting it over a longer time period - just a few pounds per month, but then you dont have to worry about changing it for longer.

My wife went for a 4 year deal on her BMW z4 as she knows she'll never get another deal like it in threes years time, so will benefit from having the car for the fourth year - its a 2.0i Turbo, black, black leather, 19 inch alloys, xenons, heated seats, etc, list price of £35K, and she has it for £299 a month!

TradePro

Ian, my instinct is that 36m would be better, as this is closer to the time when you are likely to change, of course.

A big factor is which brand of car, and how their finance arm works.

For example, Kia (who I currently work with) set GFV's very low, but the downside is payments are relatively high as a result - for example, Sportage's have GFV's of around £6000-£9000 depending on spec, when the cars are going to be worth comfortably more, therefore giving you excellent equity, and unlikely to hinder you from trading early.

Paul's BMW example (does sound a lot of car for £299 p/m) tells me that the GFV must be very high, so the only option will be to hand back to the finance company with no chance of any equity.

Sorry if I'm wrong Paul, but I can't see how else that one would work - hope you didn't have to put in too large a deposit.

motorguy

TradePro wrote: »

Ian, my instinct is that 36m would be better, as this is closer to the time when you are likely to change, of course.

A big factor is which brand of car, and how their finance arm works.

For example, Kia (who I currently work with) set GFV's very low, but the downside is payments are relatively high as a result - for example, Sportage's have GFV's of around £6000-£9000 depending on spec, when the cars are going to be worth comfortably more, therefore giving you excellent equity, and unlikely to hinder you from trading early.

Paul's BMW example (does sound a lot of car for £299 p/m) tells me that the GFV must be very high, so the only option will be to hand back to the finance company with no chance of any equity.

Sorry if I'm wrong Paul, but I can't see how else that one would work - hope you didn't have to put in too large a deposit.

I think you're spot on - the non premium brands tend to be quite expensive as their residuals are very low anyway, whereas the premium brands fare better in a PCP deal as they can set the residuals higher. Hence its probably cheaper to PCP a BMW 3 series than a Ford Mondeo.

RE: the z4 deal, yes, its set up that there wont be much equity - if any - in the deal. She typically puts in a 10% deposit, buys new, drives three years and either chops it back in and uses any equity towards her deposit or hands it back. Works for her and the money isnt a problem to her.

If you have any urges towards owning the car, i'd recommend just straight finance over 5 years rather than the complication of the PCP

largeloins

thanks for your replies guys.

I'm sure someone told me once that in order to "play" the PCP System it's cheapest to go for the lowest possible mileage option.

How do finance companies work it out?

If I take out a 10,000 annual mileage 36 month PCP, but terminate (buy new car) after 30 months. Will they calculate that I should have done 30 x (10000÷12=833.333r) = 25,000. If I have done 27,000 at 30 months, will I have to pay the excess mileage rate on the 2,000 or nothing as it's under 36,000?

thanks

TradePro

You only need to pay excess mileage charges if you end up in a position of negative equity, and wish to hand the car back.

If you keep the car (by paying the GFV either cash or by refinancing) then it's 100% yours, and the mileage you have covered is nobody else's business.

If you trade the car in against a new/newer one, there will of course be a variation in it's value depending on mileage, so this will adjust the amount of positive equity you have towards your new car.

Only if you are throwing the car back to the finance company can you be faced with excess mileage costs.

Going back to my previous post, this is linked to the brand of car because they all operate PCP in different ways.

To the best of my knowledge, manufacturers that tend to set GFV's high and leave you with no equity include;

Audi
BMW
Peugeot (and I'm pretty sure Citroen too)
Volkswagen (perhaps SEAT & Skoda too, not sure though)

I'm sure there are many others, if you tell me what car you are looking at I'll try and find out a little more for you.

TradePro

largeloins wrote: »

but terminate (buy new car) after 30 months. Will they calculate that I should have done 30 x (10000÷12=833.333r) = 25,000. If I have done 27,000 at 30 months, will I have to pay the excess mileage rate on the 2,000 or nothing as it's under 36,000?

thanks

Just to clarify, you wouldn't be terminating at that stage, you would be trading in.