PCP - 3 or 4 years?

cheekychappy

We had a look at the A1 Sportback when there was £750 contribution.
On a 1.4TFSi in black with no add ons, on 4 year PCP with 1k deposit it was £206 per month and with 2k it was £186 a month. With PCP you really need to put in as little deposit as you can as you won't see it again.

Ultrasonic

cheekychappy wrote: »

With PCP you really need to put in as little deposit as you can as you won't see it again.

That makes no sense. Although for the particular numbers you gave the £1k deposit option is cheaper. Normally though a larger deposit works out cheaper, which makes sense since you are borrowing less money. Obviously always do the sums on the options available though.

geek1981

Lower the deposit the more you pay over 3 years as you pay interest on what is owed. I think you got confused with PCH and PCP.

cheekychappy

geek1981 wrote: »

Lower the deposit the more you pay over 3 years as you pay interest on what is owed. I think you got confused with PCH and PCP.

I was talking PCP... I predict the difference of the GFV from the actual value at the end and say that the less money you put in the better unless you intend to buy the car outright. If you are trading up to a new car, I bet there won't be the same amount of equity as deposit you put in at the beginning. May not be exact science, but most of your deposit will be lost in instant depreciation.

geek1981

GFV remains the same if you put lower or higher the deposit. So if you put lower deposit you will be paying the rest of it on a higher monthly payment and probably extra as you pay back more for the interest on the balance?

cheekychappy

geek1981 wrote: »

GFV remains the same if you put lower or higher the deposit. So if you put lower deposit you will be paying the rest of it on a higher monthly payment and probably extra as you pay back more for the interest on the balance?

...I'm aware of the GFV not changing...but if you change cars at the end of the term, you won't be seeing that big deposit as equity at the end...hence if you are not going to keep the car, so in this case a lower deposit is better IMO.

Ultrasonic

cheekychappy wrote: »

...I'm aware of the GFV not changing...but if you change cars at the end of the term, you won't be seeing that big deposit as equity at the end...hence if you are not going to keep the car, so in this case a lower deposit is better IMO.

I'm afraid you are wrong.

For identical GFV the the only comparison that needs to be made is the total cost over the term of the PCP contract. The easy bit is to just add up the deposit and all the monthly payments for each deal being compared. A complicating factor is that if paying a smaller deposit means keeping more money in a savings accout then the interest earned on this money should be deducted from the cost of that deal. In practice though the interest rates on savings are usually lower than those on the loan, so the larger deposit would be expected to work out cheapest. The obvious exception being if a garage has a 0% finance deal.

It's probably always worth checking exactly what the terms would be for different sizes of deposit, but it would certainly be to be expected that a larger deposit would work out cheaper in the long run. There is no 'logic' that means a smaller deposit is best.