PCP on second-hand car - worth it?

motorguy

macman wrote: »

There is nothing wrong with a PCP in principle,

Totally agree, however thats a willfully bad deal.

BIG cash deposit, high rate, overpriced car.

Hintza

Brand spanking new £10,800

http://www.honestjohn.co.uk/cars-for-sale/search/New/Ford/Fiesta/?q=Titanium

Transformers

Nick_C wrote: »

To save others having to Google "PCP", its "Personal Contract Purchase" and it's explained here ... http://www.arnoldclark.com/newsroom/006-pcp-pch-or-hp-car-finance-explained

I do hate people using TLAs without explaining what they mean ...

Eh, perhaps you should have explained your use of 'TLA' then - you've committed exactly the same 'offence' in your reply!

Transformers

In three years time, that two year old car will be five years old - so older than the one you have now - why not just keep the car you have now for another couple of years and save the money for a new one.

With a PCP the monthly payments are kept lower because the 'balloon payment' is held back and then becomes due at the end of the period if you decide to keep the car.

So, you'll be giving the dealer your perfectly good four year old car, you'll pay the monthly payments for the next three years and then - unless you pay the residual payment - you'll have nothing to show for it.

thescouselander

Transformers wrote: »

In three years time, that two year old car will be five years old - so older than the one you have now - why not just keep the car you have now for another couple of years and save the money for a new one.

With a PCP the monthly payments are kept lower because the 'balloon payment' is held back and then becomes due at the end of the period if you decide to keep the car.

So, you'll be giving the dealer your perfectly good four year old car, you'll pay the monthly payments for the next three years and then - unless you pay the residual payment - you'll have nothing to show for it.

That's a bit of a misrepresentation about how PCP works. Yes, the OP would not own the car at the end unless paying the balloon payment but the monthly payments would have been lower than if buying the car outright - the op won't own the car because they haven't paid for it so nothing lost. Basically PCP let's you cover the costs of depreciation without having a load of capital tied up in the car - if you were to look at PCP vs Cash purchase on a balance sheet the costs of "ownership" would be the same in both cases.

Granted it's a different way of having access to a car and you need to be comfortable with not actually owning the vehicle - on the other hand, with the complexity of today's cars, there's something attractive about being able to just hand the car back.

loskie

you may find leasing a better deal.
http://www.freedomcontracts.com/Volkswagen-UP-1.0-Move-Up-5Dr-Personal-Lease/2246

macman

Same old story. People see '£1,000 cashback' offered and assume they are saving a thousand. That thousand is of course more than recovered in the higher price, high APR, low trade in value etc....

jaydeeuk1

I'd never want to finance a car that will be out of manufacturers warranty within the finance term. Car blows up with an uneconomic/unaffordable repair bill, and you still owe the finance Co. Either save up and pay in cash or finance a new car (which with the right deal will probably cost the same) where costs will at least be fixed

thescouselander

jaydeeuk1 wrote: »

I'd never want to finance a car that will be out of manufacturers warranty within the finance term. Car blows up with an uneconomic/unaffordable repair bill, and you still owe the finance Co. Either save up and pay in cash or finance a new car (which with the right deal will probably cost the same) where costs will at least be fixed

Interesting scenario and I guess this is why PCP deals don't usually cover out of warranty cars. Let's say this did happen though - I wonder if the buyer would be on the hook for repairs because a) it's not their car and b) the finance company would be jointly liable for any problems with the car because of the credit agreement.

Sounds like a can of worms anyway.

motorguy

thescouselander wrote: »

That's a bit of a misrepresentation about how PCP works. Yes, the OP would not own the car at the end unless paying the balloon payment but the monthly payments would have been lower than if buying the car outright - the op won't own the car because they haven't paid for it so nothing lost. Basically PCP let's you cover the costs of depreciation without having a load of capital tied up in the car - if you were to look at PCP vs Cash purchase on a balance sheet the costs of "ownership" would be the same in both cases.

Granted it's a different way of having access to a car and you need to be comfortable with not actually owning the vehicle - on the other hand, with the complexity of today's cars, there's something attractive about being able to just hand the car back.

All very well if the O/P wasnt being asked to put in over £5,000 of a deposit, which they'll have lost + the monthly payments. :eek:

One of their primary reasons for doing this is so that they dont have to "start again" down the line, but this is exactly what this deal is going to do for them - leave them with nothing.