Cheap personal contract purchase

MSE_Amy
MSE_Amy Posts: 53 MSE Staff
First Anniversary Combo Breaker
edited 5 October 2023 at 3:40PM in Loans

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  • Whilst looking at funding my new car, I got my dealer's PCP quote at nearly 6%, and was looking at other alternatives. Then my bank mailshotted me with an offer of 3.7% for a personal loan. However, the on-line calculator would not allow less than a 4 year repayment.

    It struck me that a five year loan would leave an amount outstanding after three years similar to the balloon on a PCP, and repayments more or less similar. You lose the guaranteed future value, but that was always illusory and conservative, and you lose the opportunity to hand the car back after three years. You gain total flexibility - you can repay at any time or let it run for the full five years, or anything between. It is also cheaper.

    Make your own checks and ensure it works for you before doing anything. However, it works for me and I am doing it.
  • bearcat16
    bearcat16 Posts: 339 Forumite
    First Anniversary First Post
    PCP deals from main dealers often come with incentives, such as 2 years free servicing or £500 deposit contribution.

    I took the PCP being offered, got the free servicing, and the £500. Made 1 payment then settled the finance agreement with a personal loan from tesco at half the interest rate. It's a win win.
  • Mobeer
    Mobeer Posts: 1,851 Forumite
    Academoney Grad First Anniversary Photogenic First Post
    The car PCP examples here do not make clear that interest is charged on the full amount financed - £16,000 in example used. This is potentially confusing; this thread was started by a user who did not comprehend this example:
    http://forums.moneysavingexpert.com/showthread.php?t=5543379
  • Hi all
    Came across a company called carmi.co yesterday. Had a chat with them and they sell cars on special PCP leases that allow you to rent the car out on airbnb-like sites for cars like hiya car, ridelink and easy car club, so that you can make money from renting the car out.

    I am however not sure about their claim that you cannot rent the car out on a normal PCP lease the same way. Does anyone have any insights into if you are actually allowed to rent your car on a normal PCP lease?
  • Nebulous2
    Nebulous2 Posts: 5,101 Forumite
    First Anniversary Name Dropper First Post
    Mobeer wrote: »
    The car PCP examples here do not make clear that interest is charged on the full amount financed - £16,000 in example used. This is potentially confusing; this thread was started by a user who did not comprehend this example:
    http://forums.moneysavingexpert.com/showthread.php?t=5543379

    I agree with you here - the wording is very misleading:-

    "To 'borrow' the car you pay...
    Deposit: £2,000
    Loan: £8,000 (£10,000-£2,000) plus interest
    Total: £10,000 plus interest"

    The "loan" is in fact £16,000, and you are paying interest on £16,000. You only repay £8,000 of it during the contract but you are charged interest on all of it.
  • Nearlyold
    Nearlyold Posts: 2,284 Forumite
    First Anniversary Name Dropper Combo Breaker First Post
    edited 30 November 2016 at 7:10PM
    Nebulous2 wrote: »
    I agree with you here - the wording is very misleading:-

    "To 'borrow' the car you pay...
    Deposit: £2,000
    Loan: £8,000 (£10,000-£2,000) plus interest
    Total: £10,000 plus interest"

    The "loan" is in fact £16,000, and you are paying interest on £16,000. You only repay £8,000 of it during the contract but you are charged interest on all of it.

    That's not the only misunderstanding, its not unknown for customers to come in at the end of a PCP agreement thinking the dealer will take the car back and the whole of the GMFV is then the deposit on their next vehicle - what a stonking deal that would be - don't pay for a third of the cost of the car, bring it back and the get paid for the entire third of the cost of the car that you never paid.
  • orrery
    orrery Posts: 797 Forumite
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    It is worth noting that PCP is a good way to buy cars that may have high depreciation. e.g. an electric car, where (in 2 or 3 years time) the specifications will have improved dramatically and new prices potentially dropped. The Guaranteed Minimum Future Value is likely to be artificially high so no-one in their right mind would go ahead with the purchase option. This is ideal if you want to keep switching to better models over time.

    PCP also works well with premium brands, as the GMFV is likely to be higher.
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  • I am looking at buying Skoda Fabia on a PCP as want low monthly payments. But can I take advantage of their £2000 deposit contribution and AA cover, then simply pay the PCP up with a cheaper personal loan?
  • orrery
    orrery Posts: 797 Forumite
    Name Dropper Photogenic First Post First Anniversary
    I am looking at buying Skoda Fabia on a PCP as want low monthly payments. But can I take advantage of their £2000 deposit contribution and AA cover, then simply pay the PCP up with a cheaper personal loan?

    From reading the pages on Moneysavingexpert, it would indeed seem to indicate that is possible.

    You may find that the same deposit contribution is available on HP and I've done exactly what you are saying on the HP - i.e. I let the 1st payment go out then asked for a quotation to pay it all off, and I did.

    I'd be surprised if the 3 years AA cover is not part of the standard purchase.
    4kWp, Panels: 16 Hyundai HIS250MG, Inverter: SMA Sunny Boy 4000TLLocation: Bedford, Roof: South East facing, 20 degree pitch20kWh Pylontech US5000 batteries, Lux AC inverter,Skoda Enyaq iV80, TADO Central Heating control
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