PCP compared to Personal Loan HELP!

mattbest1986

PCP offer is no where near close to a Personal Loan.... why would anyone go for PCP? (or am i missing something)

PCP Offer (example i've just been given)
Car Value - £13,495
Deposit - £2000
Remaining Financed Balance - £11,495

Which is made up of -
46 payments of £205.92 = £9472.32
1 payment of £354.92 (which inc an admin fee of £149)
With an extra optional Balloon payment (if i want to own the car) of £5095.40 (which inc an admin fee of £149)

My Calculations
PCP
Total value paid for PCP - £16,899.19
Car Value - £13,495

Total Credit Charged = £3404.19

Personal Loan (3.6%)
£257.20 x 48 payments plus £2000 deposit = £14,345.60
Car Value - £13,495

Total Credit Charged = £850.60

What is the benefit of PCP really?

gibby9

Some people only look at monthly payments an not the total cost.

mattbest1986

Why would anyone not look at the full costs before buying a new car. It's normally one of the biggest purchases any household would ever make.

Cornucopia

Do you have the APRs for the two options?

A PCP vs. a straightforward HP agreement or Personal Loan is not comparing like-for-like. A PCP is aiming for the Balloon payment at end of term, whereas HP is aiming for £0. That means that you are paying interest on the whole balloon payment for the whole period of the agreement.

There is also protection built in to a PCP against excessive depreciation. Presumably, there is a cost to providing this?

thescouselander

Maybe that example isn't so good but it's quite easy to find PCP deals at 0% APR and with decent dealer deposit contributions. Shop around

mattbest1986

The APR is 10.25% on the PCP
But 3.7% on the loan

zappahey

You're not comparing like for like and you can't assume that all PCP deals are the same.

motorguy

mattbest1986 wrote: »

Why would anyone not look at the full costs before buying a new car. It's normally one of the biggest purchases any household would ever make.

Thats a willfully bad PCP deal.

Heres one thats much more palatable on a similarly priced car.

http://www.vauxhall.co.uk/offers-finance/cars_offers/corsa/flexible-pcp.html

almillar

Yep, that's simply a good loan, versus a bad PCP. PCP in general isn't necessarily bad versus loans in general. I'm sure you could get a loan from Wonga that would be awful.
People do look at the monthly cost sometimes rather than the total cost for good reason - they may have no intention of ever paying the balloon cost at the end. For them, they're paying a deposit (preferably a small one, as it's 'dead money'), monthly payments for a number of years, then handing the car back, and starting a new set of monthly payments.

scaredofdebt

PCP can be a reasonable alternative if you do fairly low mileage and know that you won't go over the stipulated limits.

Finance is usually cheaper, but if you like a new car every 2-3 years PCP can be simpler.

Amy.B_3

That's not a good PCP deal, what's the car you're going for?

PCP is actually a really popular choice now.

People prefer this as they're not stuck with the car at the end, giving them options to either pay a balloon payment to own the car outright or hand the keys back and choose a different car and then start the process again.