PCP the new PPI Scandal?

nath81

People really need to start taking responsibility for their own actions. If I was signing up for something like that I would read the contract and make sure I knew exactly what I was signing up for.

You can't compare PCP with PPI. PPI was often added without the customer knowing. However a car is financed, it's your responsibility to understand the product you have chosen.

You say youngsters need more protection and guidance, but you have to 18 to take out the finance, and in the eyes of the law you are an adult.

Your son signed a legally binding contract. He needs to suck it up and learn from the mistake.

dcouponzzzz

Haven't read the entire thread, but my parents were a massive support for me up until only a couple of years ago (about 25), and I occasionally still ask for their input. Not because I couldn't make my own decisions, but because it made sense to draw from their experience for decisions with a lot of weight behind them.

My upbringing was that I can always go to them for non-judgmental advice and they trust my final decision. If an 18 year old isn't doing that, it's because they're either scared to or their parents try and control them. It's the parents responsibility to always be approachable and promote informed decision making.

Ultimately on paper the only person responsible is the young adult, but cmon... you can sign your life away when you're still in education and out partying every night. Common sense isn't inherited.

Cornucopia

Thinking about it, I would say that casual, unsecured lending is the thing which requires more regulation. PCPs, with their known, transparent position from the outset at nothing like "freedom to be abused" of credit cards and payday loans.

In terms of this thread, it's still not clear what the OP's issues are with PCPs.

The only really potentially concerning thing reported by the OP is the story about excess mileage. The only problem is that what the Salesman said is true: you can ignore the mileage element of a PCP as long as you don't plan to hand the car back to the finance company at the end of the term.

Personally, and depending on one's position and the terms of the agreement, I'd want always to be within a reasonable distance of the mileage agreed, so as to maximise my options at the end of the term.

securityguy

The basic problem with "parents should teach their children about finance" is that many parents don't know enough to do so. It's like saying "why does it matter if your child's school doesn't teach GCSE maths terribly well? Just teach it yourself, it's hardly difficult": that's true for some parents, but hardly universal advice.

The generation with children now in their early 20s are the generation that bought, or should that be "bought", houses on endowment mortgages, swapped employer pensions into private pensions and had PPI on their loans, so those parents' advice is, in general, not great.

And simply assuming it's about thrift and saving as ends in themselves is just "it were reet good before the war" nostalgia: purchasing a car so as to be able to extend your radius of job hunting, particularly in a world where jobs are not permanent and housing is in short supply, is not like spending your pocket money on sherbet dabs when you could be saving for a nice new bike; it's more complex than that.

I can afford to buy cars for cash, which paradoxically means that I am more willing to keep a car with an inter-galactic mileage going: I can afford to pay the bills as they arise, and have the price of a fresh car in the bank anyway. But were I to buy a new car I'd look seriously at PCP, because I have the financial chops to model it and see whether it's worthwhile; after all, if I were paid on whatever IR35 is called this week I'd probably have a lease car through my company, and the principle is not dissimilar. If my kids wanted to enter into a PCP deal, I'd help them analyse it too.

But expecting random parents to be able to do the modelling is, I think, a little much.

Cornucopia

Is there much "modelling" to be done, though?

My usual basic PCP advice is to compare the PCP deal being offered with the open-market lease price. The Lease will normally be a few £s cheaper, because it lacks flexibility and protection that the PCP has, but it should not be excessive.

The problem with over-analysing it is that it is, in fact, cash purchases and straight finance for cars that people tend to walk into without considering the main cost involved, which is depreciation. Now, it may be that they have the means to ignore it, but it remains an important consideration.

Leases and PCPs are all about the depreciation, but I would hope the potential buyers were not put off by that and chose a buying method that did not address it at all.

AdrianC

securityguy wrote: »

The basic problem with "parents should teach their children about finance" is that many parents don't know enough to do so.

Well, given that the whole logic of the original post was complaining about how younger adults were being taken advantage of, surely other adults are capable of figuring it out for themselves?

After all, if not, then surely the fact that it was apparently younger adults being taken advantage of would be irrelevant, since adults of all ages would be?

No, the OP was specifically complaining about younger adults and "your children" - therefore this must be age-group specific.

motorguy

securityguy wrote: »

The basic problem with "parents should teach their children about finance" is that many parents don't know enough to do so. It's like saying "why does it matter if your child's school doesn't teach GCSE maths terribly well? Just teach it yourself, it's hardly difficult": that's true for some parents, but hardly universal advice.

Surely the fundamental mantra from the older generation is "dont get yourself into debt" and thats an easy lesson to pass on. How hard is it for a parent to advise a teenager not to saddle themselves with unnecessary financial commitments if they dont have to? That doesnt require a degree in finance.

Even teaching your children to set aside a little out of their first pay cheques for savings isnt difficult. If they dont do it, well at least you've tried.

securityguy wrote: »

The generation with children now in their early 20s are the generation that bought, or should that be "bought", houses on endowment mortgages, swapped employer pensions into private pensions and had PPI on their loans, so those parents' advice is, in general, not great.

And thus the opportunity to pass on the message of not to "assume", not to believe everything you're told and to exercise some restraint when purchasing.

Unless of course you're suggesting we all just sit on our hands and take no responsiblity and let our kids learn "the hard way"?

securityguy wrote: »

And simply assuming it's about thrift and saving as ends in themselves is just "it were reet good before the war" nostalgia: purchasing a car so as to be able to extend your radius of job hunting, particularly in a world where jobs are not permanent and housing is in short supply, is not like spending your pocket money on sherbet dabs when you could be saving for a nice new bike; it's more complex than that.

Absolutely. And if a child has went in to the deal with their eyes wide open and with their "homework done" on it, then theres no issues. Technically, i'm not seeing any particular issue with what the O/Ps child has done, other than racking up 4x the expected mileage will mean they'll owe more than the car is worth at the end of the term - but that is not insurmountable.

securityguy wrote: »

I can afford to buy cars for cash, which paradoxically means that I am more willing to keep a car with an inter-galactic mileage going: I can afford to pay the bills as they arise, and have the price of a fresh car in the bank anyway. But were I to buy a new car I'd look seriously at PCP, because I have the financial chops to model it and see whether it's worthwhile; after all, if I were paid on whatever IR35 is called this week I'd probably have a lease car through my company, and the principle is not dissimilar. If my kids wanted to enter into a PCP deal, I'd help them analyse it too.

But expecting random parents to be able to do the modelling is, I think, a little much.

It doesnt take a financial genius to say "dont over commit yourself when making any purchase".

If the O/Ps child hasnt, then i dont see a particular problem

[Deleted User]

Stacy_B wrote: »

I'm convinced this in a few years will be the next PPI scandal.

It really, really won't be.

motorguy

Cornucopia wrote: »

Leases and PCPs are all about the depreciation, but I would hope the potential buyers were not put off by that and chose a buying method that did not address it at all.

Whilst i am a big advocate of PCP deals, there is nothing magical about what PCPs & leases do to "address" the depreciation that all cars suffer.

They can give you a false positive in terms of affordability because of low monthly payments compared to straightforward HP or a personal loan, however they are designed in a way that means you never own the asset and (for PCP deals) dont have any equity in the asset.

£200 odd a month via PCP might put you into a £20,000 car, however at the end of the term you'll effectively walk away with nothing. With 10% deposit that would be £2,000 + (36*£200) = £9,200. £200 a month in a personal loan and at the end of it you'll still have something of significant monetary value.

All very well if you're happy with that, but for some people it becomes about having a shiny new car right now, rather than think about where they might be in 3 years time.

gilbert_and_sullivan

In other news millions of people got burned by borrowing to excess, tick of some description, often borrowing against perceived increases in the value of their homes for new cars, holidays, flash weddings, you name it.

Bit of deja vu about methinks, its all got rather silly again just like the noughties for the got to have it now generation, mucho tears will be shed again possibly sooner than they might think.

many youngsters drop a clanger, borrowing against depreciating assets, and most learn from their mistake and don't do it again, if they're still doing the same thing twenty years later there's a problem.