PCP the new PPI Scandal?

Cornucopia

motorguy wrote: »

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.

That's not true at all. I've been there - had the worst depreciation on any of the cars I've owned on a nearly new Ford, which was a forced sale because it wouldn't fit in the garage of the house I'd just moved to (and the area precluded keeping it outside).

As such, I value the protection against depreciation offered by PCPs and Leases.

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.

Yes, that's intrinsically what they are. I think PCPs would be better termed Personal Leases or something similar that emphasised the sort of product that they are.

£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.

I cannot see how you can buy a £20,000 car for £200 per month.

As an example, a Skoda Octavia 2.0 CRDi SE Business is available on a 3+35 Lease for £202.80pm. This equates to a total cost of £7706 including £606 down.

The list price is £20,535. Assume a decent discount of £3000, and the repayments on a 36 month loan would be of the order of £500 per month with a £600 deposit. Even extending to 60 months only sees it reduce to £319.

The total cost after 3 years would be £18,600. Therefore if the vehicle was worth more than £10894, then the purchase route would be better value for money, but I'm not sure I'd take that bet.

takman

Cornucopia wrote: »

That's not true at all. I've been there - had the worst depreciation on any of the cars I've owned on a nearly new Ford, which was a forced sale because it wouldn't fit in the garage of the house I'd just moved to (and the area precluded keeping it outside).

As such, I value the protection against depreciation offered by PCPs and Leases.

I don't think you can say they offer you protection from depreciation. All your doing is paying off the depreciation every month in a calculated amount that makes sure you never have any equity in the car. Plus as you have to hand the car back at the end then you can't modify the car in any way and you end up stuck with the equipment the car has even if your needs change. Your also limited to the amount of milage that is set out in the contract or you end up being charged extra at the end.

It's a very expensive way just to always have a new car.

Cornucopia

takman wrote: »

I don't think you can say they offer you protection from depreciation. All your doing is paying off the depreciation every month in a calculated amount that makes sure you never have any equity in the car.

That's not true. Both Leases and PCPs are intrinsically based on the idea that the finance company assumes the risk of depreciation exceeding the GFMV (for PCPs) or a "nothing more to pay" position (for Leases). As long as you keep to the rules of the scheme, you are therefore protected from excessive depreciation, and you already know at the outset the amount of depreciation you are effectively paying for. You get neither of those benefits when buying in other ways.

Plus as you have to hand the car back at the end then you can't modify the car in any way and you end up stuck with the equipment the car has even if your needs change.

To an extent. If my needs changed so drastically that I needed to modify the vehicle in such a fundamental way, I think I'd probably look to cancel (assuming it was a PCP).

Your also limited to the amount of milage that is set out in the contract or you end up being charged extra at the end.

There are 4 options at the end of a PCP, only one of which involves accounting for the agreed mileage.

It's a very expensive way just to always have a new car.

No. Always having a new car is expensive, and leasing/PCPs are probably the least expensive, least risky way to do it.

takman

Cornucopia wrote: »

That's not true. Both Leases and PCPs are intrinsically based on the idea that the finance company assumes the risk of depreciation exceeding the GFMV (for PCPs) or a "nothing more to pay" position (for Leases). As long as you keep to the rules of the scheme, you are therefore protected from excessive depreciation, and you already know at the outset the amount of depreciation you are effectively paying for. You get neither of those benefits when buying in other ways.


To an extent. If my needs changed so drastically that I needed to modify the vehicle in such a fundamental way, I think I'd probably look to cancel (assuming it was a PCP).


There are 4 options at the end of a PCP, only one of which involves accounting for the agreed mileage.


No. Always having a new car is expensive, and leasing/PCPs are probably the least expensive, least risky way to do it.

Even small changes in your needs could suddenly make the car go from perfect to less than ideal. Such as deciding you want to buy a caravan or even a trailer and not having a towbar. I would hate to be so restricted.

Alot of the negatives of a PCP deal are attributed to the fact that it's a new car and happen no matter what method you use to purchase one. But I think buying a new car in general is so expensive that it would have to be the most amazing car I have ever seen for me to consider it. I have never seen a new car that is that great!.

I know a couple of people who are on this kind of deal and their cars are extremely basic. One has a Vauxhall Corsa and it doesn't have cruise control, climate control, automatic wipers etc. It only has a very basic low resolution display screen that shows everything in large writing. This car is supposed to be a limited edition model with extra features over the base model. When nee cars are so rubbish I don't know why anyone would want to pay £100- £200 a month for one!

Cornucopia

takman wrote: »

Even small changes in your needs could suddenly make the car go from perfect to less than ideal. Such as deciding you want to buy a caravan or even a trailer and not having a towbar. I would hate to be so restricted.

I think you may be missing the point. You will be restricted or penalised when changing any car, even more so when changing a new car.

Alot of the negatives of a PCP deal are attributed to the fact that it's a new car and happen no matter what method you use to purchase one. But I think buying a new car in general is so expensive that it would have to be the most amazing car I have ever seen for me to consider it. I have never seen a new car that is that great!.

Ah, okay, so is buying new cars a scandal in the making, then? As per the thread title.

I know a couple of people who are on this kind of deal and their cars are extremely basic. One has a Vauxhall Corsa and it doesn't have cruise control, climate control, automatic wipers etc. It only has a very basic low resolution display screen that shows everything in large writing.

Tragedy.

takman

Cornucopia wrote: »

I think you may be missing the point. You will be restricted or penalised when changing any car, even more so when changing a new car.


Ah, okay, so is buying new cars a scandal in the making, then? As per the thread title.


Tragedy.

I'm not restricted or penalised by modifying my car to make it better at what I want it to do (a used car that I fully own).

Buying new cars is definitely not a scandal in any way, shape or form. It's lucky that there are so many people like you that buy the new cars happily paying a monthly amount until depreciation reduces the value of the car to a level that I'm happy to buy it at. If anything the more people that buy new cars the more saturated the used car market gets and the cheaper I can buy my next used car at.

But new cars which don't even have the features my 13 year old car does are pretty rubbish!. The problem is that so many people seem to stretch themselves when buying a new car that they can't afford the cost of getting any extras. Which then seems to defeat the purpose of getting a new car is it's less equipped than cars made in the last millennium!

Cornucopia

takman wrote: »

Buying new cars is definitely not a scandal in any way, shape or form. It's lucky that there are so many people like you that buy the new cars happily paying a monthly amount until depreciation reduces the value of the car to a level that I'm happy to buy it at. If anything the more people that buy new cars the more saturated the used car market gets and the cheaper I can buy my next used car at.

Indeed. So it makes sense for people who are buying those depreciating cars to predict and cover the depreciation as well as protecting themselves from excess depreciation.

But new cars which don't even have the features my 13 year old car does are pretty rubbish!. The problem is that so many people seem to stretch themselves when buying a new car that they can't afford the cost of getting any extras. Which then seems to defeat the purpose of getting a new car is it's less equipped than cars made in the last millennium!

Buying new isn't necessarily about equipment or extras, though.

The ranges of new cars often have dozens of model choices before you even get into one-off extras. The used car market is much more of a muchness by comparison - you look for what you want, and can only buy or not buy what there is.

worried_jim

takman wrote: »

But new cars which don't even have the features my 13 year old car does are pretty rubbish!. The problem is that so many people seem to stretch themselves when buying a new car that they can't afford the cost of getting any extras. Which then seems to defeat the purpose of getting a new car is it's less equipped than cars made in the last millennium!

Having this same conversation with a friend at present- he wants to lease a £23k Mazda CX3 @ £260 per month on a three year lease in poverty spec. I've told him to spend less but get a top spec Ford Fiesta but he is having none of it.

Cornucopia

worried_jim wrote: »

Having this same conversation with a friend at present- he wants to lease a £23k Mazda CX3 @ £260 per month on a three year lease in poverty spec. I've told him to spend less but get a top spec Ford Fiesta but he is having none of it.

One of the benefits of Leases/PCPs is the option to specify the car you want, not the one that you know will sell best in X years time.

motorguy

Cornucopia wrote: »

One of the benefits of Leases/PCPs is the option to specify the car you want, not the one that you know will sell best in X years time.

However the best deals - and the ones most often quoted - are usually on very specific cars, thus to make leasing its most cost effective, you really need to be saying "i want a 5 door diesel hatch" and then take the best deal avail on whatever it is.

Add on options and leasing becomes pricey. You usually end up paying for the options across the term of your lease.