PCP the new PPI Scandal?

takman

Cornucopia wrote: »

No?

The key selling point of a new car is that it's new. Ideally, it's also been chosen by you to broadly meet your needs.

Buying something just because it is "new" is actually one of the biggest ways that I see people waste money. I know people who get a new iPhone each year just because it is the new one and openly admit that the one they had was perfectly fine and the new one has no new features that would benefit them that much.

I just don't understand people who want a brand new car but get the most basic model they can.
At my workplace if we need to make a business trip and no pool cars are available they get in a hire car. I had one of these basic models of a Ford focus (it wasn't even the most basic you could get). I had to travel over 400 miles that day and found the lack of cruise control and the fact that I had to adjust the wipers depending on how much it was raining was very annoying. The lack of cruise control especially make my leg ache after such a distance.

In respect to PCP deals then if you decide that you will only drive a new car, you don't like keeping cars for more than a couple of years and you like to have a set monthly fee which won't change then they sound pretty good. But someone who wants to save money shouldn't really be signing up to one.

Herzlos

takman wrote: »

I just don't understand people who want a brand new car but get the most basic model they can.

Known history, warranty, notional reliability, no requirement for MOT's, safety. Plenty of reasons to go new, but still make sense to go basic.

Cornucopia

motorguy wrote: »

How many people "need" a new car though?

I think that the context of this thread implies a comparison between PCPs (and by association Leasing) with other methods of buying a new car.

When you start bringing in to the issue whether buying new is a good thing at all, then that ceases to be about PCPs and starts covering all methods of buying new, including bank loans and cash.

Cornucopia

takman wrote: »

Buying something just because it is "new" is actually one of the biggest ways that I see people waste money. I know people who get a new iPhone each year just because it is the new one and openly admit that the one they had was perfectly fine and the new one has no new features that would benefit them that much.

Yes.

I just don't understand people who want a brand new car but get the most basic model they can.

No, we know you don't understand. However that doesn't make it a universally bad thing. It's simply something you personally cannot relate to - no more and no less.

At my workplace if we need to make a business trip and no pool cars are available they get in a hire car. I had one of these basic models of a Ford focus (it wasn't even the most basic you could get). I had to travel over 400 miles that day and found the lack of cruise control and the fact that I had to adjust the wipers depending on how much it was raining was very annoying. The lack of cruise control especially make my leg ache after such a distance.

I've had Cruise Control on my last 5 cars, and probably wouldn't buy one without it. However, I'm sure that there are people who have it and hate it, and people who drive plenty of miles without it and don't find it a problem. I wouldn't say it was essential, although I have tended to buy brands where every spec-level for a particular model has it.

In respect to PCP deals then if you decide that you will only drive a new car, you don't like keeping cars for more than a couple of years and you like to have a set monthly fee which won't change then they sound pretty good.

Indeed.

But someone who wants to save money shouldn't really be signing up to one.

Someone who wants to "save money" shouldn't be driving (probably) - they should be sitting at home knitting pasta. Certainly they should not be buying a new car. I don't see a PCP being any worse than any other form of finance, once the method of charging of interest is factored in. My PCP is 0% over 4 years, so that isn't an issue for me.

The maths would seem to be on my side, bearing in mind the comparison I posted previously.

Cornucopia

Stacy_B wrote: »

It's a pity Some people on here werent about when PPI was as such an expert would have prevented it from happening to "millions" of people of all ages including parents that should know better! Even the financial "experts" couldn't see it, prevent or stop it, hindsight is great with these anonymous experts.

One reason why your "PCP is the new PPI" proposition is wrong is that PPI was self-evidently problematic, but also the regulators having recognised the problems have arguably jumped too far the other way, and allowed people to reclaim PPI payments that they voluntarily agreed in full knowledge of the product features to pay.

A bad product doesn't automatically mean mis-selling.

It would help if "some" people read the thread for what it's intended ie preventing others from suffering the same fate as those that have already fallen for the PCP payment plans...

You make it sound like the Measles. Perhaps it would help if you could explain why you think it is so bad (preferably keeping arguments about why buying new cars might be bad out of it for now). Who is being "mis-sold" PCPs, and what is their role as willing customers in the process? What are the effects of having been allegedly mis-sold?

... the PCP bubble has to burst in the future.

What is the "PCP bubble" and how must it "burst"? What will happen if/when it does?

motorguy

Herzlos wrote: »

Known history, warranty, notional reliability, no requirement for MOT's, safety. Plenty of reasons to go new, but still make sense to go basic.

The other side of that is - what is "basic" these days?

You'd be hard pushed to find a car without aircon, electric windows and alloys these days, and a lot come with Nav, etc and a decent multimedia system, so its not like you're really going to have to slum it anyway.

If you genuinely have a desire for a new car - and can afford the implications - then i've no issues with it. Done it before myself.

However there are an awful lot of these deals being pushed now on new cars, encouraging people down the monthly payment route, who would be better off in the medium term with a standard loan on a nearly new car and having an asset to sell at the end of it.

motorguy

Cornucopia wrote: »

I think that the context of this thread implies a comparison between PCPs (and by association Leasing) with other methods of buying a new car.

When you start bringing in to the issue whether buying new is a good thing at all, then that ceases to be about PCPs and starts covering all methods of buying new, including bank loans and cash.

Of course, however this thread was started by someone with concerns over their son "buying" a new car, but has been hijacked into a "arent PCP deals a great idea!" thread.

I would say with 99.99999% certainty, that young person would have been better off with a used car and a standard loan. Maybe not on day one when they were showing their mates their shiny new car, but certainly down the line.

Money is hard earned, particularly when you are young. It is easy to fritter it away on a brand new car when maybe there may be more important things to spend it on round the corner.

And lets not forget with PCP or leasing youre not "buying new", you are merely renting it for the duration of the term. You might kid yourself that you can clear the final payment in three years time but in reality 99% dont.

So no, PCP or leasing isnt a "vehicle" to be used if you want to "buy new", it is a mechanism to allow you to drive a new car.

PCPs as a finance mechanism simply robs you of any hope of equity in the asset, as you're effectively financing the depreciation and not paying off anything of the asset value itself.

Its like buying a house on an interest only mortgage - gets you into a house in the short term that you couldnt otherwise buy, but just moves the problem down the line.

motorguy

Cornucopia wrote: »

One reason why your "PCP is the new PPI" proposition is wrong is that PPI was self-evidently problematic, but also the regulators having recognised the problems have arguably jumped too far the other way, and allowed people to reclaim PPI payments that they voluntarily agreed in full knowledge of the product features to pay.

A bad product doesn't automatically mean mis-selling.

You make it sound like the Measles. Perhaps it would help if you could explain why you think it is so bad (preferably keeping arguments about why buying new cars might be bad out of it for now). Who is being "mis-sold" PCPs, and what is their role as willing customers in the process? What are the effects of having been allegedly mis-sold?

Have you or someone you know had a bad experience with a PCP? What happened?

What is the "PCP bubble" and how must it "burst"? What will happen if/when it does?

I suspect the O/P is long gone because they werent getting the response they were looking for....

Cornucopia

motorguy wrote: »

Of course, however this thread was started by someone with concerns over their son "buying" a new car, but has been hijacked into a "arent PCP deals a great idea!" thread.

Well, kind of. It's not obvious where the OP's familial concerns end and some quite strange notions about PCPs begin.

I would say with 99.99999% certainty, that young person would have been better off with a used car and a standard loan. Maybe not on day one when they were showing their mates their shiny new car, but certainly down the line.

Money is hard earned, particularly when you are young. It is easy to fritter it away on a brand new car when maybe there may be more important things to spend it on round the corner.

I agree. But sometimes it isn't simply about the most sensible option.

And lets not forget with PCP or leasing youre not "buying new", you are merely renting it for the duration of the term. You might kid yourself that you can clear the final payment in three years time but in reality 99% dont.

It would be interesting to know how many people perceive PCPs in that way (they wish to keep the car beyond the end of the term). I'd certainly say that those people were more likely to be in the mis-sold camp than others.

PCPs as a finance mechanism simply robs you of any hope of equity in the asset, as you're effectively financing the depreciation and not paying off anything of the asset value itself.

At the risk of contradicting myself in a moment, the issue is that cars are a depreciating asset - there is no getting away from that being the most significant cost in the vast majority of cases. I suppose it can even become a personal choice kind of thing: whether one is happier with the depreciation issue neatly sown up, or simply trusting to the marketplace and forgetting about it until the time comes. I've been stung often enough on residuals to be firmly in the former camp, and if there had been 0% PCPs or other cheap ways to guarantee against excessive depreciation, I would have used them.

Its like buying a house on an interest only mortgage - gets you into a house in the short term that you couldnt otherwise buy, but just moves the problem down the line.

Interest-only makes sense in the context of an appreciating asset and with someone looking at property partly as an investment. I wouldn't necessarily recommend it, but I've had a number of properties during my adult life, always on an interest-only mortgage basis. I owned my first property outright in my early 40s. I now have a small BTL portfolio and live mostly off that income.

Cornucopia

motorguy wrote: »

I suspect the O/P is long gone because they werent getting the response they were looking for....

To be fair, there were probably never going to be enough flaming pitchforks for what she might have had in mind.