PCP the new PPI Scandal?

takman

Cornucopia wrote: »

What does this have to do with whether PCPs are suitable for young car purchasers?

I'm replying to previous posts and it is all related to the original topic but just like any other conversation the subject matter evolves over time.

But it is all related because like I said earlier in the thread I know a couple of young people who have bought a car on PCP and have been drawn in by the monthly price tag and the fact the car is new and have ended up with a very basic car for what is a lot of money to them.

I'm not saying they are bad due to this but it's obvious they were born out of a demand by people wanting everything new but not having the money to pay for a new car or are unable to get a loan. So like people have said if you want to add even the features that my 13 year old car has it ends up disproportionatly increasing the price of the PCP because you have to pay for these in full over the period. So this puts people off adding extras to PCP cars.

Another interesting point is that they are designed to lock you into having a new car every few years and paying the monthly fee for cars that you never own for your entire life.
This is what a lot of people are thinking Microsoft are going to do with Windows. Start charging a monthly fee for it use and you get all upgrades included with that. But there is a lot of resistance to that and nobody would agree to that. But PCP's are the same concept and a lot of people welcome them with open arms.

Herzlos

Not everyone is interested in owning a car.

neilmcl

takman wrote: »

What a load of rubbish!. Automatic lights are not as useful because lIghts are not turned on and off much. But having automatic wipers are very useful because they adjust the speed depending on the amount of rain which can change quite often. Why bother to do it yourself when it can be done automatically?. Just like you don't tune in your radio each time you change stations, you have preset ones programmed in.
But then why have indicators in your car when you can use hand signals?. Or why have a starter motor when a handle in the front does the job?. It's all about convenience.

In my experience I'd totally disagree. I've always find the auto headlights to work extremely well, however the auto wipers have always been pretty useless imho.

Cornucopia

takman wrote: »

But it is all related because like I said earlier in the thread I know a couple of young people who have bought a car on PCP and have been drawn in by the monthly price tag and the fact the car is new and have ended up with a very basic car for what is a lot of money to them.

I suppose for them it is a choice they have made for reasons that are good reasons for them - an older car to "mess around with" for a while, or a basic new car. Given that it's possible to get the cheapest leases for "bus pass money", I think people will see that and take the choice that suits them.

I wonder, also, where insurance comes into this? Although you've talked a lot about equipment on cars, presumably these basic cars are things like Citroen C1s and Ford Ka's that are not just basic on spec at the bottom of the range, but are also small, with smaller engines (which may suit a young person's options for insurance). Without understanding the purchase decision fully, it's difficult to make any kind of judgement as to whether it was ill-advised or not.

I'm not saying they are bad due to this but it's obvious they were born out of a demand by people wanting everything new but not having the money to pay for a new car or are unable to get a loan. So like people have said if you want to add even the features that my 13 year old car has it ends up disproportionatly increasing the price of the PCP because you have to pay for these in full over the period. So this puts people off adding extras to PCP cars.

I'm not actually sure that this is true. If you add one-off "dealer fit" extras, then yes, you have to pay for them, just as you would with any other car purchase route. If we are talking about things like auto lights, fitted media systems, etc., then these are items that *may* start on cars half way up the range, at a half-way-up-the-range price.

I have to say that I find this aspect of the anti-PCP argument confusing - on the one hand, you are complaining that people appear to be being "taken in" by the good value for money payments, but on the other decrying the fact that enhancing the spec increases the payments.

Another interesting point is that they are designed to lock you into having a new car every few years and paying the monthly fee for cars that you never own for your entire life.

I think that's a bit melodramatic - there's nothing to stop you buying your ex-PCP car, and keeping it for another 10 years if it suits you to do that. You can also hand the car back at the end of the term and start practicing Bangernomics. It's only a car purchase plan, not a way of life.

If you are going to own a nearly-new car for your entire life, then you will always experience depreciation. Traditionally that would be addressed by throwing in a bucket of cash every few years. Leases/PCPs are simply a different way to achieve the same end result.

... But PCP's are the same concept and a lot of people welcome them with open arms.

I think you are confusing an objection to a business model on conceptual grounds with one that is simply about price. In other words, if Windows was 50p per year, or your new car was £1 a month, there would be no objection to rental terms, I presume? In which case, the opposition is not to the concept of renting things, but to a particular price level. What is that level I wonder?

Mercdriver

The thing about depreciation is that it is treated as a daily cost when in fact it is a cost that is only relevant to you if you want or need to sell it. It's a bit similar to the argument a prospective project manager for a house purchase of mine had - "It would be a forever home, and would be worth X amount". The amount of value is only relevant to you if you sell. Otherwise it's just value on paper. If you are the type to buy a car and keep it for ten years how relevant is depreciation to you?

Depreciation has now been factored into running cost modes by Whatcar etc. It's not truly a running cost. Not in the same sense that fuel, tyres and brakes are. It's a cost that varies according to your buying/keeping habits. It helps the argument for PCP quite a lot, and with my E220 on 109k (60 plate) I'm looking at my options. My mileage is high - 20k+ a year so would be hit more by depreciation than most I suppose, yet PCP seems to be modelled more for those who would potentially suffer least from depreciation...

Depreciation is not a universal cost and shouldn't be represented as such.

Cornucopia

I'm not sure I agree with that.

Depreciation is a feature of the ownership of most new and nearly-new cars. In fact, it's the major feature. I don't recall anyone saying it was a running cost. It is (along with Finance) a cost of ownership.

Once you move away from new and nearly-new, then yes, its effects will vary, and it may become less predictable especially with the oldest or classic cars.

So once again, we have an argument that is more about whether buying new is a good idea, rather than whether PCPs/Leases are.

Again, the argument being presented is somewhat contradictory: on the one hand it's being said that having equity in a car is a good thing, and on the other hand, it's being said that a "forever car" means not having to concern oneself with the value or the underlying depreciation at all.

I would say, of course, that it's an option not to worry about the value of one's car. It still *has* a value though.

motorguy

Cornucopia wrote: »

So once again, we have an argument that is more about whether buying new is a good idea, rather than whether PCPs/Leases are.

Because thats KEY. PCP & leasing is a great way to get a new car, however is getting a new car a great idea?

Its a bit like that old analogy of someone going to the new year sales and "saving" £50 - but having actually spent £200 on stuff they didnt really need to do so. You only save money if you were otherwise going to buy those items in the first place.

Likewise - a lease on some Skoda for £X per month may be a cracking deal, but who really needs a brand new Skoda?

Cornucopia wrote: »

Again, the argument being presented is somewhat contradictory: on the one hand it's being said that having equity in a car is a good thing, and on the other hand, it's being said that a "forever car" means not having to concern oneself with the value or the underlying depreciation at all.

Its not contradictory. Its an either / or. You can buy a car, or you can rent it. Thats not a contradiction. If you buy a car, you have an asset to resell. If you rent a car, its maybe a bit cheaper in the short term.

"not having to concern oneself with depreciation" is salesman talk to take your eye off the fact that you're not paying off the car, just the depreciation.

Cornucopia wrote: »

I would say, of course, that it's an option not to worry about the value of one's car. It still *has* a value though.

Yes exactly. And i dont think anyone "worries" about the value of your car - bearing in mind theres little you can do about it. I dont worry about the value of my Merc, however i do know i can liquidate it and return maybe £4K. Something i wouldnt be able to do if i had chosen to put the purchase money into a number of payments of a lease deal.

zappahey

motorguy wrote: »

I dont worry about the value of my Merc, however i do know i can liquidate it and return maybe £4K. Something i wouldnt be able to do if i had chosen to put the purchase money into a number of payments of a lease deal.

As a convert to leasing, I decided that I would rather keep the £4k in the bank than tie it up in a depreciating asset. But, horses for courses as you've alluded further up the thread.

In my personal case, I got one of those cheap A4 deals at the start of the year and what I would save in running costs (admittedly after an expensive year with the old car) would more than pay the lease cost. So I chose to lease rather than tie up capital in a car.

motorguy

zappahey wrote: »

As a convert to leasing, I decided that I would rather keep the £4k in the bank than tie it up in a depreciating asset. But, horses for courses as you've alluded further up the thread.

In my personal case, I got one of those cheap A4 deals at the start of the year and what I would save in running costs (admittedly after an expensive year with the old car) would more than pay the lease cost. So I chose to lease rather than tie up capital in a car.

Yes, totally agree. There is a very easy case for cheap leasing if you are happy with the payments and have other funding in the bank.

Unfortunately a lot of people dont but are drawn by "easy payments" and a shiny new car when the reality is they'd be better off in a used car with a normal HP agreement - particularly given theres a world of cheap ex lease / PCP cars out there for the taking.

motorguy

I guess the issue i have is that PCPs and leasing should be viewed "with caution" maybe instead of the perception i get from Cornucopias posts of "with passion"