PCP with BMW - Any way to get out?

smithers1981

pvt wrote: »

No. Just the use of credit to buy assets that depreciate like a brick.


Do bricks depreciate that much? Surely a brick bought for a good price, and kept in good condition will hold much of its value for many years?

Cornucopia

pvt wrote: »

No. Just the use of credit to buy assets that depreciate like a brick.

Those are the best ones to finance.

Reread what you have just written there and consider what a profoundly stupid financial proposition that is. At no point, except possibly at the very end of the term, are you in a position to exit from that arrangement without finding yet more money in order to do so.

The truth is that cars depreciate. If you are going to own a car (or even rent one) that depreciation has to be funded somehow. The choice is down to the individual - fund it at the beginning by paying cash, and watch the value drop during your period of ownership or fund it as you go, and commit an amount every month to fund it. We've even had 50/50 schemes whereby you funded it in two large chunks.

A PCP simply takes that principle and locks the payments into the depreciation profile of the vehicle. If there is a shortfall part way through the agreement, that simply means you haven't yet paid enough to cover the depreciation that has already occurred - it is a feature of the depreciation not of the PCP.

If PCPs left buyers dangling at the end of their terms, unsure of whether the payments made so far would cover the depreciation, then yes, they would be a very niche product, but they don't. In effect, they provide a useful protection against future depreciation that only PCPs and Leases can. If I'm going to spend £20k+ on a car (wherever that money comes from) I'm going to want to protect myself against excessive depreciation if I can - why wouldn't I?

pvt

Cornucopia wrote: »

Those are the best ones to finance.

If you provide finance to someone you surely want it secured against an asset that retains its value. So do not follow your logic at all.

I would suggest that whether you're the one buying it, or the one financing someone to buy it, in both cases you'd want it to be an asset that retains value.

Cornucopia wrote: »

A PCP simply takes that principle and locks the payments into the depreciation profile of the vehicle. If there is a shortfall part way through the agreement, that simply means you haven't yet paid enough to cover the depreciation that has already occurred - it is a feature of the depreciation not of the PCP.

So a PCP follows the depreciation profile of the vehicle, except where it doesn't? And when it doesn't it's because you haven't paid enough, not because the profile of the PCP is wrong?

So let's match your theory up against the the original post here - you're suggesting the PCP matches the profile of the OP's vehicle's depreciation, and the 5,500 shortfall he now finds himself with is simply because he "hasn't paid enough yet"?

Nebulous2

pvt wrote: »

If you provide finance to someone you surely want it secured against an asset that retains its value.

There is a difference between selling cars and selling finance. If you are selling finance you want a strong chance of it being repaid. That doesn't require any security at all. Personal loans are often available for lower rates than car finance without any security. All a finance company needs to know is that the owner / buyer / lessee is able to afford the payments.

The problem with cars and depreciation is one of competing and partly incompatible requirements from the car sellers, the finance house and the buyer / driver.

All the weird and wonderful ways to finance a car are attempts to square that circle.

foxy-stoat

pvt wrote: »

If you provide finance to someone you surely want it secured against an asset that retains its value. So do not follow your logic at all.

I would suggest that whether you're the one buying it, or the one financing someone to buy it, in both cases you'd want it to be an asset that retains value.


So a PCP follows the depreciation profile of the vehicle, except where it doesn't? And when it doesn't it's because you haven't paid enough, not because the profile of the PCP is wrong?

So let's match your theory up against the the original post here - you're suggesting the PCP matches the profile of the OP's vehicle's depreciation, and the 5,500 shortfall he now finds himself with is simply because he "hasn't paid enough yet"?

Thats because the poor sap wants to out his agreement - which he cannot do unless he pays a chunk of money.

If the OP keeps paying to the end of the 4 years, he can simply hand back the bank's car and have no money and no car.

pvt

foxy-stoat wrote: »

Thats because the poor sap wants to out his agreement - which he cannot do unless he pays a chunk of money.

If the OP keeps paying to the end of the 4 years, he can simply hand back the bank's car and have no money and no car.

So what we're saying is that the PCP is very far from matching the profile of the vehicle's depreciation. Just that it is targeted to match it at the end of the PCP term.

Cornucopia

pvt wrote: »

So what we're saying is that the PCP is very far from matching the profile of the vehicle's depreciation. Just that it is targeted to match it at the end of the PCP term.

Nope. We can say in exactly which way it matches the depreciation profile of the car. It provides a fixed point at an agreed point in the future at which the finance company will underwrite the then value of the car. In order to do that the car's actual value needs to be in the region of the MGFV, which is both an underwritten figure and a prediction.

It's no more and no less than that - neither magic nor malevolence.

I'm sure that if there were a market for a PCP with a series of exit points in the agreement, then someone would provide it.

From my POV the only problems I have with PCPs are these:-

- Many people seem not to understand them.
- When interest rates are high, paying interest on the entire MGFV for the entire term can be expensive.
- It would be nice if finance companies and/or manufacturers would provide a MGFV generally, not just associated with PCPs.

dvdrdl

This is an odd thread.

Surely going back to the dealer, sitting and talking about it is a good idea.

Maybe opting for a downgrade might help?