Sorry another PCP question - but i have no clue!

easy_tiger

Sorry for another PCP question.

Finance and loans are new to me as my family have always bought things outright (apart from the house of course), and I was always encouraged to the same.

I am in a fortunate situation where I can purchase a car outright, I am looking at an Audi A1, just under two years old with 10,000 mileage. It's just over 13,000. I always intended to purchase outright as the money was there.

The dealership yesterday explained to me this PCP option spread over four years. I've been doing research all evening into it and trying to get my head round whether or not I'd be at a loss doing the plan rather then buying the car outright.

Am I correct in thinking.. as long as I change my car within the four year period I won't be at a loss?

I know no one can guarantee the value of a car in 2,3 etc... years time but it is very likely that there will be a difference between what I've paid to that date and the market value. I've looked at examples and the car *could* be worth around £9,000 in two years time and I would have paid approx 6,800 (24 payments of £200 plus £2,000 deposit.)

From what I understand I can : a) use that difference of £2,200 towards another car from Audi, b) give the car back with nothing else to pay. I could go somewhere but with no money from the plan to put towards another car c) pay the balloon payment to own it (which would be silly of me as i'd be paying more then i would have if i bought outright from the start.)

Is that correct?

Apologies for the questions, and I realise they're probably obvious and silly, but I really have no clue. Although the salesman was very nice and not pushy at all, I did feel quite swamped with the info, especially when I have no experience in finance.

I will be asking him these questions also, but I just want to make sure he doesn't pull the wool over my eyes!

As I mentioned, I do have the money to buy it up front, but it'd be nice to not have to spend such a huge chunk of money in one go and I could use the money in the meantime on other things or invest it.

Any tips on what questions to ask, or any potential loopholes would be helpful. i am aware of the mileage quota and we've discussed a mileage figure which I know I won't exceed.

He already talked about the GAP insurance which seemed like a vital policy to buy. Since coming home to research, I have seen that the GAP insurance can be purchased from other places for significantly cheaper!

Thanks in advance.

motorguy

It sounds an awful lot like a PCP deal is not the right deal for you.

Why not take anyway any hassle or worry or risk and simply take out a loan for the car if you really dont want to use savings?

PCP deals on used cars are rarely competitive, once you total up what you're going to pay.

Dealers are pushing PCP deals very heavily - the salesman and the dealership WILL get a nice backhander from the finance company so bear in mind the salesman is NOT being objective.

Hintza

To follow on to what Motorguy said. Do the sums including income from your lump sum.

I would be surprised if PCP came out on top.

But some people don't like to spend capital and would much rather use income to finance cars etc.

Nasqueron

If you can get the finance on 0% or lower interest than your savings it's probably worth. If you're paying finance costs and it makes it more than the car is worth it seems a bit silly. I went with PCP as it was 0% so I could earn some money on my savings while paying the car off and then buying it at the end (not a person who wants a new car all the time)

Gap Insurance will never be good value at the dealership, I got a 5 year (deferred for 1) policy which should cover the difference between the finance and a new car until the car is 5 years old for less than 1/2 what the dealership were charging for a lower policy

motorguy

Nasqueron wrote: »

Gap Insurance will never be good value at the dealership, I got a 5 year (deferred for 1) policy which should cover the difference between the finance and a new car until the car is 5 years old for less than 1/2 what the dealership were charging for a lower policy

Its worth poking the dealer for a better deal on Gap insurance. On our A45 they were looking £599 and i said it would need to be under £300 before we would consider it. In fairness it was a very good policy compared to a lot of the third party ones and it was a £45K car.

They initially said no, then on the day of the handover dropped to £399. We declined and said no, it needed to be under £300. They rang 2 days later @ £299...

neilmcl

GAP insurance at dealerships is never cheap, despite how they try and dress it up as a better product than you can get elsewhere. My example, I was initially offered GAP at BMW for £749, this mysteriously came down to £399 when I said no. In the end I got a much better deal for replacement vehicle GAP at an independent for around £160.

daveyjp

If you don't understand it, don't do it. You will get stitched up.

Be bullish. Tell them you would like that car and you are paying cash. You aren't interested in all the other expensive add ons, just the best deal on the car and you are there to do a deal.

When you have spent your money, simply treat it as a loan to yourself and pay it back over 2-3 years. You will then own your car and cash in the bank to repeat the process when you are ready.

You've not said which engine, but if the car is a diesel and you won't break the often low PCP mileage it isn't for you.

If its a 1.4 Tsi research the many documented problems with the various versions of what can be a troublesome engine.

Nasqueron

motorguy wrote: »

Its worth poking the dealer for a better deal on Gap insurance. On our A45 they were looking £599 and i said it would need to be under £300 before we would consider it. In fairness it was a very good policy compared to a lot of the third party ones and it was a £45K car.

They initially said no, then on the day of the handover dropped to £399. We declined and said no, it needed to be under £300. They rang 2 days later @ £299...

Dealers are losing commission so may not be willing to move.

My policy was offered at £499 on a £24k car and not even sure if it was the highest level (vehicle replacement) and it was for 3 years (new car so insurance would have replaced in the first year) meaning 2 years cover.

I paid £233.46 through a third party for a 4 year Replacement Gap policy with a 1 year deferment meaning up until 5 years after I bought the car I will get a payout from them to cover the cost of a brand new car.

I went to my insurer to get a quote based on your data, chose a 5 year policy covering the full vehicle limit (excessive I know as the insurer will pay something) and it came to £360.53 for a £45k car. I would wage your policy doesn't give that level of cover

motorguy

Nasqueron wrote: »

Dealers are losing commission so may not be willing to move.

Hence why I said "its worth poking the dealer for a better deal". Its by no means certain, but usually they'll take the view half a cake is better than no cake at all. They may well chose not to, but its always worth asking.

Nasqueron wrote: »

I went to my insurer to get a quote based on your data, chose a 5 year policy covering the full vehicle limit (excessive I know as the insurer will pay something) and it came to £360.53 for a £45k car. I would wage your policy doesn't give that level of cover

I'm not getting in to a bun fight on the internet over the absolute cheapest GAP insurance by the way - I was merely demonstrating that there was negotiation to be done with the dealer. That may work out best for some people or it may not. Just throwing it out there as an option for people


The benefit for us was the dealer sorted it at a price that was in the right ball park, and chances are, if left to our own devices we'd probably not have gotten round to sorting it out later.

jimjames

easy_tiger wrote: »

He already talked about the GAP insurance which seemed like a vital policy to buy. Since coming home to research, I have seen that the GAP insurance can be purchased from other places for significantly cheaper!

Thanks in advance.

I certainly wouldn't agree with your assessment on GAP insurance being vital. For some people with no savings it may be a worthwhile option to look at a policy from somewhere other than the dealer.

In your situation when you have the money to buy the car outright it doesn't seem like it would be worth it to me. Remember what the policy is for. It will only pay out if the car is written off and the value is less than the amount you owe. So if you have an accident that doesn't write the car off then it won't pay out. If you have an accident at the end of the PCP deal then it won't pay and you have a car worth it's market value. Without GAP you have an extra £300 (or whatever) in your pocket towards the depreciation on the car.

So overall I can't see the point in spending the money on GAP in your situation.

Nasqueron

motorguy wrote: »

Hence why I said "its worth poking the dealer for a better deal". Its by no means certain, but usually they'll take the view half a cake is better than no cake at all. They may well chose not to, but its always worth asking.




I'm not getting in to a bun fight on the internet over the absolute cheapest GAP insurance by the way - I was merely demonstrating that there was negotiation to be done with the dealer. That may work out best for some people or it may not. Just throwing it out there as an option for people


The benefit for us was the dealer sorted it at a price that was in the right ball park, and chances are, if left to our own devices we'd probably not have gotten round to sorting it out later.

It's not a matter of a bunfight, it's pointing out not only is gap cheaper elsewhere but also the level of cover you get.

Knocking £200 off the price is fine but if it's return to invoice gap or 3 years then it's going to leave you worse off than replacement gap for say 5 years.

It's crucial even if you get a deal at the dealership that you confirm what the cover actually is and thus making sure people are aware that there are different kinds with different periods - dealerships commonly sell return to invoice. If there is a total write off, if the car was bought at a discount or the same model has gone up in price you'll be out of pocket with the invoice policy