We’d like to remind Forumites to please avoid political debate on the Forum.
This is to keep it a safe and useful space for MoneySaving discussions. Threads that are – or become – political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!
Understanding PCP
Comments
-
You're financing the full capital amount and paying interest on it, not just on the repayment part.
What I meant is that PCP differs from HP in that you pay a much lower monthly payment as the "balloon" payment is the value of the car after the agreed term.
This helps people on a low income who cannot afford the higher monthly cost of HP for the same car.0 -
Technically, you're not saving a fortune - you're paying the worth of a 3 year old car.
You're neither buying a new car nor getting the benefits of a new car.
If i buy a 3 year old Focus with 36,000 miles on it, i havent saved a fortune - i've bought a cheaper used car.
Exactly. It's not exactly news that second hand is usually cheaper than new.
When I've bought brand new cars, I've done so with the intention of keeping them for the longer haul.
So, I've been able to 'run them in' gently, know everything about their history and have had success in getting the dealer to do odd jobs as a 'gesture of goodwill' because I've known the car from new.
I get the full longer term benefit/return from the money I spend on proper servicing and I don't have the worries of not knowing what went before me.:hello:0 -
What I meant is that PCP differs from HP in that you pay a much lower monthly payment as the "balloon" payment is the value of the car after the agreed term.
This helps people on a low income who cannot afford the higher monthly cost of HP for the same car.
Agreed.
Though it doesnt have be someone on lower income for it to work - why tie up large sums of money in a car you dont intend to keep for more than three years anyway?0 -
Agreed.
Though it doesnt have be someone on lower income for it to work - why tie up large sums of money in a car you dont intend to keep for more than three years anyway?
I think the thing with PCP is that the monthly payments are quite low so it's almost like renting a car. At the end of the term you can terminate the contract (as long as you have paid 50% of the finance, which is highly likely) if you do not wish to pay the final balloon payment to own the car outright.0 -
I think the thing with PCP is that the monthly payments are quite low so it's almost like renting a car. At the end of the term you can terminate the contract (as long as you have paid 50% of the finance, which is highly likely) if you do not wish to pay the final balloon payment to own the car outright.
Yes, its like a halfway house between regular HP type finance and leasing.
You can hand the car back anyway at the end of term - you dont have to envoke a Voluntary Termination to do so.0 -
I hate the whole concept of PCP. You are just renting a car effectively. Penalties if you want to drive it a bit more than you agree. Then if you want to buy it there's a massive payment at the end, right where you have become accustomed to it and the novelty has worn off.
I would much rather save and buy a good second hand car on autotrader despite the risk.0 -
I hate the whole concept of PCP. You are just renting a car effectively.
Yup. With an option to buy at the end of it if you so desire, and maybe a little equity in there if you resell it / trade it in.
Thats not necessarily a bad thing. If you dont plan to keep the car long term why tie up a load of capital? Most people see cars as white goods. Something to fulfill a particular purpose for them - get to work, get the kids to school, etc - so if a set monthly amount can be budgeted for to do that, then that can make a lot of sense.
Penalties if you want to drive it a bit more than you agree.
No. Only if you hand it back. The vast majority either trade it in, sell it elsewhere or keep it. Therefore no penalties apply.
Then if you want to buy it there's a massive payment at the end, right where you have become accustomed to it
If you plan on keeping a car long term, then a PCP deal most likely isnt the best mechanism for doing so. It would be the wrong product.
Thats not a fault of the product, but a fault of its use in that scenario.
and the novelty has worn off.
Which is exactly why it works for so many - people want to keep a car usually 3 years ish - under warranty, agreed monthly set amount just like most of their other bills and they're paid monthly anyway.
I would much rather save and buy a good second hand car on autotrader despite the risk.
Yup. As is your prerogative (and everyone elses) to chose the right product for them at any particular time when buying a car.
What works for you may not work for others and vice versa.
Also RE: risk, some people dont want that risk of a major unexpected bill, and are happy / happier paying monthly for something (almost) guaranteed to be risk free.
You can PCP / lease a brand new car now for under £100 a month. That could be very palatable to someone running something at £1,000 and facing sporadic big bills, mots, etc and maybe rinsing and repeating every 18 months anyway.0 -
I hate the whole concept of PCP. You are just renting a car effectively. Penalties if you want to drive it a bit more than you agree. Then if you want to buy it there's a massive payment at the end, right where you have become accustomed to it and the novelty has worn off.
I would much rather save and buy a good second hand car on autotrader despite the risk.
As above, the mileage penalty is only if you are handing the car back and it's logical as the GMV at the end is agreed up front based on your estimated mileage so if you say you do 8000 with the intention of doing 12,000 but wanting to get a higher GMV at the end then you pay for it because the car is worth less to the dealer.
The GMV / balloon is fixed up front so you'll know in 3 years what you have to pay, it's not a surprise or unexpected bill, you sign your contract stating you are going to pay that or that is what the car will be worth if you want to trade in.
PCP is a nice money maker for the car sellers flogging to people who don't understand it or those who want to keep paying to get a new car every 3 years but for other people it's a good system which means you get all the benefits of warranty etc and can make car buying more affordable especially with 0% interest aroundSam Vimes' Boots Theory of Socioeconomic Unfairness:
People are rich because they spend less money. A poor man buys $10 boots that last a season or two before he's walking in wet shoes and has to buy another pair. A rich man buys $50 boots that are made better and give him 10 years of dry feet. The poor man has spent $100 over those 10 years and still has wet feet.
0 -
You can PCP / lease a brand new car now for under £100 a month. That could be very palatable to someone running something at £1,000 and facing sporadic big bills, mots, etc and maybe rinsing and repeating every 18 months anyway.
Looking into this and found a Corsa for £99/month for 4 years plus an initial rental of £3900 and then limited to 8k miles/yr = total cost of £8700.... you'd need to have very UN-sporadic and expensive bills to make it a worthwhile proposition on a £1000 car.
Even some cheaper £99/mth cars are coming in at over £5000 over the contracts lifetime.
And then you hand it back!0 -
Mr_Singleton wrote: »Looking into this and found a Corsa for £99/month for 4 years plus an initial rental of £3900 and then limited to 8k miles/yr = total cost of £8700.... you'd need to have very UN-sporadic and expensive bills to make it a worthwhile proposition on a £1000 car.
Even some cheaper £99/mth cars are coming in at over £5000 over the contracts lifetime.
And then you hand it back!
Suppose it depends how reliable the £1000 car is, how much work needs doing, how well maintained etc plus what you'd lose from not being able to get to work, plus higher fuel costs, more VED etc
All sums to do beforehand anywaySam Vimes' Boots Theory of Socioeconomic Unfairness:
People are rich because they spend less money. A poor man buys $10 boots that last a season or two before he's walking in wet shoes and has to buy another pair. A rich man buys $50 boots that are made better and give him 10 years of dry feet. The poor man has spent $100 over those 10 years and still has wet feet.
0
This discussion has been closed.
Confirm your email address to Create Threads and Reply
Categories
- All Categories
- 351.7K Banking & Borrowing
- 253.4K Reduce Debt & Boost Income
- 454K Spending & Discounts
- 244.7K Work, Benefits & Business
- 600.1K Mortgages, Homes & Bills
- 177.3K Life & Family
- 258.4K Travel & Transport
- 1.5M Hobbies & Leisure
- 16.2K Discuss & Feedback
- 37.6K Read-Only Boards