buying a car - HP vs PCP

Mrs_Mac_1

Hello

Has anyone on here any views on hire purchase vs personal contract purchase for buying either a new or used car?

John Mulholland Motors are advertising great offers at the moment for new Hyundai or Skoda cars, something along the lines of up to £2000 dealer contribution towards your new car and then min of £99 per month payment.

Have any of you used pcp to purchase a car? I have used hp in the past and I understand how it works. I assume with the pcp that i would never outright own the car as most people would opt for a new car by the time 3-4 years are up?

Which make of car would retain its value better by the time 4 years are up?

In the case of John Mulholland offers, which would be the better make, Hyundai or Skoda?

Motorguy Paul, have you any opinions?


Thanking all in advance.
Mrs Mac

MataNui

Traditional HP means you finance the total value of the car over a period (say 3 years). You pay a deposit then fixed monthly payments. At the end of 3 years the car is yours. You have an asset you can either just keep driving or PX against the deposit on a new car.

PCP means you finance the depreciation on the car (NOT the car itself) ##EDIT## Simplistic but demonstrates the difference. You pay a deposit then fixed monthly payments then an optional balloon payment. At the end of the 3 years you own nothing. You have no asset to PX. If you want to keep the car you need to find the money for the balloon payment. If you cant or dont want to you are left with no car and no money for a deposit on a new car.

PCP payments are a lot less because you are only paying for the depreciation. The big chunk of the value is at the end. Personally i dont like PCP. I think its going to be the next PPI scandal. It gets people into cars they really cant afford to be in.

In terms of the actual depreciation thats going to depend on model and trim as well as the make. Some options can keep almost 100% of their value which really raises the overall residual value of the car after 4 years.

qwert_yuiop

MataNui wrote: »

PCP payments are a lot less because you are only paying for the depreciation. The big chunk of the value is at the end. Personally i dont like PCP. I think its going to be the next PPI scandal. It gets people into cars they really cant afford to be in.
.

Paul, surely you're paying for the depreciation on an hp plan as well, and unless they're seriously overcharging on the pcp it ought to be no worse? (Maybe they are) The only advantage I could see with hp otherwise is if you intend to keep the car several more years, in which case you should probably pbuy a 3 year old to begin with and really save some money.

Zola.

SERE have 5 years 0% deals on at the mo. Cracking offer if you can find a car you like

ballyblack

In the case of John Mulholland offers, which would be the better make, Hyundai or Skoda?

Matter of choice but maybe for reselling an 'ongoing manufacturers warranty' would be a consideration after 4 years ownership on HP?

Hyundai 5yrs v Skoda 3 years

ballyblack

SERE have 5 years 0% deals on at the mo. Cracking offer if you can find a car you like

Not much use if you are paying a higher price :eek: .....for the car than the competition


.

motorguy

Mrs_Mac_1 wrote: »

Hello

Has anyone on here any views on hire purchase vs personal contract purchase for buying either a new or used car?

John Mulholland Motors are advertising great offers at the moment for new Hyundai or Skoda cars, something along the lines of up to £2000 dealer contribution towards your new car and then min of £99 per month payment.

Have any of you used pcp to purchase a car? I have used hp in the past and I understand how it works. I assume with the pcp that i would never outright own the car as most people would opt for a new car by the time 3-4 years are up?

Which make of car would retain its value better by the time 4 years are up?

In the case of John Mulholland offers, which would be the better make, Hyundai or Skoda?

Motorguy Paul, have you any opinions?


Thanking all in advance.
Mrs Mac

Sorry for the late response.

As has been said already, the merits of a PCP deal are that monthly payments are kept low and it keeps the payments for a new car reasonable.

The downside is, you're effectively signing up to keep the car for a set period of time, then either trading in, selling it, or handing it back. If you intend to keep it indefinitely, it would be better to look for a car and either pay it off via a conventional loan, HP or 0% finance.

As has been alluded to, 0% finance has to be paid for by somebody, so if someone is offering it, check you're not paying for it by paying a higher price for the car in the first place.

Its also worth factoring in with a PCP deal that it may be "only £££ per month", but often there is a significant deposit so you need to factor that in when looking at the TOTAL cost over the period or apportion it across your monthly payments for a real monthly payment figure.

Be careful of what Mulholland is doing - the £2000 "dealer contribution" is most likely just discount you'd otherwise get off the car, so again, make sure you're not paying more to get this £2,000 contribution "free".

Also, watch the mileage allowance - i've had a look at the Fabia deal he's doing with £2000 contribution from them and £99 a month and its just 5,000 miles a year. Thats restrictively low....

boliston

motorguy wrote: »

....

Also, watch the mileage allowance - i've had a look at the Fabia deal he's doing with £2000 contribution from them and £99 a month and its just 5,000 miles a year. Thats restrictively low....

Can they still charge a mileage penalty if you have paid off 50% of the finance and the car is still in good condition?

Surely as long as those 2 criteria are met they are obliged to terminate the agreement with nothing further to pay?

daveyjp

50% of the finance repayment on a 3 year PCP is around the full term of the agreement anyway.

So on 5,000 a year after 3 years you need to do less than 15,000 or expect a charge.

boliston

daveyjp wrote: »

50% of the finance repayment on a 3 year PCP is around the full term of the agreement anyway.

So on 5,000 a year after 3 years you need to do less than 15,000 or expect a charge.

I'm sure the final balloon is not as much as 50% of the finance - more like 30%

MataNui

boliston wrote: »

I'm sure the final balloon is not as much as 50% of the finance - more like 30%

Lets split hairs and say about 40%. Only saying that because there are a few posts on here about VT on PCP and people are only meeting the 50% in month 30ish (or later) of a 36 month contract. Also these deals are financed so the eventual balloon payment closely matches the residual value of the car. On average this would be around 40% after 3 years. Note liberal use of words like 'average', 'ish' and 'about'.