Car financing: PCP

XeonSX

Hello,

I'd like some advice on PCP and legality of my plan.
I would like to buy a vehicle for my dad. I like the option of being able to hand the car back after 3 years and get guaranteed amount. At 1.5% interest this PCP deal seams good. However the more I research this I found out I need to pay attention to terms like legal owner, registered keeper and fronting.

Personally I don't see much wrong with taking responsibility for a finance even if the car is not for me.
I am happy to keep paying for it, happy to be held responsible for settling the balance if/when time comes.

The way it stands I think the financing company will be legal owner and since agreement is between me and them they'll put my name down as keeper which doesn't work if my dad is the main driver of the car.

Any advice welcome...

Nearlyold

Do you and your Dad live at the same address?

National_Debtline

Hi XeonSX,


You need to be mindful of a couple of things with PCP agreements in particular. One is that sometimes the balloon payment is particularly large, so large that you would actually repay less than 1/3 of the agreement over the term. This can present a problem if you fall into arrears with payments because if less than 1/3 of the agreement has been paid the car can be repossessed form a public road without the need for a court order (and you will still owe the remaining finance, minus the resale price of the car).


It can also be an issue if the vehicle is in an accident. Normal car insurance may not cover the full outstanding finance if the car was in an accident, so you can look into Gap Insurance to cover this shortfall.


It terms of dad being the registered keeper, this is something you would need to discuss with the car company (I am sure there is an easy solution for that). But really you need to check whether PCP will be the most cost effective way of buying a car. You will typically pay a lot more than the car is worth, if you pay it off, so perhaps leasing a vehicle would be more suitable if you like the idea of handing it back. Or getting a personal loan to buy a car, that way the car is owned outright from the start with only the loan payments to manage.


Laura
@natdebtline

enthusiasticsaver

PCP is one of the most expensive and inflexible ways of buying a car. Should the car no longer be suitable or you fall into difficulties making the payments the chances are it will be very expensive to get out of the deal. There is usually a large balloon payment at the end of the period so if your dad still needs the car at that point you will need to make the payment or enter a new deal.

As to the legalities of you buying it and being the owner or keeper and your dad being the main driver (you can also be named as driver) I am sure that could be overcome providing you make your intentions clear when buying it. I would personally look at leasing or buying outright on some sort of finance. Cheaper if it is a used car rather than brand new as it loses thousands the minute you drive it off the forecourt.

Nebulous2

There is nothing to stop you being the registered keeper and your father being the main driver. The insurance company may want to know why, where you live / where the car will be kept ovenight etc but it will be possible.

XeonSX

Do you and your Dad live at the same address?

Yes

I am aware of PCP risks and with large deposit I'm minimising the risks of being unable make payments for 3 years for whatever reasons. Leasing is not cheaper, in some cases even more expensive after 3 years and I don't even get the option to keep the car. PCP deal costs about 4% of the car value which I find quite acceptable so financially it makes sense, if nothing goes wrong.

I called Blackhorse today, who would be providing PCP financing and they told me point blank no, you must be the main driver and nobody else could be listed as keeper. Even car sales rep was surprised there is nothing that can be arranged to make it work. If I were to accept to be the main driver, there are further costs with insurers. Very few insurers want to offer a cover to someone who isn't a registered keeper, those who do want substantially higher premiums, the cheapest quote I have is 270% more than if my dad was both owner and keeper of the car.
Its ridiculous to pay close to 3x the price for something this basic. So now I'm trying to figure out which is more cost effective, get a loan and buy without PCP/ other car loan making my dad the registered keeper (insurance is still 30% higher since I'll remain to be legal owner) or get on PCP and pay extortionate insurance costs.

System

You're not buying a vehicle for your dad, you are renting one. You will pay out all of that money over 3 years and at the end of it you will have nothing without making a balloon payment of thousands. That is not buying a vehicle. Buying a vehicle is going there with money you have and paying for it and owning it outright.

Here's what you are doing when you buy a car on PCP or lease one.

Watch the entire video.

Take note of the points:
"Not only do I want to spend all of my money on a way to get around town, I want to spend way more than all of my money just on a way to get around town. In 5 years it is my hope to have no money."

Now you've done that lets calculate just how much this car you're getting for your dad is going to cost you.
Go to this website:
http://www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php
Select the standard calculator, put in the amount of the deposit as the principle amount, set the interest rate to 4%, set the number of years as the time between now and when you retire at age 67 so for example if you're 30 you put 37. Run the numbers.
Next take the value of those results at year 3. Set that plus the total amount of monthly payments you'll make as the principle amount. Set the years as you did previously but less 3 so for example if you previously put 37 put 34. Run the numbers. That is a low example of the amount of money doing this will cost you and how much you will be worse off by when you retire age 67 renting this car for your father instead of investing it.

Cornucopia

Tarambor wrote: »

You're not buying a vehicle for your dad, you are renting one. You will pay out all of that money over 3 years and at the end of it you will have nothing without making a balloon payment of thousands. That is not buying a vehicle. Buying a vehicle is going there with money you have and paying for it and owning it outright.

Here's what you are doing when you buy a car on PCP or lease one.

Watch the entire video.

Take note of the points:
"Not only do I want to spend all of my money on a way to get around town, I want to spend way more than all of my money just on a way to get around town. In 5 years it is my hope to have no money."

I gave up after 1:48 of the ranting. His Sister must be pretty peeved.

PCPs are what they are. There is no deception there, other than self-deception for some people (but not others).

Like the OP, I like the idea that someone other than me is underwriting the depreciation of my car. If Car Dealers offered free-standing insurance on that, I would consider it, but they don't.

System

Cornucopia wrote: »

I gave up after 1:48 of the ranting.

Those who don't like hearing the truth tend to.

Like the OP, I like the idea that someone other than me is underwriting the depreciation of my car.

And you don't think you're paying for that? If you don't then you are truly a mug.

Cornucopia

Tarambor wrote: »

Those who don't like hearing the truth tend to.

You make it sound like some kind of religious experience - it's just buying a car.

And you don't think you're paying for that? If you don't then you are truly a mug.

I'm sure it's costed in, but that doesn't make it not useful.

But this isn't about me. I'm just trying to add some balance to what's been a somewhat one-sided discussion thus far.

Nebulous2

It might be worthwhile speaking to an insurance broker. You seem to be getting very confusing messages about what is and isn't possible.

I've worked with multiple people who own / buy cars they never drive and they all get insurance at reasonable rates.

I've a relative who lost his driving licence due to a health condition. He is keeper but his wife is main / only driver.

I think the insurance may suspect that you are going to be the main driver but are using your dad to get cheaper insurance.

The finance company doesn't generally ask who is the main driver. I'm sure you know people who aren't employed, possibly bringing up children, who are the main driver of a nice shiny new car. Many of them will be on PCP in their partner's name.