PCP Deposit Head Scratcher

Technoholic

Can someone help me get my head around the whole deposit question when taking a PCP?

I'm about to take one out again, admittedly last time I had one, I didn't do as much research as I could have done and I\m much more clued up now and know it's right for me, but the deposit aspect is the one part I'm not 100% clear on. Some people say put in the least you can, some people say put in the most you can.

Here's the situation - I'm getting a car with 0% APR PCP, with dealer contributions of £18000 which I wouldn't get without the PCP. I want to put in £10000 deposit to bring my monthlies down a little.

Excluding the fact that the 10k could be sitting in an interest bearing account instead of used on a 0% APR agreement, how does putting in a large amount upfront affect things, specifically the equity, at the end? I don't get it!

Thanks!

fwor

Technoholic wrote: »

I'm getting a car with 0% APR PCP, with dealer contributions of £18000

Wow - that's a car that they really want rid of! How did you manage to choose such a car?

If the APR really is 0% for the whole duration of the agreement, I would think it would make sense to pay as little deposit as you can get away with.

Technoholic

Yes it’s a BMW 7 series. Not the most sought after car but does everything I want in extreme luxury.

So as you’ve said, it’s 0% for the whole term, and I should put in as little as possible. What I don’t understand is why!? No one can seem to explain this clearly.

Surely if my monthlies are higher then by the end of the term I’m still paying the same overall?

Cornucopia

Technoholic wrote: »

Excluding the fact that the 10k could be sitting in an interest bearing account instead of used on a 0% APR agreement...

That IS the advantage. Otherwise it should be exactly the same - in particular the future equity and balloon payment should be the same.

Technoholic

Yeah, I guess that’s what I figured. Because in my head if I didn’t out 10k in, then I’d be paying an extra 10k due to the extramonthlies and at the end of the 4 year agreement, before paying the balloon payment, I would have paid exactly the same right? Obviously this only goes for 0% deals.

Technoholic

Having read some of the other pcp threads on here, I feel I should prepare for the inevitable comments on why I’m spending 80k on a car and more so why I’m talking about it in a money saving forum.

Well firstly, I don’t need this car, I want it, can afford it (with or without pcp) but 0% gives me the ability to keep some money in the bank for security. Secondly, having followed this forum for years, the money saving advice has helped me in some respects to be able to afford things like this.

Mainly though I want it!

Clive_Woody

Technoholic wrote: »

Having read some of the other pcp threads on here, I feel I should prepare for the inevitable comments on why I’m spending 80k on a car and more so why I’m talking about it in a money saving forum.

Well firstly, I don’t need this car, I want it, can afford it (with or without pcp) but 0% gives me the ability to keep some money in the bank for security. Secondly, having followed this forum for years, the money saving advice has helped me in some respects to be able to afford things like this.

Mainly though I want it!

You've done remarkably well to get this far without one of the usual suspects popping up to recant a story of how they never pay more than £6.50 for a car and once had one that went 1,000,000 miles and only needed one new set of tyres in that time.

It's only a matter of time :money:

Technoholic

Clive_Woody wrote: »

You've done remarkably well to get this far without one of the usual suspects popping up to recant a story of how they never pay more than £6.50 for a car and once had one that went 1,000,000 miles and only needed one new set of tyres in that time.

It's only a matter of time :money:

I know! I’m eagerly awaiting my first story!

System

Technoholic wrote: »

. I want to put in £10000 deposit to bring my monthlies down a little.

But you're not, all you're doing is pre-paying part of your monthly cost. Per month the car still costs you the same.

Excluding the fact that the 10k could be sitting in an interest bearing account instead of used on a 0% APR agreement, how does putting in a large amount upfront affect things, specifically the equity, at the end? I don't get it!

Thanks!

It doesn't affect the equity at the end, it just lowers the monthly payments so you can feel a bit better about how much you're getting screwed and convince yourself it isn't a bad deal.

The last PCP thread I responded to it turned out that they were paying over £3000 in interest to finance about 60% of the value of the car. If they'd gone to the bank and got a loan to cover the entire purchase price so no balloon payment etc the interest was around 1/3 of what it was on the PCP deal.

No PCP deal is truly interest free, they get their money out of you in other ways.

henrik1971

Clive_Woody wrote: »

You've done remarkably well to get this far without one of the usual suspects popping up to recant a story of how they never pay more than £6.50 for a car and once had one that went 1,000,000 miles and only needed one new set of tyres in that time.

It's only a matter of time :money:

I did chuckle, as I can tend to be that person from time to time, but I also understand that life is for living and splashing out at certain points is part of doing that. However, this is a money saving forum, and so you can't blame people for giving their money saving opinions.

I do think MSE should consider having a separate forum category for wealthy people who want to discuss extravagant expenditure on luxury items. That way, everyone is clear at the outset what the parameters are and all the unwanted comments about £500 cars can be screened out.

Technoholic

Tarambor wrote: »

.

No PCP deal is truly interest free, they get their money out of you in other ways.

You say this but don't give an example of what that actually means.

If I pay for the car cash upfront, or I get a hypothetical 0% loan, or I take the PCP and pay it all including the balloon payment, how are they getting any more from me by going the 0% PCP route? Granted I could get some money on the capital in a bank but they are not getting what I am losing, Im just "losing" it myself. If anything by paying PCP, I'm getting a bigger discount due to the contributions available which I wouldn't get by paying cash. I agree that PCP is not for everyone but I can't see how they are getting more from me in this scenario