PVP Loan

Sarah_hilton

Hi
We are about to purchase a new car (not brand new) and have been advised by the garage to take out a PVP Loan instead of a normal repayment loan, and while I get what their saying in the fact that the deposit we have put down from our old car is a guaranteed amount for in 3yrs time should we want to change, I still can't help thinking this is for for their benefit only. Not sure if I'm only thinking this because I wanted to put down some more deposit but cant with this type of loan. Please could you advise which is the best way to go, as we purchase in the next few days. Thankyou

[Deleted User]

Do they perhaps mean PCP?

Shakin_Steve

We don't know your circumstances, so can't tell you what's best for you. Do you want/need to change your car again in three years? Personally, I like to pay through hire purchase, so that the car is mine at the end of the agreement, but others prefer the PCP route.
I would sit down and work out exactly how much each method is going to cost you, and make a decision based on that.

Nebulous2

I very much doubt if the deposit you put down from your car will be available to you in 3 years time. If it is PCP the car has a guaranteed minimum value at the end of the contract. The only way you have any value or equity in the car is if it is worth more than the guaranteed value.

So to give an example - they will guarantee to give you a minimum of £5000. That is the amount you will still have to pay on the finance at the end of the 3 years to keep the car. At the end of the 3 years if they offer you £6000 for your car as a trade-in you have £1000 deposit on your next deal.

PCP generally means paying more interest over the period, but having a lower monthly payment, which is the attraction for people.

ratrace

the real reason they urge people to take out pcp is simply because they make more money on the deal and they have better incentives from the finance company

System

Sarah_hilton wrote: »

Hi
We are about to purchase a new car (not brand new) and have been advised by the garage to take out a PVP Loan instead of a normal repayment loan, and while I get what their saying in the fact that the deposit we have put down from our old car is a guaranteed amount for in 3yrs time should we want to change, I still can't help thinking this is for for their benefit only. Not sure if I'm only thinking this because I wanted to put down some more deposit but cant with this type of loan. Please could you advise which is the best way to go, as we purchase in the next few days. Thankyou

Its PCP. Basically you pay a deposit, pay a monthly figure for 3 years and then there's a balloon payment to make which is set at the beginning of the deal and what they think the value of the car will be by then. If you can't make the balloon payment then you lose the car, your only option if you've no money is to hand the car back and start the whole thing all over again - that is probably what they meant and most people do this, its called the PCP trap. Basically you end up with nothing at the end of the deal, you've not been able to save any money for another car so you end up signing up for another 3 year PCP deal so you've something to go to work in.

This video pretty much aligns with my view of the whole shoddy thing.

https://youtu.be/8tk1BycWC9I