New Car PCP and Equity

Exa

Hi all, first time posting after many years of reading tips and advice :money:

My question, or more a discussion topic I suppose, is with Car PCPs

Is it possible to 'keep your money' through a PCP? Now I know that's a bit of a silly question, but what I mean is roll the equity.

Eg.
Put a large cash deposit down initially, trade in at the sweet spot (2 years or so?) and get another car, eventually after a few cars, if managed properly, you'd have a decent amount of equity in the car? Yes, always be paying for a car, yes more expensive than buying a car outright but the advantage of getting out before the depreciation kicks in (I know the car loses value "when it drives off the forecourt" and all the rest :rotfl:)

Thought this would be the place to ask, if someone has experience in doing this or something similar.

I'm personally not interested in new cars, I own mine, but my partner wants a new car and it's affordable for us. I'm looking at the best option, (PCP, or a 1-2 year old year with a bank loan etc) with at least keeping some of the money alive rather than losing it all in interest/depreciation/negative equity. I know cars aren't investments but you get my meaning!

Or just lease and accept it's dead money

Cheers,
Exa

Cornucopia

In short: no.

PCPs are not designed to allow money to roll-up in that way. Also, for almost all cars, the depreciation is exponential, with it being fastest at the point when the car initially rolls off the forecourt.

There are no easy MSE answers to car ownership - it is always a compromise between the cost of purchase and the cost of maintenance.

If you are desperate to own a brand new car, then leases of small cars make the most sense to me. Get the payments down to c. £100pm, and it starts to be both bus pass territory, and a not unreasonable total cost of ~£1200 per year, depending on deposit.

fatrab

Depending on the car your looking at buying, perhaps a site like Drive the Deal would be a better option. You eliminate the "drive off the forecourt" part of the depreciation this way if you buy the right car to begin with.


e.g. I bought a brand new Focus ST tdci through drive the deal saving £5285 off list price. I ran the car for 5 months, did 11,000 miles in it and sold the car for £200 less than I'd paid for it (while getting paid company car allowance so I actually made money from it).


There are also huge savings available in the nearly-new car market which would again be far more beneficial than what you're trying to achieve through PCP.

almillar

You always seem to hear about equity (positive) at the start of a deal, whereas it always seems to be negative equity at the end of the deal. Think about that...
If they really want to sell you another car, and want yours back to sell, they'll be happy.
The whole point of PCP normally, is that they have to predict how much your car will be worth when it's, say, 3 years old with 50,000 miles on it. If they guess too high, you're in negative equity (but they guaranteed you a value, so you're protected), if there IS equity in it, they guessed the value too low. Good? Well, maybe, but it means you've been overpaying on the car for the last 3 years.

motorguy

fatrab wrote: »

Depending on the car your looking at buying, perhaps a site like Drive the Deal would be a better option. You eliminate the "drive off the forecourt" part of the depreciation this way if you buy the right car to begin with.


e.g. I bought a brand new Focus ST tdci through drive the deal saving £5285 off list price. I ran the car for 5 months, did 11,000 miles in it and sold the car for £200 less than I'd paid for it (while getting paid company car allowance so I actually made money from it).


There are also huge savings available in the nearly-new car market which would again be far more beneficial than what you're trying to achieve through PCP.

+1

For what the O/P is trying to achieve, i'd be getting the best deal possible via drivethedeal or broadspeed.com, but down a large deposit and finance the rest on a cheap (non PCP) loan.

Changing every two years is very difficult to do effectively as thats when the most depreciation is.

Leasing is probably the most viable way of doing it as it at least lets you see exactly what its costing you and you dont have your own cash tied up in it.

System

You will NOT have any equity in the first 2 years with a typical car. Absolutely none, zero, zilch, nada. I can say that with 100% certainty. The fastest rate of depreciation of a new car is in the first few years, you can see that just by going on Ebay and seeing how cheap you can buy 2017 and used 2018 cars for. I bought my Mondeo at 2 years old for just a little over 1/3 of its new price. I paid £8500 for it at 2 years old and it was £24k new. There is no way in hell if you'd have bought that on PCP you'd have any equity in it at all.

Like all rules though there are a handful of exceptions to this but they apply exclusively to performance cars where demand exceeds supply. The right hand drive V8 Ford Mustang when it was in its first 2 years of production was such an example, you could own that for a year and sell it for more than you paid for it such was the demand. However for "normal" cars the only thing the value does is tank through the floor in those first couple of years. The only thing you'd achieve with your plan would be to have found a way to set fire to the most amount of money in the shortest space of time via car ownership.

Exa

Thanks for the replies and advice all, appreciate it. I know it's a basically a lose-lose with a new car, just trying to make the best decision