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Stupid question time - PCP
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johnnyr1970
Posts: 11 Forumite
in Motoring
Whilst I understand the concept of PCP the one thing I haven’t really got my head round is what happens to my current vehicle if I opt to acquire a new car on PCP? I have a Lexus CT which I expect to be worth circa £12k when I look to swap it in January. If I want to use PCP to fund my next car then what do I do with my current one????
I know I could ask a dealer but I’m not at the stage of visiting them yet so thought I’d ask here first. And I noted a lot of negativity around PCP in the forum so am looking to avoid that type of response here if possible.
I know I could ask a dealer but I’m not at the stage of visiting them yet so thought I’d ask here first. And I noted a lot of negativity around PCP in the forum so am looking to avoid that type of response here if possible.
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You sell it, either privately, to a carbuyer like WBAC, or the dealer supplying your new car will buy it off you and use it as the deposit on your PCP.I want to go back to The Olden Days, when every single thing that I can think of was better.....
(except air quality and Medical Science
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PCP is just car finance by another name. You can trade in your car and finance the new car anyway you like.
The pitfalls with PCP are that you often need a deposit and at the end of the deal you either hand over the keys and walk away with nothing, or pay the outstanding balance to keep the car. PCP deals appear very attractive initially, but 3 or 4 years down the line you have to start all over again. Dealers (and manufacturers) push them as customers return after 3/4 years looking for another car.
Car manufacturers sometimes sweeten finance packages by including free servicing, a lump sum to help with the deposit, etc.
It's a buyers market, do you research and read carefully the small print. Remember there is no free lunch, someone has to pay for the car.0 -
you are forgetting that the PCP can be terminated at a certain point so you would then be a buyer with no trade in. Or if at the end of the agreement can just be handed back.
Depends what if any "equity" YOU have in the car. It may be worth 12k but you may not own that 12k's worth.0 -
'Your' Lexus CT isn't yours at all. It belongs to the finance company at the moment. When you signed your PCP, you might have put down a deposit, and then you would have paid monthly payments, including interest. At the end of the deal is the GFV, the Guaranteed Final Value. This is the amount they promise you it's worth, and is the balance of the agreement. They have to work this out based on your mileage, and what they think it'll be worth at the end of the agreement. So you can hand it back, owing nothing, or you can pay that same amount, and finally actually own the car. The risk of the car being worth less at the end of the agreement is on them.0
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The two deals for the two cars are separate, unless you choose to link them (for your own convenience).
Your old car needs to be sold, and any outstanding finance repaid. Whatever is left over is yours, and you can choose to spend some or all of it on your new car.
From my perspective much of the hostility towards PCPs is due to horror tales from people who never understood their PCP in the first place, added to a fundamental misunderstanding of the meaning of the "numbers". I don't think that the Manufacturers help by "pretending" that a car is "just £199 per month", when there is a downpayment required of as much as £8k or more (I have seen this deal advertised).
There is no magic (good or bad) about PCPs. They simply structure the deal and the numbers in a particular way, and make a specific, underwritten guarantee about the car's future value. The alternative when buying a new car is to drive away with little idea and no guarantee over the biggest part of the expenditure of ownership.
If there is a disadvantage, it comes from a certain amount of inflexibility (and I'm surprised that no Manufacturer has yet realised the goodwill and marketing advantages of a Flexible PCP - one that could be terminated at 2, 3 or 4 years, say, with a known MGFV for each term known at the outset). If the interest rate is high, there is also the disadvantage that interest is paid on both the amount being paid and the balloon payment, which can lead to more interest proportionately being paid than in a similar straight HP agreement.0 -
Frozen_up_north wrote: »PCP is just car finance by another name. You can trade in your car and finance the new car anyway you like.
The pitfalls with PCP are that you often need a deposit and at the end of the deal you either hand over the keys and walk away with nothing, or pay the outstanding balance to keep the car. PCP deals appear very attractive initially, but 3 or 4 years down the line you have to start all over again.
How is it a pitfall to pay off the full amount of money that the car costs? How is that different to buying say cash except you pay some money up front then some monthly then some at the end rather than all the money up front
Why do you need to start all over again 3-4 years down the line? You can just pay the rest of the balance and have a car you know.Sam Vimes' Boots Theory of Socioeconomic Unfairness:
People are rich because they spend less money. A poor man buys $10 boots that last a season or two before he's walking in wet shoes and has to buy another pair. A rich man buys $50 boots that are made better and give him 10 years of dry feet. The poor man has spent $100 over those 10 years and still has wet feet.
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How is it a pitfall to pay off the full amount of money that the car costs? How is that different to buying say cash except you pay some money up front then some monthly then some at the end rather than all the money up front
Why do you need to start all over again 3-4 years down the line? You can just pay the rest of the balance and have a car you know.
Because normal folk on here do not have 20 large in the bank ready and waiting to pay for the car at the end of the term.......they think oh good, I can have a brand new Mercedes/BMW that I cant afford to buy for the £199 that is plastered all over the windows in big white writing.
PCP is hiring a car for 2/3/4/5 years with an option to buy. They cant afford to buy it at the start nor at year 5 - unless they save up for the final payment.
They are the same folk who 25 years ago thought, oh good I can buy a house for £200,000 on an interest only mortgage and then have a heart attack when they are asked for the £200,000 cash that they should of saved up in their repayment vehicle.
Works for some people but not for others.0 -
foxy-stoat wrote: »Because normal folk on here do not have 20 large in the bank ready and waiting to pay for the car at the end of the term.......they think oh good, I can have a brand new Mercedes/BMW that I cant afford to buy for the £199 that is plastered all over the windows in big white writing.
PCP is hiring a car for 2/3/4/5 years with an option to buy. They cant afford to buy it at the start nor at year 5 - unless they save up for the final payment.
They are the same folk who 25 years ago thought, oh good I can buy a house for £200,000 on an interest only mortgage and then have a heart attack when they are asked for the £200,000 cash that they should of saved up in their repayment vehicle.
Works for some people but not for others.
Crikey, what sort of cars are you thinking about? A £20k final payment would be on a pretty expensive car. For a lot of people the final payment will be less than half that.0 -
foxy-stoat wrote: »Because normal folk on here do not have 20 large in the bank ready and waiting to pay for the car at the end of the term.......they think oh good, I can have a brand new Mercedes/BMW that I cant afford to buy for the £199 that is plastered all over the windows in big white writing.
PCP is hiring a car for 2/3/4/5 years with an option to buy. They cant afford to buy it at the start nor at year 5 - unless they save up for the final payment.
They are the same folk who 25 years ago thought, oh good I can buy a house for £200,000 on an interest only mortgage and then have a heart attack when they are asked for the £200,000 cash that they should of saved up in their repayment vehicle.
Works for some people but not for others.
None of that makes it a pitfall. Someone not reading terms and conditions and ignoring the numbers on the paperwork that you read and sign doesn't make PCP a bad product, it means they're stupid and deserve everything they getSam Vimes' Boots Theory of Socioeconomic Unfairness:
People are rich because they spend less money. A poor man buys $10 boots that last a season or two before he's walking in wet shoes and has to buy another pair. A rich man buys $50 boots that are made better and give him 10 years of dry feet. The poor man has spent $100 over those 10 years and still has wet feet.
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