Thoughts on PCP

Mrjuls33

Just after peoples thoughts on pcp deals for car finace a good way of buying a new car or a road to a debt trap ?

jonesMUFCforever

If you have the money to pay the balloon payment and you want to keep the car it can be a decent deal.
If you hop from one car to another and can't afford the payment at the end it is indeed the start of a debt spiral.

Nebulous2

There are strong views about PCP on here, with the majority being negative.

PCP is designed above all to reduce monthly payments. It does that by not paying off the car over the period of the contract. This means more interest over the contract, as you are paying it on a bigger balance. It also means people who have found payments tough over the contract generally need a lump sum at the end, to either pay the balloon payment or pay the deposit on the next PCP.

As is often the case, sometimes astute people can make it work very well. As an example dealers may offer a 4 figure deposit contribution if you finance the car. Taking that contribution then paying off the agreement quickly can be the cheapest way to buy a car. With a big enough sweetener from the dealer to offset the interest paid, PCP can be a better deal than usual, whilst letting it run its course.

Niv

As the above have said, it depends how you go about it. I will tell you my experience.

I needed a car for work, I do relatively high mileage so wanted something new/only a couple of years old. As I was in the process of moving house at the time of needing to buy a car I only had a few k in cash available. I looked into both old and new cars and as it happened it worked out cheaper for me to buy a new car than a one year old car so I decided to go with pcp.
My deal was that I got ~£2k ‘contribution’ from the garage, £500 preloaded card to spend on what I wanted (advertised as £500 of fuel), 3 years full AA cover and 0% loan on the pcp.

I can afford the balloon payment. My intensions are to keep the car and run it until it is not viable any longer so for me this was a good deal.

PCP is not for everyone and if you cannot afford the balloon payment at the end you are ‘forced’ into another pcp or must find a cheap car you can currently afford. If you go for pcp deal after pcp deal it is a expensive way of owning a car.

MEM62

Mrjuls33 wrote: »

Just after peoples thoughts on pcp deals for car finace a good way of buying a new car or a road to a debt trap ?

Personally, I do not like them as you are making payments but never own the vehicle. (And I am basing that statement on the fact that very few people make the balloon payment at the end of the term) Also, there is almost no flexibility if your circumstances change.

I guess the biggest advantage of PCP is that it can put you in a car that you would otherwise not be able to afford. Basically, it can give you a BMW on a Ford budget.

The arrangement does suit some. My sister likes the arrangement and has had cars on PCP's for many years but it's not for me. In fact I would not finance a vehicle at all. Paying interest to buy an asset with a value that falls like a stone just doesn't make any sense to me.