The cost of small cars is no longer small!

motorguy

giraffe69 wrote: »

The upsides of PCP are that it
1. makes cars more affordable for those who haven't got cash upfront
2. easy for those who wish to change every 3 years or so
3. some offers of deposit contribution to offset interest
4. Predictability of monthly amount
but downsides appear to be
1. Interest
2. Cost of early redemption
3. Extra costs e.g. Gap Insurance
4. Being tied into existing dealer/brand unless an effort is made
5. Worry about annual mileage
6. Worry about suggested damage at time of returning car

Happy if others added to either side of this list as I'm going to buy a new car in the next six months and guess I'm a bit prejudiced against it as a payment model probably not yet having done it.

Relative to the downsides
1. Interest - often new car PCP deals are at incentivised interest rates or 0% APR. Used car PCP deals are usually best avoided as they are usually at scandalous rates. :eek:
2. Cost of early redemption - yes, there are penalties to get out early, although not as bad as leasing and you have the option of a VT if needs be. Like any financial agreement they are best not entered in to without careful consideration.
3. I'd argue that even with buying cash theres merit in GAP insurance. How heartbreaking would it be to put say £50K in to your new Pride & Joy to have it written off a year later and the insurance company pay out say £38,000? Plus GAP is cheap now - around £200 which over 3-4 years is minimal
4. Theres no effort required to change brand. Its no different than HP in that sense. Simply trade it in elsewhere.
5. Yes, its best to put a higher mileage than you expect to do, rather than spend your time watching the mileometer.r Also if your mileage does change, either make provision for it or ring the finance company who will plug in your new mileage prediction and adjust the payment.
6. Only applicable if you actually return the car. Most people dont - they just trade it in. Likewise there are BVRLA guidelines to be followed by the finance company so they cant just make up charges. Look after the car as you would expect someone else to look after yours and there wont be an issue

James2k

For someone who doesn't use pcp, you sure are a strong advocate for it! You sure you aren't selling it on the side? Relentlessly positive with nary a nod to the negatives.

How does trading it in at another brand/dealer work with negative equity - genuine question i don't know.

Also, please stop saying 'most people' you cant know that.

Herzlos

In a chance of circumstances you'd be equally hosed if you went down the purchase (cash or bank loan) or the PCP route. The only difference is with a purchase you've already covered all the money, with a PCP you need to stump up the money you didn't provide earlier.

motorguy

James2k wrote: »

For someone who doesn't use pcp, you sure are a strong advocate for it! You sure you aren't selling it on the side? Relentlessly positive with nary a nod to the negatives.

Also, please stop saying 'most people' you cant know that.

I was a motor trader (part time / full time) for 30+ years. I started out selling new Austin Rovers back in 1988.

I still have many contacts in the motor trade - quite a few in big main dealers.

Several of my closest friends are motor traders and i generally talk to them daily.

I still have access to many trade sites.

I am giving information based on my experience and what i'm hearing from my trade friends.

Based on my experience and knowledge i would say 90% of people trade their PCP'd car back in rather than hand it back to the finance company. Thats "most people" and yes i can possibly know that.

motorguy

James2k wrote: »

How does trading it in at another brand/dealer work with negative equity - genuine question i don't know.

You either settle it with cash, or they attempt to roll it in to the next deal.

Often this is done with by giving less discount than you otherwise might receive and adding it on to the value of the car.

It matters little if its PCP or straight HP finance as they get a settlement figure from the finance company. In fact PCP is just a form of HP finance.

motorguy

Herzlos wrote: »

In a chance of circumstances you'd be equally hosed if you went down the purchase (cash or bank loan) or the PCP route. The only difference is with a purchase you've already covered all the money, with a PCP you need to stump up the money you didn't provide earlier.

+1

Buy a new car with cash and you find yourself needing to sell it sooner than expected and you're going to get severely rogered in terms of what you paid for it relative to what its worth. (there are some exceptions but very few).

James2k

motorguy wrote: »

I was a motor trader (part time / full time) for 30+ years. I started out selling new Austin Rovers back in 1988.

I still have many contacts in the motor trade - quite a few in big main dealers.

I still have access to many trade sites.

I am giving information based on my experience and what i'm hearing from my trade friends.

Based on my experience and knowledge i would say 90% of people trade their PCP'd car back in rather than hand it back to the finance company. Thats "most people" and yes i can possibly know that.

ahhh, it all becomes clear

motorguy

James2k wrote: »

ahhh, it all becomes clear

Yes, once a motor trader, always a motor trader. It gets in your blood.

Would love to still be doing it but the reality is these days its a horror story to make money at, and frankly IT contracting pays an awful lot more.

James2k

motorguy wrote: »

You either settle it with cash, or they attempt to roll it in to the next deal.

Often this is done with by giving less discount than you otherwise might receive and adding it on to the value of the car.

It matters little if its PCP or straight HP finance as they get a settlement figure from the finance company. In fact PCP is just a form of HP finance.

so if you have a bmw with bmw finance, worth 10k say, and the guaranteed final value is 12k. so if you gave it back to bmw they would call it quits.

but if you took this car to Audi, they give 10k for the car, but to settle the finance its 12k (for example) to bmw.

what happens then?

motorguy

James2k wrote: »

so if you have a bmw with bmw finance, worth 10k say, and the guaranteed final value is 12k. so if you gave it back to bmw they would call it quits.

but if you took this car to Audi, they give 10k for the car, but to settle the finance its 12k (for example) to bmw.

what happens then?

Yes, in those circumstances you'd hand it back to the finance company (BMW Finance) with nothing further to pay (subject to fair wear and tear).

If you took the car to Audi they "should" direct you to hand the car back to BMW Finance and then effectively sell you their car from a clean slate.

Often what happens is the dealer you are buying off will try to take your car as a trade in. There are various reasons for this but mainly

• If you leave his showroom you may never come back
• Trade ins usually mean another opportunity for profit

When its that far away as your example is though i'd imagine the Audi dealer "should" advise you correctly (if he has any scruples at all).

I think generally speaking the finance companies have the residual values skewed in their favour so such a scenario would be relatively rare these days