Considering PCP

as400

Never had PCP before...am I right in thinking that if you intend to buy the car at the end of the purchase period then the mileage if significantly higher than originally anticipated will be irrelevant?


IE the original balloon payment will remain the same if you want to purchase the vehicle outright?


It seems I can put down quite a low deposit....make quite low payments over say 36 months....and ( I intend driving high mileage 30K+ per year) but by choosing just 8K on my PCP plan will only have to pay a low monthly rental?


Obviously if I was at the end walking away from the deal or looking to take another car then the higher mileage would have consequences but if I'm going to buy the car outright then the mileage is irrelevant?

Browntoa

Yes , the mileage is irrelevant if you intend to purchase. The balloon payment stays the same.

AdrianC

Bear in mind, though, that in three years time you'll be looking at the paperwork wondering why on earth you should be paying the value of a 3yo/24k car for a 3yo/90k+ car...

One way or another, it all balances out.

...and you've been paying interest on that difference in value for the duration of the agreement, too, because you've been borrowing more money for longer.

TheMoonandBack

Unless you’ve got the money to either buy the car outright now, pay the ballon at the end, or cover the excess mileage costs or value gap (if you end up returning it or trading it or it is written off), I wouldn’t do it.

marlot

If you're sure you'll have the money at the end, this can be a reasonable way of using finance. You'll pay quite a bit of interest though.



If the car was an insurance total loss any time in the PCP period, there could be a gap between the outstanding finance and the insurance payout.

photome

there are always negative posts when it comes to PCP.


OP work out the total cost, if you can afford it do it.


I bought a car on PCP nearly 3 years ago. car was 16500


I put down 5000, paid back 4500 in monthly payments before paying the balance of just under 8000.


yes i paid interest but £1000 interest in 32 months isnt to bad in my opinion.


I got the loan direct from Halifax rather than the dealer, it was a much better deal, Halifax call it a flex car plan

Jonesya

as400 wrote: »

It seems I can put down quite a low deposit....make quite low payments over say 36 months....and ( I intend driving high mileage 30K+ per year) but by choosing just 8K on my PCP plan will only have to pay a low monthly rental?

Obviously if I was at the end walking away from the deal or looking to take another car then the higher mileage would have consequences but if I'm going to buy the car outright then the mileage is irrelevant?

3 years x 22k miles per year excess mileage x 10ppm ?? = £6,600

That's a pretty substantial consequence if anything happens and you don't or can't buy the vehicle at the end of the term.

A better test is to rerun your PCP calcs with your actual 30,000 a year mileage, if you can afford the monthly payments then great. If you can't then that its begs the question of how you could afford the final payment at the end. Ultimately you're just shifting costs around between monthly payments and final payments.

jimbo6977

Jonesya wrote: »

3 years x 22k miles per year excess mileage x 10ppm ?? = £6,600

That's a pretty substantial consequence if anything happens and you don't or can't buy the vehicle at the end of the term.

A better test is to rerun your PCP calcs with your actual 30,000 a year mileage, if you can afford the monthly payments then great. If you can't then that its begs the question of how you could afford the final payment at the end. Ultimately you're just shifting costs around between monthly payments and final payments.

If you know you are going to come into some money at a pre-determined future date, but you need / could do with a change of car now, it might make sense.

AdrianC

Jonesya wrote: »

3 years x 22k miles per year excess mileage x 10ppm ?? = £6,600

That's a pretty substantial consequence if anything happens and you don't or can't buy the vehicle at the end of the term.

Now divide that by 36. £183/mo.

A better test is to rerun your PCP calcs with your actual 30,000 a year mileage, if you can afford the monthly payments then great. If you can't then that its begs the question of how you could afford the final payment at the end. Ultimately you're just shifting costs around between monthly payments and final payments.

Agreed. And it's a question of which works better over the total term, taking into account the risk of changing plans.

Gap insurance would also be much more important. If the car gets written off a week before the end of the finance, the insurer will pay out the value of a 3yo/90k+ car, while the finance house will expect the value of a 3yo/24k one.

Jonesya

jimbo6977 wrote: »

If you know you are going to come into some money at a pre-determined future date, but you need / could do with a change of car now, it might make sense.

Each to their own. But I'd ask this, if you can't afford it now then that suggests you don't have a good buffer of savings, so whose to say you won't need that money for something else when it finally arrives? And of course, what do you do if it doesn't arrive?

movilogo

PCP is good for people who can't afford to buy outright and effetively want to hire the car long term.



A car depreciates most in first 3 years. PCP is a mean to make the hirer bear this depreciation.


Cheapest way to buy a car is buy few years old (outright or via personal loan).