PCP - Miles don't matter

motorguy

AdrianC wrote: »

I never said that the consumer didn't have multiple options outside of the contract. Of course they do.

Great. We're in agreement then - the consumer has multiple options - 3 main ones - and the financier has only two. Not sure what you were arguing about TBF.

lopsyfa

motorguy wrote: »

Not sure why you quoted my quote to say that, thats not the point i was making.

The mileage on a car will have an impact on the value of the car, however the contracted mileage is only relevant if the car is handed back.

And there may not be negative equity.

Because you are making the point as if if the car is part exchanged, the contractual mileage will not be taking into consideration. Let's look at all the three cases using the assumptions below:

1. The GMV of the car is £10,000.
2. the car is now worth £9000 sold to dealer or £9500 sold privately (can assume anything here and it wouldn't change the argument too much).
3. The customer has done 10,000 miles above contract at 5p/mile (£500 cost).

The three options you mention for the customer are:
1. Hand the car back at the end: He will need to pay the mileage penalty
2. Part exchange at the end: if he sells to the dealer for £9000, the dealer will add the £1000 shortfall to pay off the GMV and this will increase the cost of his new car by £1000
3. Walk away

However, if within the contract mileage, the options would have worked out as:
1. Hand the car back at the end: No penalty
2. Part exchange at the end: If the dealer can't offer him at least the GMV(£10000), he will just simply hand over the car to the finance company and start over. If the dealer can offer him more, cool
3. Walk away

You may come back and said for option 2, the car may be worth more than GMV but this is rarely so. Even then, 10000 miles will still make a difference to the value of the car.

motorguy

lopsyfa wrote: »

Because you are making the point as if if the car is part exchanged, the contractual mileage will not be taking into consideration.

Wholly correct.

lopsyfa wrote: »

Let's look at all the three cases using the assumptions below:
1. The GMV of the car is £10,000.
2. the car is now worth £9000 sold to dealer or £9500 sold privately (can assume anything here and it wouldn't change the argument too much).
3. The customer has done 10,000 miles above contract at 5p/mile (£500 cost).

The three options you mention for the customer are:
1. Hand the car back at the end: He will need to pay the mileage penalty
2. Part exchange at the end: if he sells to the dealer for £9000, the dealer will add the £1000 shortfall to pay off the GMV and this will increase the cost of his new car by £1000
3. Walk away

However, if within the contract mileage, the options would have worked out as:
1. Hand the car back at the end: No penalty
2. Part exchange at the end: If the dealer can't offer him at least the GMV(£10000), he will just simply hand over the car to the finance company and start over. If the dealer can offer him more, cool
3. Walk away

You may come back and said for option 2, the car may be worth more than GMV but this is rarely so. Even then, 10000 miles will still make a difference to the value of the car.

I'm not disagreeing with any of this - even if your figures are very skewed to make your point stand. My point was and is - the contracted mileage clause is not enforced unless you hand the car back.

As you say, by setting a low contracted miles and exceed them, you run the risk that at the end of term you will owe more than the car is worth, but some people may chose to take that risk.

Oh, and one thing your "example" doesnt take in to account is that increasing the contracted miles costs money, so even in the O/P's example of £15 a month, £15 a month * 36 = £540.

And i think your £1,000 devaluation for 10K miles extra is way out. I just plugged in a 3 year old Focus TDI Zetec with 24K miles on it to WBAC - valuation is £8,310. With 34,000 miles it £8,000. So £310 difference.

Wouldnt be worth paying the extra £15 a month there would it?

[Deleted User]

motorguy wrote: »

I have no doubt the O/P is misquoting the salesman slightly. The salesman is quite right that the contracted mileage is irrelevant if the car is not being handed back and the dealer will not {look at the contracted mileage} when the car is being traded in as its irrelevant.

Sure, but there is a possibility that the dealer decides they don't want to take it as a trade-in. Maybe they were optimistic on the GFV and it's not worth what it will cost the dealer to effectively buy it from the real owner, the finance company.

AdrianC

lopsyfa wrote: »

Because you are making the point as if if the car is part exchanged, the contractual mileage will not be taking into consideration.

Because the car is being bought, for the balloon, off the finance house.

And that balloon was set with the contracted mileage taken firmly into account.

So if the actual mileage is much higher than the contracted mileage, then the final deal in that PX is going to be "adjusted" to fill that shortfall.

So, no, the PCP finance house aren't taking it into account - the salesman was right. But the final PX will work out more expensive.

motorguy

DELETED USER wrote:

Sure, but there is a possibility that the dealer decides they don't want to take it as a trade-in. Maybe they were optimistic on the GFV and it's not worth what it will cost the dealer to effectively buy it from the real owner, the finance company.

For clarity, the finance house sets the GFV, not the dealer. The GFV's are usually set pessimistically, so that IF the finance house has to take the car back, then they know they can recoup the money after costs.

No dealer in their right mind will refuse to take a car as a trade in. They'll value it either as stock for resale, or to be traded on (usually underwritten by a trader), or to be sent to auction house.

jbainbridge

I've had this in LOOKERS too. Seems like they'll say anything to sell a car. You're right to be cautious.

motorguy

jbainbridge wrote: »

I've had this in LOOKERS too. Seems like they'll say anything to sell a car. You're right to be cautious.

Anything ANY salesman tells you must be taken with a pinch of salt. If you are basing your decision making on it, then the information being given needs to be cross checked.

What the salesman has told the O/P is not a lie, however its not giving a true picture for the O/P.

I remember there was a local dealer to me years ago who when you were buying a car, that very car was "in demand", "not going to sit long", "optimum spec" however come trade in time - no matter how short the timescale was that same car was "off the boil", "not the seller it once was", "the wrong spec for todays market".