PCP & Guaranteed Future Value

DrEskimo

dolphin85 wrote: »

Sorry to drag this one on and, again, thanks for all the information so far, but to clarify, should I be able to find a dealer willing to meet the £5777 balloon value for my car will that mean that I effectively have a deposit of £5777 against a new agreement or will I have to find additional funds for this. I'm assuming the former as the dealer would have the car (even if they cant sell it for £5777) they will still get a good number for it and have a sale of a new car on the books too, am I correct?

Thanks,
Dolph

It's the latter.

You have finance outstanding to the tune of the £5,777.
The dealer offers to buy your car at £5,777.

You are therefore taking that offer and clearing the outstanding debt (in reality, the car dealer will take the car off you and do this for you).

So you are now at £0. Any new deal would require additional funds from yourself.

LandyAndy

dolphin85 wrote: »

Sorry to drag this one on and, again, thanks for all the information so far, but to clarify, should I be able to find a dealer willing to meet the £5777 balloon value for my car will that mean that I effectively have a deposit of £5777 against a new agreement or will I have to find additional funds for this. I'm assuming the former as the dealer would have the car (even if they cant sell it for £5777) they will still get a good number for it and have a sale of a new car on the books too, am I correct?

Thanks,
Dolph

:rotfl: The dealer will have the car and the finance house will have the £5777. You will have nothing.

AdrianC

dolphin85 wrote: »

Sorry to drag this one on and, again, thanks for all the information so far, but to clarify, should I be able to find a dealer willing to meet the £5777 balloon value for my car will that mean that I effectively have a deposit of £5777 against a new agreement or will I have to find additional funds for this.

You have a choice at the end of your current PCP.

You give the car back to the finance people and walk away
Somebody gives the finance company £5,777, and the car doesn't go back to them.

If the value is above the balloon, then that £5,777 might come from a dealer in PX - and anything above the £5,777 goes either in your pocket or into the new deal.

So if the car is worth £6,777 - then you have £1,000 as "deposit" for the new deal.

almillar

should I be able to find a dealer willing to meet the £5777 balloon value for my car will that mean that I effectively have a deposit of £5777 against a new agreement

Absolutely not! This is the PCP trap. At the end, you hand the car back and start again, from ZERO.
Or you pay the balloon and keep the car.
Or, and this is where the confusion lies, you 'trade in' your car against another one. You may have 'equity' or 'negative equity' in your car that the salesman will use to try to get more money out of you, or get another car sold to you. Be cautious!

That £5,777 is money that you borrowed, but have not yet paid off. Handing back means it gets paid off (with the car). That includes 'trading it in' - you're counting the value of the car twice if you think you have that money as a deposit.

iwb100

almillar wrote: »

Absolutely not! This is the PCP trap. At the end, you hand the car back and start again, from ZERO.
Or you pay the balloon and keep the car.
Or, and this is where the confusion lies, you 'trade in' your car against another one. You may have 'equity' or 'negative equity' in your car that the salesman will use to try to get more money out of you, or get another car sold to you. Be cautious!

That £5,777 is money that you borrowed, but have not yet paid off. Handing back means it gets paid off (with the car). That includes 'trading it in' - you're counting the value of the car twice if you think you have that money as a deposit.

If you think of PCP as leasing and always compare the deal against a traditional PCH then there is no trap.

It can be a very affordable way to drive a new car if that is what you want. But people see it as "buying" which is the issue.

almillar

If you think of PCP as leasing and always compare the deal against a traditional PCH then there is no trap.

It can be a very affordable way to drive a new car if that is what you want. But people see it as "buying" which is the issue.

Certainly. I'm on a PCH now and have been on PCP in the past, but the poster thought they had built up a deposit towards their next car, whereas they start from £0 at the end of a PCP.

iwb100

almillar wrote: »

Certainly. I'm on a PCH now and have been on PCP in the past, but the poster thought they had built up a deposit towards their next car, whereas they start from £0 at the end of a PCP.

Unless there is equity left in the car. You must assume there isn't but can use a depreciation calculator to work out the likelihood...

Most deals try to leave a small amount in to ensure the customer just "rolls into a new deal".

Hunter_Jaeger

iwb100 wrote: »

Most deals try to leave a small amount in to ensure the customer just "rolls into a new deal".

But no doubt the excess mileage will kill off that thought.

Op in your position you are going to hand the car back, pay excess mileage plus any damages so at the minimum it will cost you £2,800+ to be left with nothing.

Alternatively take out a loan for as short a period as possible and pay £,5700.

Then next time buy an older car.

A 2014 car still on PCP sounds as if it was second hand when you entered the agreement so you will in all likelihood been fleeced with sky high interest rates.

PCP deals can be quite a good management tool for company cars that are going to rack up stellar mileages, pay low monthly payments, buy for the balloon payment, sell (or run for another year or so) and repeat.

AdrianC

The excess mileage doesn't affect the balloon. If they're selling you the car, they don't care about the mileage. If you'd been accurate in your mileage prediction, you'd be paying less for it...

It only needs paying if you return the car to them - because they then have the car to deal with.

AnotherJoe

AdrianC wrote: »

The excess mileage doesn't affect the balloon. If they're selling you the car, they don't care about the mileage. If you'd been accurate in your mileage prediction, you'd be paying less for it...

It only needs paying if you return the car to them - because they then have the car to deal with.

My bad you are right I'll delete my post