PCP isn't MSE

68ComebackSpecial

motorguy said:

68ComebackSpecial said:

dipsomaniac said:

Sorry if I have done you a disservice grumpy_chap I might have been mistaken lumping you with motorguy and bowfer.  Still trying to get someone to explain how buying a new car, keeping it for 3 years and then rinsing and repeating is MSe

Because some people want to own a new/ sub 3 year old "prestige" vehicle and can't afford to buy them through any other means. It might not be what you, I and countless other members aspire to but for some people their preferred lifestyle is all about looking "successful" to their friends/ family/ neighbours and this means having a new car, wearing labelled clothing etc. MSE can help them to achieve the best PCP deal to buy the car they want and maybe, if they hang around long enough, they might change their mindset and realise that there are other, less financially wasteful, ways of living a good life.

Why does PCP have to be about getting a "prestige" car?  The most successful PCP deals tend to be around Clios, Fiestas, Meganes and small to medium soft roader type Nissans etc.  Pretty much all Renaults, Fords, Vauxhalls, Nissans are sold new on PCP or lease deals.

And - contrary to the view of a small but noisy minority - people dont PCP a car to impress others, they do so primarily because it gets them what they want for a payment they can afford and are happy with.

RE: the second bit in bold, PCP puts them in to a new or nearly new variant of the car they could otherwise buy on an HP finance / personal loan deal.

A friend of mine, 25 years ago was buying up 4-6 year old BMWs, Mercs and Audi trade ins from the local franchised dealers, sticking a set of new replica alloys on them and selling them like hot cakes.  Genuinely he had rows of them and they sold hand over fist.  But the market moved on when the "prestige" manufacturers started selling the new / nearly new cars on PCP deals with similar payments to the older cars on finance. 

I didn't say that choosing to PCP is purely to purchase a car to impress others but that it is the motivator for many. For some people what they want is a car to impress others .... at a price they can afford..... because an outward display of material wealth is what floats their boat. Nothing wrong with that if it's what makes them happy.  If this forum can help them to achieve what they want then it has met it's aim.

motorguy

Sea_Shell said:

motorguy said:

68ComebackSpecial said:

dipsomaniac said:

Sorry if I have done you a disservice grumpy_chap I might have been mistaken lumping you with motorguy and bowfer.  Still trying to get someone to explain how buying a new car, keeping it for 3 years and then rinsing and repeating is MSe

Because some people want to own a new/ sub 3 year old "prestige" vehicle and can't afford to buy them through any other means. It might not be what you, I and countless other members aspire to but for some people their preferred lifestyle is all about looking "successful" to their friends/ family/ neighbours and this means having a new car, wearing labelled clothing etc. MSE can help them to achieve the best PCP deal to buy the car they want and maybe, if they hang around long enough, they might change their mindset and realise that there are other, less financially wasteful, ways of living a good life.

Why does PCP have to be about getting a "prestige" car?  The most successful PCP deals tend to be around Clios, Fiestas, Meganes and small to medium soft roader type Nissans etc.  Pretty much all Renaults, Fords, Vauxhalls, Nissans are sold new on PCP or lease deals.

I've not studied the numbers, but I'd always thought that PCP on "average" cars (Ford, Vauxhall) was an even worse deal, due to the faster depreciation that they suffer over the more "prestigious" brands?

In other words their residuals are through the floor.

When you say "most successful", what do you mean?

Most popular?
Best for the dealer?
Best for the finance company?
Or best for the customer?

Its not a "worse" deal, no. 

They dont suffer faster depreciation, necessarily, and some of the deals are very competitive.

Their residuals dont particularly matter, particularly if you go for a PCH deal, not a PCP.  A brand new Astra Griffin for £245 down and £245 a month on a PCH is the first one i found there.  I would imagine that stacks up quite well against a 1 series of similar spec and pwoer.

And by "successful" i'm trying to reinforce the point that PCPing isnt just about a 3 series or Audi A4 - its how pretty much all new cars are sold these days.

Top 10 new cars sold 2020

https://cardealermagazine.co.uk/publish/these-were-the-uks-best-selling-cars-in-2020/212532

The bulk of those are fairly average family hacks not people trying to "impress the neighbours".  Top 3 are the usual suspects - Ford Fiesta, Vauxhall Corsa, VW Golf.  

Take 10 minutes on a saturday morning and drop in to your local Vauxhall, Ford, Renault, Nissan dealer and they'll be packed full of regular people buying regular cars to just get on with life.  They're not doing so to "keep up with the Jones", "impress the neighbours" or to live "above their station" in life.

motorguy

Grumpy_chap said:

dipsomaniac said:

I have never taken out a PCP but isn't it about paying for a new car, keeping it for 3 years, then rinsing and repeating? If so, how am I moving the goal posts?

OK, so you describe in high-level terms how a PCP works.
BUT, you are conflating two different products:

1. PCP is simply a finance product, with a structure to reduce monthly payments by a generally large(ish) deposit and a large balloon payment which bears interest for the whole term of the product life. 
2. Having a new car every few years is, for those that can afford it, a choice of how they choose to spend their money and meet their desires and needs.

With regards to (1) the PCP finance product, I agree this is not MSE because of the interest costs applied and carried full-term for the balloon payment.  Manufacturer incentives and zero percent interest offers do distort that.  Keen sales-persons do also, in some cases, over-emphasise the low monthly payments to "push" a sale to individuals that cannot really afford it.  That is not good, but it is the sales-persons' job to get the sale.

Because of (1), some people do end up with (2) when they cannot really afford it - this is not recommended.  Alternatives can be just as effective and avoid the risk of financial strife.

Totally separate from the finance product (1) is the choice to have a new car every few years (product 2).  If an individual can afford this choice and wants or needs the new car every few years, then the MSE-approach is to meet that outcome in the most cost-effective manner.  

Life is not just about achieving the same end (a means of transport) at the lowest possible cost.  Similarly, the world does not work with the same type of approach for any other product.  If it did, there would be little point in maintaining an aspirational societal structure where you can train, work hard to get a better job and income as the increased income would yield no benefit other than a figure on a balance sheet.

• Why buy a premium £1k mobile, when a £150 product is more MSE?
• Why buy a Panasonic or Sony TV when a Technilks from Tesco will show the same picture?
• Why buy a Bentley when it is no faster in a traffic jam than a Mondeo?
• Why buy a brand new car when a clapped out banger will do the job?

The answer to all of the above is choice and, if the choice is affordable, it is not for others to say that the choice is incorrect.  Interestingly, each of the questions can be asked as the inverse and the answer is pretty much the same, except you could re-phase the "buy" with "make do".

Well summarised

motorguy

Cornucopia said:

Cars are a tricky purchase from an MSE POV - there are no really good options to own and operate a depreciating asset that requires expensive insurance and the possibility of other unpredictable running costs.   

OTOH, I have a new-ish car that would have cost over £20K when it was new and I pay £183pm on a PCH Lease (similar to a PCP) including maintenance and I have no liability for any fluctuations in its residual value.    I simply don't want to take on a significant capital cost nor the responsibility for disposal losses.  

The other thing about it is that with a reasonable monthly income, these payments simply become living costs rather than interfering with capital, investments, etc.

Yup.  For that monthly payment they wrap up their depreciation, warranty, protection from large ad hoc bills and breakdown cover and often servicing costs in one monthly payment.

That - clearly - works for a lot of people.

fred246

I remember trying to be helpful to someone on low pay when I was working. "Oh no you haven't got one of those PCP things?". "It's all right for you. You've got money. We can't afford repairs." I left thinking "So the poor have to drive around in brand new vehicles while the rich drive old ones?". There did use to be adverts where people took out payday loans when their car broke down. So to save money you need the discipline to save a 'cash buffer'. That's the way to get out of the PCP trap and save money in the long term. If you can't do it the poor will just have to keep driving new cars I suppose.

Sea_Shell

motorguy said:

Sea_Shell said:

motorguy said:

68ComebackSpecial said:

dipsomaniac said:

Sorry if I have done you a disservice grumpy_chap I might have been mistaken lumping you with motorguy and bowfer.  Still trying to get someone to explain how buying a new car, keeping it for 3 years and then rinsing and repeating is MSe

Because some people want to own a new/ sub 3 year old "prestige" vehicle and can't afford to buy them through any other means. It might not be what you, I and countless other members aspire to but for some people their preferred lifestyle is all about looking "successful" to their friends/ family/ neighbours and this means having a new car, wearing labelled clothing etc. MSE can help them to achieve the best PCP deal to buy the car they want and maybe, if they hang around long enough, they might change their mindset and realise that there are other, less financially wasteful, ways of living a good life.

Why does PCP have to be about getting a "prestige" car?  The most successful PCP deals tend to be around Clios, Fiestas, Meganes and small to medium soft roader type Nissans etc.  Pretty much all Renaults, Fords, Vauxhalls, Nissans are sold new on PCP or lease deals.

I've not studied the numbers, but I'd always thought that PCP on "average" cars (Ford, Vauxhall) was an even worse deal, due to the faster depreciation that they suffer over the more "prestigious" brands?

In other words their residuals are through the floor.

When you say "most successful", what do you mean?

Most popular?
Best for the dealer?
Best for the finance company?
Or best for the customer?

Their residuals dont particularly matter, particularly if you go for a PCH deal, not a PCP.  A brand new Astra Griffin for £245 down and £245 a month on a PCH is the first one i found there.  I would imagine that stacks up quite well against a 1 series of similar spec and pwoer.

I suppose the question would be, what would their £245 per month buy them if they actually wanted to own/purchase a car.   Not much by comparison I would think.   A 0% finance deal would only give you £8800 to spend.   Factor in interest, and it'll be even less than that.

I get the impression that dealers are very much incentivised to sell the brand new option at £245 per month, rather than sell the customer a used car on traditional finance over 3 years at £245 per month, assuming they had anything that cheap/old actually on their forecourt!    

This whole thread seems to be comparing apples and oranges though, as we're comparing owning/purchasing a car, with renting/having use of a car.    If customers are going into a PCP deal with their eyes wide open as to exactly what the deal is, and the options that they have (or maybe don't have!) at the end of the period, then that's OK, but I think many don't.

But, I can see the benefits if you want a hassle free package to be able to have a new car, and the payments are affordable.   We might even consider it, once we're certain of our pension fixed income coming in, if it's burning a hole in our pockets!!!    If we don't spend it our heirs will!!

motorguy

Sea_Shell said:

motorguy said:

Sea_Shell said:

motorguy said:

68ComebackSpecial said:

dipsomaniac said:

Sorry if I have done you a disservice grumpy_chap I might have been mistaken lumping you with motorguy and bowfer.  Still trying to get someone to explain how buying a new car, keeping it for 3 years and then rinsing and repeating is MSe

Because some people want to own a new/ sub 3 year old "prestige" vehicle and can't afford to buy them through any other means. It might not be what you, I and countless other members aspire to but for some people their preferred lifestyle is all about looking "successful" to their friends/ family/ neighbours and this means having a new car, wearing labelled clothing etc. MSE can help them to achieve the best PCP deal to buy the car they want and maybe, if they hang around long enough, they might change their mindset and realise that there are other, less financially wasteful, ways of living a good life.

Why does PCP have to be about getting a "prestige" car?  The most successful PCP deals tend to be around Clios, Fiestas, Meganes and small to medium soft roader type Nissans etc.  Pretty much all Renaults, Fords, Vauxhalls, Nissans are sold new on PCP or lease deals.

I've not studied the numbers, but I'd always thought that PCP on "average" cars (Ford, Vauxhall) was an even worse deal, due to the faster depreciation that they suffer over the more "prestigious" brands?

In other words their residuals are through the floor.

When you say "most successful", what do you mean?

Most popular?
Best for the dealer?
Best for the finance company?
Or best for the customer?

Their residuals dont particularly matter, particularly if you go for a PCH deal, not a PCP.  A brand new Astra Griffin for £245 down and £245 a month on a PCH is the first one i found there.  I would imagine that stacks up quite well against a 1 series of similar spec and pwoer.

(1) I suppose the question would be, what would their £245 per month buy them if they actually wanted to own/purchase a car.   Not much by comparison I would think.   A 0% finance deal would only give you £8800 to spend.   Factor in interest, and it'll be even less than that.

(2) I get the impression that dealers are very much incentivised to sell the brand new option at £245 per month, rather than sell the customer a used car on traditional finance over 3 years at £245 per month, assuming they had anything that cheap/old actually on their forecourt!    

(3) This whole thread seems to be comparing apples and oranges though, as we're comparing owning/purchasing a car, with renting/having use of a car.    If customers are going into a PCP deal with their eyes wide open as to exactly what the deal is, and the options that they have (or maybe don't have!) at the end of the period, then that's OK, but I think many don't.

But, I can see the benefits if you want a hassle free package to be able to have a new car, and the payments are affordable.   We might even consider it, once we're certain of our pension fixed income coming in, if it's burning a hole in our pockets!!!    If we don't spend it our heirs will!!

(1) Yes, exactly.  And most people dont want to "own" the car long term.  They want to run it three or so years and see what their needs are.  So yes, the choice might be between a brand new car, warranty, no risk of ad hoc bills, or maybe a 5 year old car.  If you only want to run it for 3 years, then most will opt for the £245 a month on a brand new car rather than the older car.

(2) The salesmen in dealers will be broken in to the two types - new car and used car sales.  New cars, yes very incentivised to sell new cars so the franchise can meet their target / commitment to the manufacturer on units sold.  Used cars, yes sell all the approved used cars that have been trade ins, bought in, etc (and usually will have a lot more profit in them for the dealer)

(3) Yup and most people are happy with their PCP deals.  BUT for many there are other opportunities that would yield a "similar" result but might cost them less.  However if people are happy with their PCP, get a palatable deal and it works for them then great.

Grumpy_chap

motorguy said:

The other thing about it is that with a reasonable monthly income, these payments simply become living costs rather than interfering with capital, investments, etc.

Yup.  For that monthly payment they wrap up their depreciation, warranty, protection from large ad hoc bills and breakdown cover and often servicing costs in one monthly payment.

That - clearly - works for a lot of people.

For that scenario - the choice of a new car every few years and just pay monthly forever, is PCP the best outcome?
Assuming the individual is going into the process fully informed and aware they don't / won't own the car but are just paying for use of the car (which some don't):

• a Ford Focus ST-Line on the Ford PCP £5,730 deposit, 36 monthly payment £250/month, 9k miles /year.  Total outlay £14,730
• Ford Focus ST-Line lease (PCH) from a nationwide online company £1,401 initial, £234 admin, 35 monthly £234, 10k miles/year.  Total outlay £9,825

motorguy

Grumpy_chap said:

motorguy said:

The other thing about it is that with a reasonable monthly income, these payments simply become living costs rather than interfering with capital, investments, etc.

Yup.  For that monthly payment they wrap up their depreciation, warranty, protection from large ad hoc bills and breakdown cover and often servicing costs in one monthly payment.

That - clearly - works for a lot of people.

For that scenario - the choice of a new car every few years and just pay monthly forever, is PCP the best outcome?
Assuming the individual is going into the process fully informed and aware they don't / won't own the car but are just paying for use of the car (which some don't):

• a Ford Focus ST-Line on the Ford PCP £5,730 deposit, 36 monthly payment £250/month, 9k miles /year.  Total outlay £14,730
• Ford Focus ST-Line lease (PCH) from a nationwide online company £1,401 initial, £234 admin, 35 monthly £234, 10k miles/year.  Total outlay £9,825

I've pointed this out before on this thread, theres an easy £5K off a new Focus, so the £5,730 deposit becomes say £1,000

https://broadspeed.com/new_cars/Ford/Focus/Choose_Number_Of_Doors/Hatchback/Choose_Fuel_Type/Choose_Engine_Size/Choose_Transmission

So that becomes £1000 + £250 x 36 = £10,000.

Whilst i would certainly advocate PCH - IMHO it will become the revalent car purchase type,  PCP gives you more options - options to purchase it, the option to maybe get a bit extra back over the residual value, the dealer will take your trade in also (leasing companies wont).

And where does the "forever" come from?  Realistically people use PCP / PCH when it suits them but are under no obligation whatsoever to continue using it "forever".   At the end of term hand it back / sell it and the world is your lobster in terms of what you do next.

Grumpy_chap

The PCH is at least taking the hassle out of the negotiations with the dealer.

The "forever" part comes from the fact that if you have a nice shiny car and it's due to go back after three years, the vast majority of people are then going to want another new or nearly new car.  I think that matched your niece you mentioned up-thread.  Not a high number of people will return the 3 yo car and then buy a 10 yo "make do" car. 

As I understand it, at the end of the 3 year deal, you are often faced with either paying £250 per month for another three years to pay the balloon on the current car, or £250/month to swap to another new car.  Given that choice, another new car is much of a no-brainer.  Much the same as my SiL with her Mini, except she was not on PCP but 50-50 finance.

The other big factor in PCP / lease is the mileage and what can sometimes be extortionate over-mileage charges.  This can be a real impact if, say, the individual changed jobs in the three year term and the commute mileage changed significantly.