PCP isn't MSE

motorguy

Grumpy_chap said:

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

(2) 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. 

(3) 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.

(4) 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.

(1) Yes.  Absolutely.  There is merit in PCH, however it is more constrained.  Works for a lot of people and i think its popularity will expand greatly.

(2) Thats another wild assumption though.  Speaking as someone whos done it - went from a new car on PCP to a used car - then yes people do it.  And yes, chances are my neice and her husband will do that for the next couple of iterations.  He drives a 2010 1 series (changed recently from a 2007 Passat), their main car is a Captur.  Perhaps a couple of iterations down the line they'll hold on to one of the cars but right now they've a couple of young kids and a monthly payment to cover their main motoring needs works for them.  And you dont need to buy a 10 year old car next time.  Could be a 1 year old car bought with a cheap loan and then paid off over time.  Could be an older car.  Doesnt have to be.  I could forsee a situation for my niece where down the line they get offered a year old car and take it out on a loan then just keep it.  People - contrary to the belief of a few - dont perpertually keep PCPing from their 20s until they die.  Their wants, needs, requirements change.

(3) Correct, and many opt to just get another new car.  It works for them, so why not?  Why do we need to judge others and tell them they're "wrong"?  If its costing them a bit more than an alternative but they're happy with their choice and can afford it then thats their prerogative.

(4) Agreed.  That is a risk.  With PCP you do have the option to buy the car at the end of the term for the fixed residual if it turns out you've been (proverbially) driving it to the moon and back.  Or a dealer can buy it off you.  PCH is more restrictive.   

Sea_Shell

At the end of the day, PCP is a product that enables someone to drive away a brand new car, when for similar monthly payments they may otherwise have only afforded, a 5+ year old used car.

The earlier comparison to an interest only mortgage was a good one IMO.

They both enable affordability, where it otherwise wouldn't be.

Grumpy_chap

motorguy said:

(3) Correct, and many opt to just get another new car.  It works for them, so why not?  Why do we need to judge others and tell them they're "wrong"?  If its costing them a bit more than an alternative but they're happy with their choice and can afford it then thats their prerogative.

I really don't think any of my comments are judging others or telling them that they are "wrong".

motorguy

Grumpy_chap said:

motorguy said:

(3) Correct, and many opt to just get another new car.  It works for them, so why not?  Why do we need to judge others and tell them they're "wrong"?  If its costing them a bit more than an alternative but they're happy with their choice and can afford it then thats their prerogative.

I really don't think any of my comments are judging others or telling them that they are "wrong".

Your comments suggest you think people are in some way forced to keep PCPing ad infinitum.  Thats simply not the case.  They may chose to, but they by no means have to.  You also used the example of having to PCP new or make do with a 10 year old car - two extremes when there are many options in between.

My reference to "judging" wasnt necessarily directed at you (you will notice i said "we" as in collective "we" as in forum group members, rather than saying "you") however there are definitely some on here who take their situation / what works for them and judge others as "wrong" for not doing the same thing, and then use "MSE" incorrectly to justify that stance.

fred990

Sea_Shell said:

The earlier comparison to an interest only mortgage was a good one IMO.

They both enable affordability, where it otherwise wouldn't be.

Indeed, as numerous 60-70 year olds are now finding out.
Somehow they're 'victims' and now need 'help'.....no doubt from the taxpayer! 
Most of these finance wheezes eventually have consequences. 

Grumpy_chap

fred990 said:

Sea_Shell said:

The earlier comparison to an interest only mortgage was a good one IMO.

They both enable affordability, where it otherwise wouldn't be.

Indeed, as numerous 60-70 year olds are now finding out.
Somehow they're 'victims' and now need 'help'.....no doubt from the taxpayer! 
Most of these finance wheezes eventually have consequences. 

Yes, the endowment mortgages was the financial wonder product of the 1980's so those with them will now be ending work and seeking a relaxing retirement.
There does seem to be, amongst some quarters at least, a notion that if you buy something and it works out less well than hoped / planned for, then that must have been mis-sold and compensation is due.

fred990

Grumpy_chap said:

fred990 said:

Sea_Shell said:

The earlier comparison to an interest only mortgage was a good one IMO.

They both enable affordability, where it otherwise wouldn't be.

Indeed, as numerous 60-70 year olds are now finding out.
Somehow they're 'victims' and now need 'help'.....no doubt from the taxpayer! 
Most of these finance wheezes eventually have consequences. 

Yes, the endowment mortgages was the financial wonder product of the 1980's so those with them will now be ending work and seeking a relaxing retirement.
There does seem to be, amongst some quarters at least, a notion that if you buy something and it works out less well than hoped / planned for, then that must have been mis-sold and compensation is due.

Interest only mortgages are just like endowment mortgages but without the endowment!!
I wonder what they'll dream up next....taxpayer funded? 
'Help to buy' cars. 

Sea_Shell

fred990 said:

Grumpy_chap said:

fred990 said:

Sea_Shell said:

The earlier comparison to an interest only mortgage was a good one IMO.

They both enable affordability, where it otherwise wouldn't be.

Indeed, as numerous 60-70 year olds are now finding out.
Somehow they're 'victims' and now need 'help'.....no doubt from the taxpayer! 
Most of these finance wheezes eventually have consequences. 

Yes, the endowment mortgages was the financial wonder product of the 1980's so those with them will now be ending work and seeking a relaxing retirement.
There does seem to be, amongst some quarters at least, a notion that if you buy something and it works out less well than hoped / planned for, then that must have been mis-sold and compensation is due.

Interest only mortgages are just like endowment mortgages but without the endowment!!
I wonder what they'll dream up next....taxpayer funded? 
'Help to buy' cars. 

Is the scrappage scheme still going???

Cornucopia

The reason why interest-only mortgages can make sense under certain circumstances is because you are buying an expensive asset that may well appreciate in value.   

Which points to the notion that this entire discussion isn't about whether one product is "better" than another, for everyone and for all time.   It's about (1) selecting products that make sense for your circumstances, and (2) having enough information to make that sensible choice.

Biggus_Dickus

Grumpy_chap said:

fred990 said:

Sea_Shell said:

The earlier comparison to an interest only mortgage was a good one IMO.

They both enable affordability, where it otherwise wouldn't be.

Indeed, as numerous 60-70 year olds are now finding out.
Somehow they're 'victims' and now need 'help'.....no doubt from the taxpayer! 
Most of these finance wheezes eventually have consequences. 

Yes, the endowment mortgages was the financial wonder product of the 1980's so those with them will now be ending work and seeking a relaxing retirement.
There does seem to be, amongst some quarters at least, a notion that if you buy something and it works out less well than hoped / planned for, then that must have been mis-sold and compensation is due.

That takes me back Gc 😁 ;...Endowment mortgages were indeed a wonder product for a while but the lucrative tax advantage they offered was eroded away by Govt legislation almost completely by the early 90’s.

There were many companies that sprang up with the specific intent of purchasing Endowment policies from homeowners.

As a result countless thousand homeowners sold their Endowments for cash,...as did I. The amount of cash the companies were offering defied logic and the decision to sell, for me any way,  was a no-brainer. They were seemingly in a bidding frenzy for several years,...think Tulip Fever.

However, many homeowners, rather than pay-off all or most of their original mortgage, spent their Endowment cash windfall on other things,...and then started to blame everything and everyone (except themselves of course!) when they were unable to pay-off their original mortgage lump-sum when the mortgage term ended.

Those homeowners weren’t mis-sold or badly advised,...they just stupidly buried their heads in the sand for many years,...until the day of reckoning arrived.