PCP isn't MSE

Cornucopia

I think we are beginning to drift off the point - is the issue PCPs, or is it new cars, generally, or indeed, car finance (and borrowing) generally?

People have "spent tomorrow's money today" for a long while and in many, many creative ways.   The number of people who save for large purchases like cars and houses must be vanishingly small.

fred246

Well people tend to get a PCP so they can drive new cars. The UK number plate system always seems to encourage that to some degree. Other countries are far more interested in the vehicle than it's age.

Herzlos

fred246 said:

Well people tend to get a PCP so they can drive new cars. The UK number plate system always seems to encourage that to some degree. Other countries are far more interested in the vehicle than it's age.

Do you actually know that the PCP is to drive a new car, or are you talking nonsense? You can get a used car on PCP too, and I have to admit that whilst eyeing up a "new" 2016 car the PCP offer was pretty tempting as it dropped the monthly payments from ~£150 to ~£80, albeit there was the balloon to factor in.

thegentleway said:

BOWFER said:

thegentleway said:

My mum just bought a fairly newish i20 and despite her being able to pay for it in cash the salesman tried to sell it to her on PCP on the premise that petrols/diesel are going to be worthless soon with the electric revolution...

It's perfectly sound thinking.

🤦‍♂️ No it’s not. She doesn’t need to replace her car in 3-4years time let alone worry about resale value

Bowfer - there's no way petrol/diesel cars will be worthless in 3 years, there are far too many luddites who'll refuse to move onto electric cars until they have no choice. They'll be worth a bit less, maybe, but will still have value.
thegentleway - there's nothing about a PCP that'd force your mum to give the car back at the end. It just means that after the agreed time the car has an agreed value which she can either pay to keep the car, or hand the car back with no hassle. Of course if she's sure she'll keep it there's nothing stopping her taking out the PCP to get the discounts and then clearing it a week later.

motorguy

The_Real_Cheddar_Bob said:

I love this thread! It's bold, blunt and factual. PCP is for people who refuse to accept their reality of spending more than they earn and justifying it by being able to "afford" the monthly payments. I'm pretty sure Martin Lewis said its like robbing your future self of money. If it wasn't him, it was someone similar. 

Thats laugh out loud funny.

PCP is for people who want to package up their transport needs in to one monthly payment which includes depreciation, warranty and sometimes servicing and protects them from ad hoc big bills and associated car hassles.

That works for a lot of people. 

People dont go "i refuse to accept my reality and therefore i WILL get myself a new car", they go "we need a means to get us about, we have a budget of £x to do that, what can we get?"

motorguy

Sea_Shell said:

fred990 said:

Indeed Bob, one wonders what the industry would look like were it not for this financial 'product', spending tomorrows money today. 
One of the big German company execs (bmw I think) referred to the UK as Treasure island! 

Is PCP a UK phenomenon or is it widely used across Europe?   

How do the Germans buy their Audi's, BMW's and Mercedes'?

Cant say for sure, but in other markets leasing is more prevalent.

Found this 

https://www.statista.com/topics/5284/car-purchasing-experience-in-europe/

Average new car price across Europe = 28,000 Euros.  Largest amount of new cars bought per year = Germany.

Top 4 best selling brands in Germany

VW
Mercedes
BMW
Audi

https://www.best-selling-cars.com/germany/2021-q1-germany-best-selling-car-brands-and-models/

motorguy

fred246 said:

Well people tend to get a PCP so they can drive new cars. The UK number plate system always seems to encourage that to some degree. Other countries are far more interested in the vehicle than it's age.

No, people tend to get a PCP (as a monthly payment suits them) and that can get them a new car.

PCP on a new car means you've a three year warranty as a minimum, likely breakdown and recovery cover, free loan car, no big adhoc maintenance bills, no MOT hassles, etc.

Thats quite compelling for a lot of people.  

Grumpy_chap

Cornucopia said:

I think we are beginning to drift off the point - is the issue PCPs, or is it new cars, generally, or indeed, car finance (and borrowing) generally?

I don't think it is possible to answer the question whether PCP is (or is not) MSE, without also considering within that answer whether taking finance for a car is MSE.

Cornucopia said:

People have "spent tomorrow's money today" for a long while and in many, many creative ways.   The number of people who save for large purchases like cars and houses must be vanishingly small.

I don't think that comparing finance for a house purchase and finance for a car (or pretty much anything else) purchase can be compared as equals.  For the vast majority of cases:

• Everyone needs to live somewhere and that creates a monthly cost, either rent or mortgage.  In the absence of an action to change, rent is a monthly cost until death.  Borrowing is a monthly cost (often similar in magnitude to rent) for a fixed period but usually not until death.  The borrowing on a property is also acquiring an asset that is usually expected to maintain or appreciate in value.
• Very few people need to have a car greater than they could realistically save and afford to buy outright in a reasonable time-frame.  The borrowing on a car is acquiring an asset that is guaranteed to depreciate.

motorguy

Grumpy_chap said:

I don't think it is possible to answer the question whether PCP is (or is not) MSE, without also considering within that answer whether taking finance for a car is MSE.

And the reason that question cant be answered is because MSE is not about only buying what you "need".  Its about buying what you want at the best price possible.

There would be quite a compelling case to say buying a brand new car is not "money saving" because there are easily cheaper alternatives. 

MSE is not about saving money by only getting in life what you need its about ensuring you save money on what you want.

motorguy

Grumpy_chap said:

I don't think that comparing finance for a house purchase and finance for a car (or pretty much anything else) purchase can be compared as equals.  For the vast majority of cases:

• Everyone needs to live somewhere and that creates a monthly cost, either rent or mortgage.  In the absence of an action to change, rent is a monthly cost until death.  Borrowing is a monthly cost (often similar in magnitude to rent) for a fixed period but usually not until death.  The borrowing on a property is also acquiring an asset that is usually expected to maintain or appreciate in value.
• Very few people need to have a car greater than they could realistically save and afford to buy outright in a reasonable time-frame.  The borrowing on a car is acquiring an asset that is guaranteed to depreciate.

Then that leads to who lives in a house greater than what they actually "need"?

You're saying people dont need a new car but then it could equally be argued people dont need a detached house in a nice development when they could live in a terraced house at a fraction of the price?

So even with house buying there is a very significant element of "want" not "need".

Jenni_D

motorguy said:

MSE is not about saving money by only getting in life what you need its about ensuring you save money on what you want.

It's deja vu all over again.