Getting into the PCP Game

neilmcl

anotheruser said:

We have a car, probably worth about £2500.

Was thinking about getting into the PCP game of essentially renting a new car. We wouldn't be able to afford the balloon payment so would either trade it in for another new car or trade it in and that's that.

I'm a bit worried it's not really worth it though. While it means we don't have to stump up another £4000 - £6000 for a used but good car (could pay less but this tends to be a good spot for us), it does mean we'll be paying a good £200-£300 a month anyway.

Anyone made this switch and have any advice? 

Just lease then.

BOWFER

Freecall said:

BOWFER said:

That's like saying renting a villa is 'enticing people into a holiday home they cannot really afford'
Irrelevant, all you need is to be able to afford for the period you want it.

.  Commitments which can be difficult to get out of should your circumstances change. 

As I demonstrated above, PCP is relatively easy to get out of if your circumstances change.
You ask the PCP company for a settlement figure, you then find a buyer for the car.
Said buyer, if it's a business, will pay the settlement direct for you, meaning you don't have to find the money youreself.
Yes you 'might' be out of pocket in the difference - who knows.
Equally, you might be left with some dough.

BOWFER

Freecall said:

But surely that is the whole point, renting a villa for a holiday is a very specific point-purchase.  A fortnight later you move on and at some future date make your plans for your next holiday.

Explain the difference between hiring a villa you couldn't afford to buy and hiring a car you can't afford to buy.
Apart from the time span.

BOWFER

NSG666 said:

You do need to be careful not to assume the vehicle will be worth more than the GFV - the idea and hope, even from the manufacturers, is that they will be but occasionally  a model is facelifted or goes out of fashion and is worth significantly less. Of course that then illustrates anther benefit of PCP over outright purchase in that you just hand the car back and the PCP provider takes the loss. I'm not anti-PCP by the way.

Of course there's a risk you won't get any equity, but being able to just walk away with nothing can be appealing too.
I've heard more than one story of people buying cars that become totally unappealing and they'd struggle to sell to anyone if they owned them.
Effectively stuck with them.
Not with PCP, hand back and walk away with a grin.

MalMonroe

anotheruser said:

We have a car, probably worth about £2500.

Was thinking about getting into the PCP game of essentially renting a new car. We wouldn't be able to afford the balloon payment so would either trade it in for another new car or trade it in and that's that.

I'm a bit worried it's not really worth it though. While it means we don't have to stump up another £4000 - £6000 for a used but good car (could pay less but this tends to be a good spot for us), it does mean we'll be paying a good £200-£300 a month anyway.

Anyone made this switch and have any advice? 

Hi, I entered into my first PCP agreement two years ago. I felt it was a bargain as it was 0% for two years. And it's true, there's been no interest charged. And I've enjoyed having a newish car too. Like you, I can't afford the balloon payment. My agreement ends next month and I'm in a bit of a quandary. I've done a lot of research and it transpires that I can sell my car to a garage for a decent price, £2k more than the balloon payment. Or I can continue on and pay monthly until the car is mine. The APR is 6.9% but that's still lower than the 16.9% APR I've been quoted for a personal loan to pay off the amount due. Or I can swap the car for a newer model, only two years old with low mileage. But obviously pay more per month. I could sell it for a profit and use that to get a used car elsewhere but I worry about reliability. The car I've had for two years is the car I know and trust now.

I don't want to be without a car as need it for such mundane tasks as taking most people I know (as well as myself) for medical and hospital appointments and to the supermarket. They could get taxis I suppose but why would they when I'm free?!  (I don't mind).

I am tempted to upgrade and pay more for a nice shiny new car but during covid I'm not really going anywhere so the car's a bit like an ornament, stuck outside not doing a lot.

You can get good cars on PCP cheaper than £200 to £300 a month though. Think small hatchback, around two years old. I like Toyota because in my experience they're the most reliable car I've had in 35 years of driving. But any make is probably just as good . . . maybe.  

ratrace

Op, whatever route you go down be it pcp, hp, lease, or bank loan, its all still debt imho

im very opposed to debt i dont like it having been in debt and worked my tail off paying it off its not for me. especially for somthing that loses a lot of money, i would feel very uneasy having thousends of pounds worth of debt sat my drive. just not worth the sleepless nights that i went through when i had debt

it seems like money is a little tight for you as you say in your op that you will not have the money for the baloon etc... i would not do it and stick to the 4 to 6k that you are used to for now untill finances change

with pcp its also reccomended that you take out gap insurance should the worse happen also you have to take into account that if there is any damage on the car that falls outside of the bvlra guide then you will have to pay for that also, only you can decide if its for you but i though i would give my opinion on it all the best with whatever you do.

jimjames

BOWFER said:

Freecall said:

BOWFER said:

That's like saying renting a villa is 'enticing people into a holiday home they cannot really afford'
Irrelevant, all you need is to be able to afford for the period you want it.

.  Commitments which can be difficult to get out of should your circumstances change. 

As I demonstrated above, PCP is relatively easy to get out of if your circumstances change.
You ask the PCP company for a settlement figure, you then find a buyer for the car.

Maybe you want to explain to this person how they can just get out of their PCP? This is just one recent thread

https://forums.moneysavingexpert.com/discussion/6288902/santander-consumer-finance-reducing-monthly-payments

jimjames

BOWFER said:

Freecall said:

But surely that is the whole point, renting a villa for a holiday is a very specific point-purchase.  A fortnight later you move on and at some future date make your plans for your next holiday.

Explain the difference between hiring a villa you couldn't afford to buy and hiring a car you can't afford to buy.
Apart from the time span.

You know you can afford the villa at the time you book and pay for it. You have no idea what your finances may be in 12 months time as per the thread I just posted.

DrEskimo

BOWFER said:

NSG666 said:

You do need to be careful not to assume the vehicle will be worth more than the GFV - the idea and hope, even from the manufacturers, is that they will be but occasionally  a model is facelifted or goes out of fashion and is worth significantly less. Of course that then illustrates anther benefit of PCP over outright purchase in that you just hand the car back and the PCP provider takes the loss. I'm not anti-PCP by the way.

Of course there's a risk you won't get any equity, but being able to just walk away with nothing can be appealing too.
I've heard more than one story of people buying cars that become totally unappealing and they'd struggle to sell to anyone if they owned them.
Effectively stuck with them.
Not with PCP, hand back and walk away with a grin.

This makes no sense.

With the car you just traded in after 9months, you would have been able to trade it in to the exact same dealer for the exact same price had you bought it (or for argument sake, got it on PCP to get the best possible deal and then settled the PCP the next day).

The only difference between the two is you had to pay interest for those 9months on top of the depreciation, whereas had you settled the PCP you would have just paid the depreciation.

Your ability to trade a car in to a dealer is not just reserved for people with cars on PCP. You don't have to sell it privately, it's just an option.

So buying the car in your cases would have been cheaper.

BOWFER

jimjames said:

Maybe you want to explain to this person how they can just get out of their PCP? This is just one recent thread

https://forums.moneysavingexpert.com/discussion/6288902/santander-consumer-finance-reducing-monthly-payments

I've explained how, I literally did it last week.