Getting into the PCP Game

jimjames

motorguy said:

Herzlos said:

Proving the point perfectly.

However, PCP can be a pretty cost-efficient way of getting a new car, but a new car is rarely MSE. The MSE way would be to buy something that's taken the brunt of the depreciation already (maybe 2-3 years old)

I don't doubt you can be quids in with a PCP, given the right car and deposit, but the sheer volume of underwater PCP posts on here show's it's not all of them.

Even looking at depreciation:

Cars lose their value fastest from new and it tails off, so without a big deposit or high capital repayments it's unlikely you'll have any equity in the deal and the easiest opportunity to get out without paying is at the VT point (normally about 6 months before the PCP ends).

 And yes, some peoples personal circumstances do change and they may need advice with financial commitments they have made, but that would equally apply with a personal loan, HP deal, or even a cash purchase for that matter.

The difference on a cash purchase is that you just sell the car and get the cash. There is no loan to worry about or calculating whether you're under water or not with the value.

motorguy said:

Ibrahim5 said:

It makes it clear that PCP is only for people that can't afford to buy a car. Only for the poor and helps them remain poor.

Whether you buy a car for cash or on finance, they incur costs.  You cant get away from depreciation and running costs.  Why shouldnt people roll that up in to one (often interest free) monthly payment?

Not strictly true, but obvious is in the majority of cases. Depreciation is something you can get away from with the right purchase (mine is currently appreciating) but agree that running costs are needed whatever you buy. The value of car the OP refers to as their current one is pretty minimal depreciation anyway.

motorguy

jimjames said:

The difference on a cash purchase is that you just sell the car and get the cash. There is no loan to worry about or calculating whether you're under water or not with the value.

Agreed - though you'll likely suffer a loss, particularly if you bought from a dealer in the first place and then are trying to sell back to the trade / sell privately.  

motorguy

jimjames said:

Not strictly true, but obvious is in the majority of cases. Depreciation is something you can get away from with the right purchase (mine is currently appreciating) but agree that running costs are needed whatever you buy. The value of car the OP refers to as their current one is pretty minimal depreciation anyway.

We're in a bit of a bubble though at the moment arent we.  Values are generally up, but they cant continue to go up and will likely start to drop back again (talking about typical daily driver stuff, some rarer stuff bought right will likely appreciate anyway)

Daily driver type cars tend to "normally" depreciate.  So generally speaking you're incurring depreciation anyway.  It suits a lot of people to roll that in to a monthly payment.  My wifes niece and her husband have a Renault Captur as their main car, for example.  A typical family wagon like that will usually depreciate.

Ibrahim5

You only look at finance when you can't afford things. If I want a washing machine I just buy it. No weekly payments at Bright House or Crazy George.

Herzlos

jimjames said:

The difference on a cash purchase is that you just sell the car and get the cash. There is no loan to worry about or calculating whether you're under water or not with the value.

You'll lose roughly the same amount of money however it's financed. It's just that if you pay in cash you've already spent the money and will get some back, but with PCP you haven't yet spent the money and thus may need to add money in to clear it.

Buying a new car and selling it is always going to cost a lot of money in normal times.

I'm actually quite pro-PCP as long as you understand the implications; I'll probably go PCP next time. You get the same car, with a deferred payback of some lump of it and higher overall cost, but you gain some flexibility in whether you want to keep the car or not and lower the monthlies.

The only point I objected to was the idea that a PCP is always going to be in equity, since it rarely seems to be the case.

ontheroad1970

Ibrahim5 said:

You only look at finance when you can't afford things. If I want a washing machine I just buy it. No weekly payments at Bright House or Crazy George.

There you go again, comparing apples with brass tacks.  

dipsomaniac

You can buy a car for less than a new washing machine. I did it 18 month ago and would have no problem driving 800 miles in it today

dipsomaniac

Comparing investing for your retirement (you need a £400k pot for £20k pension) and discussing PCP is like comparing apples with brass tacks

dipsomaniac

Buying a 3 year old car and keeping for a min. of 4 years is MSE.  Not suffering a big hit every 3 years. Got to admire the motor industrys marketing and salesmen.  PCP, lease and finance enables/encourages people to drive a new car who can not afford it

BOWFER

onlyfoolsandparking said:

luckily my last car on PCP was worth the GRV and then I moved to bangers where I never worried about where I parked etc.

Unsure what you mean here.
With PCP you will always be able to walk away at the end.
Unless it looks like it's been in a stock car race, you don't have to worry that you'll be owe them anything.
You hope it will be worth more than the GFV and then you can use that equity, but it should always be worth the GFV.
That's why the word 'guaranteed' is used in GFV.