PCP v Lease

motorguy

Herzlos said:

iwb100 said:

But most people looking for pcp are trying to trade their car after 3 years, 

I think we can only assume that most people looking for PCP are trying to keep their monthly payments down. Trading after 3 years is just part of the set up and pushed by the sales staff. There's no reason anyone with a PCP couldn't keep the car as long as they want, they may just need to refinance at 3 (or whatever) years.

Yup.

3 years is a typical PCP term as you're covered for the manufacturers warranty for the entire time.  Often they offer a cheap servicing package too to cover that timeframe.

If someone wants to clear the PCP finance and keep it, then great, they've totally got that option.  We've dont that with our current car.  New car offers arent great currently, as theres nothing better we could replace it with so we're just going to run it cradle to grave.

Got a low rate PCP at the time, now on a 2.9% APR loan for the balance.

SouthLondonUser

I am not sure in what ways I would be embarrassing myself, to be honest.

For the cars I was interested in, PCP was always a good deal more expensive.

A few times I looked up a few cars, PCP was always more expensive.

With motorcycles, where I certainly know more than cars, the cheapest PCP rates tend to be available only on the least desirable models.

You have showed me that my experience was not as representative as I thought, and good PCP rates are, in fact, available more widely than I had understood. Thank you for the clarification, that's interesting. But it doesn't change the main conclusion that one should always do his homework and look for the cheapest source of funding. Going for a PCP because it reduces your monthly payments, but without even checking if you can get a cheaper personal loan, maybe with a longer term and comparable monthly outgoings, is simply stupid. Yet that's what many people do.

Oh, and we seem to be in agreement that the best PCP rates are only on new cars. When buying used, a personal loan can easily be cheaper.

And when the difference is minimal, one should consider the greater flexibility of a personal loan: you can sell the car with no penalty whenever you want if your circumstances change, the lender won't give you a hard time for that small scratch on the door, etc.

iwb100

motorguy said:

DrEskimo said:

motorguy said:

iwb100 said:

When that happens PCP makes sense for the consumer. It’s happening for people right now with the way the market is. But if you want to buy a car for the long term simply finance it using a cheaper method than PCP. I guess I should add that this is like cheaper for those with access to cheaper bank loans and that in fairness won’t be everyone. 

Where are getting this idea that PCP on a new car must be more expensive than a cheap loan?

Lets try a worked example and you can explain it to me.

Ford are doing 0% finance PCP on a new Puma, with a residual value of £13,384.  I can avail of any discounts that a cash, HP or personal loan customer can, so the purchase price is a moot point.  Most importantly they are lending me £20,000 ish for 2 years at 0% APR, i make the payments interest free, then at the two year point i take out a personal loan for the £13,384 at 2.9% APR.

How is that more expensive than taking out a personal loan for the full amount at 2.9% APR?

(i've no intentions of buying this car, but its a fairly typical new car purchase these days).

It's worth checking what discounts are available and whether this applies on the 0% deal. I know of a few examples where you got a lesser discount on the 0% deal relative to the interest bearing deal, so in effect the interest cost was just payable under a different guise.

I don't think that is the case with the Ford deal above, but it is only available for 2yr deals. 3-yr PCP is charged at 3.9%, which when you factor in the different payment structure with the GFV, is more expensive in terms of actual interest charged than even a personal loan at the same 3.9% APR.

That used to happen in the past when the dealer was offering 0% themselves on used car or specific stock. 

Used to be quite common in home furnishings.  We went to buy a new suite at a small independent store.  They offered us 0% finance as part of their sales pitch but then quietly said they could give us a better discount if we didnt take it as they had to pay the interest.

Its actually now illegal to do that anyway.

Any discount you get on a new car will be independent of the 0% or otherwise deal offered.

Sometimes there will be a 0% deal and one with interest but deposit contributions etc. it’s not illegal and which is best will depend on the apr, term, deposit etc so won’t be the same for each customer. 

motorguy

SouthLondonUser said:

I am not sure in what ways I would be embarrassing myself, to be honest.

For the cars I was interested in, PCP was always a good deal more expensive.

Thats not what you said though is it?  What you said was - "unless you are lucky enough to want one of the cars which no one else wants and which they try to offload with competitive finance options. "

What you're saying now is a subjective experience based on what you saw for the cars you were interested in.

What you originally put was a broad brush sweeping statement about PCPs in general which is incorrect.  By repeating it even when given further information demonstrating it to be wrong, falls in to the realm of embarassing yourself.

motorguy

SouthLondonUser said:

You have showed me that my experience was not as representative as I thought, and good PCP rates are, in fact, available more widely than I had understood. Thank you for the clarification, that's interesting. But it doesn't change the main conclusion that one should always do his homework and look for the cheapest source of funding. Going for a PCP because it reduces your monthly payments, but without even checking if you can get a cheaper personal loan, maybe with a longer term and comparable monthly outgoings, is simply stupid. Yet that's what many people do.

Oh, and we seem to be in agreement that the best PCP rates are only on new cars. When buying used, a personal loan can easily be cheaper.

Yup.  Totally agree.  I have never said otherwise.  What i have said is its important not to broad brush rule out certain funding options before checking the facts.

And yes, totally in agreement RE: used car PCPs.  Almost invariably awful.

motorguy

SouthLondonUser said:

And when the difference is minimal, one should consider the greater flexibility of a personal loan: you can sell the car with no penalty whenever you want if your circumstances change, the lender won't give you a hard time for that small scratch on the door, etc.

You can sell the car without penalty when your circumstances change, with a car on PCP.  You would simply be clearing the finance with the proceeds.  The lender wont give a monkeys about that small scratch on the door.

motorguy

iwb100 said:

motorguy said:

DrEskimo said:

motorguy said:

iwb100 said:

When that happens PCP makes sense for the consumer. It’s happening for people right now with the way the market is. But if you want to buy a car for the long term simply finance it using a cheaper method than PCP. I guess I should add that this is like cheaper for those with access to cheaper bank loans and that in fairness won’t be everyone. 

Where are getting this idea that PCP on a new car must be more expensive than a cheap loan?

Lets try a worked example and you can explain it to me.

Ford are doing 0% finance PCP on a new Puma, with a residual value of £13,384.  I can avail of any discounts that a cash, HP or personal loan customer can, so the purchase price is a moot point.  Most importantly they are lending me £20,000 ish for 2 years at 0% APR, i make the payments interest free, then at the two year point i take out a personal loan for the £13,384 at 2.9% APR.

How is that more expensive than taking out a personal loan for the full amount at 2.9% APR?

(i've no intentions of buying this car, but its a fairly typical new car purchase these days).

It's worth checking what discounts are available and whether this applies on the 0% deal. I know of a few examples where you got a lesser discount on the 0% deal relative to the interest bearing deal, so in effect the interest cost was just payable under a different guise.

I don't think that is the case with the Ford deal above, but it is only available for 2yr deals. 3-yr PCP is charged at 3.9%, which when you factor in the different payment structure with the GFV, is more expensive in terms of actual interest charged than even a personal loan at the same 3.9% APR.

That used to happen in the past when the dealer was offering 0% themselves on used car or specific stock. 

Used to be quite common in home furnishings.  We went to buy a new suite at a small independent store.  They offered us 0% finance as part of their sales pitch but then quietly said they could give us a better discount if we didnt take it as they had to pay the interest.

Its actually now illegal to do that anyway.

Any discount you get on a new car will be independent of the 0% or otherwise deal offered.

Sometimes there will be a 0% deal and one with interest but deposit contributions etc. it’s not illegal and which is best will depend on the apr, term, deposit etc so won’t be the same for each customer. 

You need to re-read what i said.

It is illegal to offer one price for a product on a finance deal, and another if not using the finance deal.

You cannot say to someone - "Here is this car at £20,000 with 0% finance" and then say to another customer "Here is this same car at £20,000 but if you dont take the finance, i'll knock another £1,000 off".

You can of course offer various finance deals to the same person - noone has said otherwise - but you cant vary the price of the product when doing so.

SouthLondonUser

motorguy said:

SouthLondonUser said:

I am not sure in what ways I would be embarrassing myself, to be honest.

For the cars I was interested in, PCP was always a good deal more expensive.

Thats not what you said though is it?  What you said was - "unless you are lucky enough to want one of the cars which no one else wants and which they try to offload with competitive finance options. "

What you're saying now is a subjective experience based on what you saw for the cars you were interested in.

What you originally put was a broad brush sweeping statement about PCPs in general which is incorrect.  By repeating it even when given further information demonstrating it to be wrong, falls in to the realm of embarassing yourself.

What part of

"

You have showed me that my experience was not as representative as I thought, and good PCP rates are, in fact, available more widely than I had understood. Thank you for the clarification, that's interesting.

"

is unclear?? I very openly and clearly admitted I was wrong on this point, what more do you want?

motorguy

SouthLondonUser said:

motorguy said:

SouthLondonUser said:

I am not sure in what ways I would be embarrassing myself, to be honest.

For the cars I was interested in, PCP was always a good deal more expensive.

Thats not what you said though is it?  What you said was - "unless you are lucky enough to want one of the cars which no one else wants and which they try to offload with competitive finance options. "

What you're saying now is a subjective experience based on what you saw for the cars you were interested in.

What you originally put was a broad brush sweeping statement about PCPs in general which is incorrect.  By repeating it even when given further information demonstrating it to be wrong, falls in to the realm of embarassing yourself.

What part of

"

You have showed me that my experience was not as representative as I thought, and good PCP rates are, in fact, available more widely than I had understood. Thank you for the clarification, that's interesting.

"

is unclear?? I very openly and clearly admitted I was wrong on this point, what more do you want?

I responded to your point, and your subsequent points separately.