PCP - do all dealers of Mini offer the same PCP deals?

DrEskimo

iwb100 said:

DrEskimo said:

iwb100 said:

Bolt1234 said:

Mini told me today that I should get a 4 year PCP as after 3 years I can walk away without penalty.  They also said that putting say a 12 month deposit down doesn’t necessarily reduce the monthly payments £ for £.

is this right?? It doesn’t sound right.

You can walk away from a PCP deal after one day. You can do so at any point. By paying the settlement fee which will be the outstanding payments + the balloon payment - any interest not yet accrued.

So if your car is worth more than the settlement you can always leave by selling your car and paying it off. Or by paying it off with your own funds. And you can do so anytime. 

As for a deposit not reducing monthly payments - I’ve no idea what they mean.  But the only advantage of a large deposit on a PCP is reducing the amount you borrow on your credit file and giving you more equity up front potentially meaning you reach a point of positive equity faster. I’d say on balance large deposit PCP deals aren’t a great idea as you got cash you could invest and instead sink it into a depreciating asset. That doesn’t make much sense. 

Borrowing money to sink into a deprecating asset makes even less sense. You are going to suffer the same depreciation costs, all you are doing is adding additional interest costs on top.

Increasing the deposit reduces the amount borrowed, which decreases the interest the you are charged. Investing money when you have debt being charged at 6.9% is not sensible at all.

OP look at the actual cost of interest (not just the APR). Look how much you can save by going for a personal loan (even if the rate is similar). Increase the amount upfront or increase the amount you repay each month to save money on interest.

The interest saved will be so minimal on a PCP by throwing in a big deposit that it makes it not worth it since the max allowable deposit is set to restrict people from saving such interest. 

The point is that you can save the interest by paying it off with cash or a loan after taking the PCP with any benefits of doing so. 

If you listen to those expert in PCP they always caution against large deposits. Because PCP is a flexible lease in reality and that’s how it should be seen. Not as an investment. It’s leasing the car for 4 or 4 years with an option to buy or an option to trade any equity. That’s what you are paying for. Putting in a high deposit means you never see that again at the end in equity and frankly if you intend to buy the car outright then do so right at the start to save the interest payments. The thing that matters is that any deposit is merely paying off depreciation and not impacting the GFV so your equity in the vehicle almost certainly will end up being less, considerably less than a large deposit up front in a PCP.

All the money you put towards a PCP is 'lost'. The upfront payment and the monthly payments. Shifting that about with increased upfront and lower monthlies, or smaller deposit and higher monthlies is broadly the same, except you save money on less interest with a higher deposit. Yes there will be a maximum amount, but what ever additional money you put down will decrease the amount of interest proportional to that amount and the interest charged. In this case, 6.9% saved on any additional £1 put upfront.

The general rule of thumb to avoid high upfront payments is based on people increasing the upfront payment to get monthly costs to an affordable level, and then not being able to put a high deposit again come renewal. This is just the same as 'don't over stretch yourself'. If you are happy with the monthly payments at £1,000 upfront, and have £10,000 capital, it makes complete sense to increase the upfront payment to £10,000 and effectively save 6.9% interest on that £9,000 you were going to borrow. You can then set aside the difference in the monthly payment and be better off by the end of the term (or midway, or where ever). As you can save the difference in the monthly payments, by the end of the deal you will be in the same situation, but with slightly more due to the interest savings.

"The thing that matters is that any deposit is merely paying off depreciation and not impacting the GFV so your equity in the vehicle almost certainly will end up being less"

What do you mean end up less? Less relative to what? A PCP with a lower upfront payment?The equity at the end would be exactly the same, regardless of how you structured the loan (high upfront low monthly, low upfront higher monthly).

IMHO a PCP shouldn't be seen as an investment or a flexible lease. It should be seen for what it is. Secured finance to buy a car.

motorguy

Bolt1234 said:

Mini told me today that I should get a 4 year PCP as after 3 years I can walk away without penalty.  They also said that putting say a 12 month deposit down doesn’t necessarily reduce the monthly payments £ for £.

is this right?? It doesn’t sound right.

Broadly speeking hes not wrong about the 3 year without penalty thing.

You have the right to Voluntarily Terminate a finance agreement with nothing further to pay once 50% of the total cost of the transaction has been paid, subject to fair wear and tear on the car.  

This was introduced a long time ago to stop finance companies chasing people who could no longer afford their cars and who had had to return them for punitive amounts.

It is used these days moreoften by people wanting to finish their finance agreement early and walk away.

There are a couple of things to bear in mind

• The car will be subject to fair wear and tear checks by the finance company's representative upon return.  They will charge for things like scratches, scuffed alloys, small dings, dents, incomplete service history, etc.  These amounts will often be significant.
• They can also try to envoke any mileage charges pro rata.  For example, if you signed up to a 5,000 miles a year agreement over 4 years but returned the car at 3 years with 30K on it, they would attempt to charge you for the difference in the miles at that point.  Its a legal technicality as to whether they can or should, however if they push it to a county court they often win.

motorguy

Bolt1234 said:

Mini told me today that I should get a 4 year PCP as after 3 years I can walk away without penalty.  They also said that putting say a 12 month deposit down doesn’t necessarily reduce the monthly payments £ for £.

is this right?? It doesn’t sound right.

Putting down a bigger deposit WILL reduce the monthly payments.

You could save interest that way.

Using MINIs website, a JCW with a deposit of £2,000 on a 48 month PCP will have monthly payments of £397.12, a residual of £12,060 and overall charges including interest of £5,110.

Up the deposit to £5,000 and the monthly payments drop to £324.39, a residual of the same £12,060 and overall charges drop to £4,691.

So by upping the deposit to £5000, you'd save £419 in interest charges and reduce the monthly payment by £72.73

It is worth pointing out that the ammortised monthly payment (ie, the actual monthly cost when you spread the deposit over the monthsy) with a £2,000 deposit is £431.51 a month.  With a £5,000 deposit thats still £421.79.  So you're still paying a lot per month there for the car.

motorguy

iwb100 said:

DrEskimo said:

iwb100 said:

Bolt1234 said:

Mini told me today that I should get a 4 year PCP as after 3 years I can walk away without penalty.  They also said that putting say a 12 month deposit down doesn’t necessarily reduce the monthly payments £ for £.

is this right?? It doesn’t sound right.

You can walk away from a PCP deal after one day. You can do so at any point. By paying the settlement fee which will be the outstanding payments + the balloon payment - any interest not yet accrued.

So if your car is worth more than the settlement you can always leave by selling your car and paying it off. Or by paying it off with your own funds. And you can do so anytime. 

As for a deposit not reducing monthly payments - I’ve no idea what they mean.  But the only advantage of a large deposit on a PCP is reducing the amount you borrow on your credit file and giving you more equity up front potentially meaning you reach a point of positive equity faster. I’d say on balance large deposit PCP deals aren’t a great idea as you got cash you could invest and instead sink it into a depreciating asset. That doesn’t make much sense. 

Borrowing money to sink into a deprecating asset makes even less sense. You are going to suffer the same depreciation costs, all you are doing is adding additional interest costs on top.

Increasing the deposit reduces the amount borrowed, which decreases the interest the you are charged. Investing money when you have debt being charged at 6.9% is not sensible at all.

OP look at the actual cost of interest (not just the APR). Look how much you can save by going for a personal loan (even if the rate is similar). Increase the amount upfront or increase the amount you repay each month to save money on interest.

The interest saved will be so minimal on a PCP by throwing in a big deposit that it makes it not worth it since the max allowable deposit is set to restrict people from saving such interest. 

The point is that you can save the interest by paying it off with cash or a loan after taking the PCP with any benefits of doing so. 

If you listen to those expert in PCP they always caution against large deposits. Because PCP is a flexible lease in reality and that’s how it should be seen. Not as an investment. It’s leasing the car for 4 or 4 years with an option to buy or an option to trade any equity. That’s what you are paying for. Putting in a high deposit means you never see that again at the end in equity and frankly if you intend to buy the car outright then do so right at the start to save the interest payments. The thing that matters is that any deposit is merely paying off depreciation and not impacting the GFV so your equity in the vehicle almost certainly will end up being less, considerably less than a large deposit up front in a PCP.

Even upping the deposit to £5K from £2K saves £500 on interest charges.  Thats quite significant.

The only reason i'd caution against a higher deposit is that it can give a false impression as to how much the car is really costing - you often see people say "my monthlies are only £250 a month" then you find out they put down £5,000 because of equity in their previous car or cash, so on a 3 year agreement they're actually paying £381 a month amortised.  Which is fine as long as someone is aware of that.

BUT, given the rate, PCP on this car new isnt a great idea full stop.

motorguy

DrEskimo said:

iwb100 said:

Bolt1234 said:

Mini told me today that I should get a 4 year PCP as after 3 years I can walk away without penalty.  They also said that putting say a 12 month deposit down doesn’t necessarily reduce the monthly payments £ for £.

is this right?? It doesn’t sound right.

You can walk away from a PCP deal after one day. You can do so at any point. By paying the settlement fee which will be the outstanding payments + the balloon payment - any interest not yet accrued.

So if your car is worth more than the settlement you can always leave by selling your car and paying it off. Or by paying it off with your own funds. And you can do so anytime. 

As for a deposit not reducing monthly payments - I’ve no idea what they mean.  But the only advantage of a large deposit on a PCP is reducing the amount you borrow on your credit file and giving you more equity up front potentially meaning you reach a point of positive equity faster. I’d say on balance large deposit PCP deals aren’t a great idea as you got cash you could invest and instead sink it into a depreciating asset. That doesn’t make much sense. 

Borrowing money to sink into a deprecating asset makes even less sense. You are going to suffer the same depreciation costs, all you are doing is adding additional interest costs on top.

Increasing the deposit reduces the amount borrowed, which decreases the interest the you are charged. Investing money when you have debt being charged at 6.9% is not sensible at all.

OP look at the actual cost of interest (not just the APR). Look how much you can save by going for a personal loan (even if the rate is similar). Increase the amount upfront or increase the amount you repay each month to save money on interest.

I agree with this.  The 6.9% APR is crazy high for a new car, and theres pretty much no discounts available.  

When i bought my Cooper S new in 2018 there was 10% easy discount to be had (even on the JCW), and the APR was 2.9%.

To add further insult to injury, its very easy to add £5K of options to a JCW (or any MINI for that matter, my Cooper S had £5K of options on it and i went light on the tick list), so they get crazy expensive.

As per my original post, i'd be borrowing the money via a 2.8% APR cheap loan over say 5 years.  At the three year point dealers would be falling over themselves to buy that car for stock and the O/P would simply clear the loan at that point saving themselves literally thousands.

iwb100

DrEskimo said:

iwb100 said:

DrEskimo said:

iwb100 said:

Bolt1234 said:

Mini told me today that I should get a 4 year PCP as after 3 years I can walk away without penalty.  They also said that putting say a 12 month deposit down doesn’t necessarily reduce the monthly payments £ for £.

is this right?? It doesn’t sound right.

You can walk away from a PCP deal after one day. You can do so at any point. By paying the settlement fee which will be the outstanding payments + the balloon payment - any interest not yet accrued.

So if your car is worth more than the settlement you can always leave by selling your car and paying it off. Or by paying it off with your own funds. And you can do so anytime. 

As for a deposit not reducing monthly payments - I’ve no idea what they mean.  But the only advantage of a large deposit on a PCP is reducing the amount you borrow on your credit file and giving you more equity up front potentially meaning you reach a point of positive equity faster. I’d say on balance large deposit PCP deals aren’t a great idea as you got cash you could invest and instead sink it into a depreciating asset. That doesn’t make much sense. 

Borrowing money to sink into a deprecating asset makes even less sense. You are going to suffer the same depreciation costs, all you are doing is adding additional interest costs on top.

Increasing the deposit reduces the amount borrowed, which decreases the interest the you are charged. Investing money when you have debt being charged at 6.9% is not sensible at all.

OP look at the actual cost of interest (not just the APR). Look how much you can save by going for a personal loan (even if the rate is similar). Increase the amount upfront or increase the amount you repay each month to save money on interest.

The interest saved will be so minimal on a PCP by throwing in a big deposit that it makes it not worth it since the max allowable deposit is set to restrict people from saving such interest. 

The point is that you can save the interest by paying it off with cash or a loan after taking the PCP with any benefits of doing so. 

If you listen to those expert in PCP they always caution against large deposits. Because PCP is a flexible lease in reality and that’s how it should be seen. Not as an investment. It’s leasing the car for 4 or 4 years with an option to buy or an option to trade any equity. That’s what you are paying for. Putting in a high deposit means you never see that again at the end in equity and frankly if you intend to buy the car outright then do so right at the start to save the interest payments. The thing that matters is that any deposit is merely paying off depreciation and not impacting the GFV so your equity in the vehicle almost certainly will end up being less, considerably less than a large deposit up front in a PCP.

All the money you put towards a PCP is 'lost'. The upfront payment and the monthly payments. Shifting that about with increased upfront and lower monthlies, or smaller deposit and higher monthlies is broadly the same, except you save money on less interest with a higher deposit. Yes there will be a maximum amount, but what ever additional money you put down will decrease the amount of interest proportional to that amount and the interest charged. In this case, 6.9% saved on any additional £1 put upfront.

The general rule of thumb to avoid high upfront payments is based on people increasing the upfront payment to get monthly costs to an affordable level, and then not being able to put a high deposit again come renewal. This is just the same as 'don't over stretch yourself'. If you are happy with the monthly payments at £1,000 upfront, and have £10,000 capital, it makes complete sense to increase the upfront payment to £10,000 and effectively save 6.9% interest on that £9,000 you were going to borrow. You can then set aside the difference in the monthly payment and be better off by the end of the term (or midway, or where ever). As you can save the difference in the monthly payments, by the end of the deal you will be in the same situation, but with slightly more due to the interest savings.

"The thing that matters is that any deposit is merely paying off depreciation and not impacting the GFV so your equity in the vehicle almost certainly will end up being less"

What do you mean end up less? Less relative to what? A PCP with a lower upfront payment?The equity at the end would be exactly the same, regardless of how you structured the loan (high upfront low monthly, low upfront higher monthly).

IMHO a PCP shouldn't be seen as an investment or a flexible lease. It should be seen for what it is. Secured finance to buy a car.

Less as in , less equity than the deposit. Lets  say a customer puts in £5K. A lot of people think that locks that amount of equity in and at the end they get that equity back out in value. In say HP the more you put in at the start the higher your equity stake in the car but PCP works differently. They won’t necessarily have that equity at the end as it depends on the market and value vs GFV. That’s why I would say large deposits are generally not recommended. 

You pay a monthly amount to use the car. Like a lease. There is sense in putting a deposit in to reduce the interest payments however, it will depend on the APR and the length of time you want to keep the car for. In this case above with such a stupidly high apr it’s going to arguably be worth it. I think it is always worth comparing the cost of a PCH and a PCP to decide which is better. PCP is usually going to be more but you can end a PCP if you have the funds or equity to do so at any point - so the cost differential will determine which is best for the customer.

iwb100

motorguy said:

iwb100 said:

DrEskimo said:

iwb100 said:

Bolt1234 said:

Mini told me today that I should get a 4 year PCP as after 3 years I can walk away without penalty.  They also said that putting say a 12 month deposit down doesn’t necessarily reduce the monthly payments £ for £.

is this right?? It doesn’t sound right.

You can walk away from a PCP deal after one day. You can do so at any point. By paying the settlement fee which will be the outstanding payments + the balloon payment - any interest not yet accrued.

So if your car is worth more than the settlement you can always leave by selling your car and paying it off. Or by paying it off with your own funds. And you can do so anytime. 

As for a deposit not reducing monthly payments - I’ve no idea what they mean.  But the only advantage of a large deposit on a PCP is reducing the amount you borrow on your credit file and giving you more equity up front potentially meaning you reach a point of positive equity faster. I’d say on balance large deposit PCP deals aren’t a great idea as you got cash you could invest and instead sink it into a depreciating asset. That doesn’t make much sense. 

Borrowing money to sink into a deprecating asset makes even less sense. You are going to suffer the same depreciation costs, all you are doing is adding additional interest costs on top.

Increasing the deposit reduces the amount borrowed, which decreases the interest the you are charged. Investing money when you have debt being charged at 6.9% is not sensible at all.

OP look at the actual cost of interest (not just the APR). Look how much you can save by going for a personal loan (even if the rate is similar). Increase the amount upfront or increase the amount you repay each month to save money on interest.

The interest saved will be so minimal on a PCP by throwing in a big deposit that it makes it not worth it since the max allowable deposit is set to restrict people from saving such interest. 

The point is that you can save the interest by paying it off with cash or a loan after taking the PCP with any benefits of doing so. 

If you listen to those expert in PCP they always caution against large deposits. Because PCP is a flexible lease in reality and that’s how it should be seen. Not as an investment. It’s leasing the car for 4 or 4 years with an option to buy or an option to trade any equity. That’s what you are paying for. Putting in a high deposit means you never see that again at the end in equity and frankly if you intend to buy the car outright then do so right at the start to save the interest payments. The thing that matters is that any deposit is merely paying off depreciation and not impacting the GFV so your equity in the vehicle almost certainly will end up being less, considerably less than a large deposit up front in a PCP.

Even upping the deposit to £5K from £2K saves £500 on interest charges.  Thats quite significant.

The only reason i'd caution against a higher deposit is that it can give a false impression as to how much the car is really costing - you often see people say "my monthlies are only £250 a month" then you find out they put down £5,000 because of equity in their previous car or cash, so on a 3 year agreement they're actually paying £381 a month amortised.  Which is fine as long as someone is aware of that.

BUT, given the rate, PCP on this car new isnt a great idea full stop.

Yep agreed. You can of course work out potential for investing that £5K and work out the interest saving vs that. In this case at a high APR it’s probably going to be relatively even. But those that advise on PCP finance generally suggest avoiding putting in high deposits for the reason you state that it creates a false sense of ‘wow new car low payments’ and at the end they go to change into a new car (as almost everyone on pcp does) and their monthly payments are way higher. 

motorguy

iwb100 said:

motorguy said:

iwb100 said:

DrEskimo said:

iwb100 said:

Bolt1234 said:

Mini told me today that I should get a 4 year PCP as after 3 years I can walk away without penalty.  They also said that putting say a 12 month deposit down doesn’t necessarily reduce the monthly payments £ for £.

is this right?? It doesn’t sound right.

You can walk away from a PCP deal after one day. You can do so at any point. By paying the settlement fee which will be the outstanding payments + the balloon payment - any interest not yet accrued.

So if your car is worth more than the settlement you can always leave by selling your car and paying it off. Or by paying it off with your own funds. And you can do so anytime. 

As for a deposit not reducing monthly payments - I’ve no idea what they mean.  But the only advantage of a large deposit on a PCP is reducing the amount you borrow on your credit file and giving you more equity up front potentially meaning you reach a point of positive equity faster. I’d say on balance large deposit PCP deals aren’t a great idea as you got cash you could invest and instead sink it into a depreciating asset. That doesn’t make much sense. 

Borrowing money to sink into a deprecating asset makes even less sense. You are going to suffer the same depreciation costs, all you are doing is adding additional interest costs on top.

Increasing the deposit reduces the amount borrowed, which decreases the interest the you are charged. Investing money when you have debt being charged at 6.9% is not sensible at all.

OP look at the actual cost of interest (not just the APR). Look how much you can save by going for a personal loan (even if the rate is similar). Increase the amount upfront or increase the amount you repay each month to save money on interest.

The interest saved will be so minimal on a PCP by throwing in a big deposit that it makes it not worth it since the max allowable deposit is set to restrict people from saving such interest. 

The point is that you can save the interest by paying it off with cash or a loan after taking the PCP with any benefits of doing so. 

If you listen to those expert in PCP they always caution against large deposits. Because PCP is a flexible lease in reality and that’s how it should be seen. Not as an investment. It’s leasing the car for 4 or 4 years with an option to buy or an option to trade any equity. That’s what you are paying for. Putting in a high deposit means you never see that again at the end in equity and frankly if you intend to buy the car outright then do so right at the start to save the interest payments. The thing that matters is that any deposit is merely paying off depreciation and not impacting the GFV so your equity in the vehicle almost certainly will end up being less, considerably less than a large deposit up front in a PCP.

Even upping the deposit to £5K from £2K saves £500 on interest charges.  Thats quite significant.

The only reason i'd caution against a higher deposit is that it can give a false impression as to how much the car is really costing - you often see people say "my monthlies are only £250 a month" then you find out they put down £5,000 because of equity in their previous car or cash, so on a 3 year agreement they're actually paying £381 a month amortised.  Which is fine as long as someone is aware of that.

BUT, given the rate, PCP on this car new isnt a great idea full stop.

Yep agreed. You can of course work out potential for investing that £5K and work out the interest saving vs that. In this case at a high APR it’s probably going to be relatively even. But those that advise on PCP finance generally suggest avoiding putting in high deposits for the reason you state that it creates a false sense of ‘wow new car low payments’ and at the end they go to change into a new car (as almost everyone on pcp does) and their monthly payments are way higher. 

Its not even £5K though, its the difference between the £2K proposed deposit and the £5K which is £3K.  So an additional £3K in and saving £500 by doing so is notable.

And yes, you could potentially invest it, but to get that level of return its not going to be risk free.

The angle i'm coming from is if the O/P "really must" go down the PCP route (and i'd strongly advise against it, as per my get a cheap loan comment), then by upping the deposit they're at least mitigating some of that interest, as long - as we both agree - they realise and understand its giving a false sense of low monthly payments with no additional benefit in terms of equity at the end of the term.

DrEskimo

motorguy said:

Bolt1234 said:

Mini told me today that I should get a 4 year PCP as after 3 years I can walk away without penalty.  They also said that putting say a 12 month deposit down doesn’t necessarily reduce the monthly payments £ for £.

is this right?? It doesn’t sound right.

Putting down a bigger deposit WILL reduce the monthly payments.

You could save interest that way.

Using MINIs website, a JCW with a deposit of £2,000 on a 48 month PCP will have monthly payments of £397.12, a residual of £12,060 and overall charges including interest of £5,110.

Up the deposit to £5,000 and the monthly payments drop to £324.39, a residual of the same £12,060 and overall charges drop to £4,691.

So by upping the deposit to £5000, you'd save £419 in interest charges and reduce the monthly payment by £72.73

It is worth pointing out that the ammortised monthly payment (ie, the actual monthly cost when you spread the deposit over the monthsy) with a £2,000 deposit is £431.51 a month.  With a £5,000 deposit thats still £421.79.  So you're still paying a lot per month there for the car.

Precisely. If you factor in the £72/month you are saving in the monthlies, you will end up with £3,456 in your savings account, which is the additional £3k you put in + the ~£400 you saved in interest. 

So if there is £2k equity in the vehicle, when you factor in the money you saved per month you can end up with £5k deposit again, plus a bit extra from the interest you saved (along with any small interest gains from having it in a savings account over the 4yrs, like Chase's 1.5% savings account).

You need to account for the savings in the monthlys.

Bolt1234

Blimey. It’s complex! I am good with my mileage and know what I do year on year. I also look after my cars well.  Never been charged when I have returned them and it was the same when I had a company car.  

I could at a push buy the car outright but really don’t want to do that.  Yes agree the apr is high.  It’s a desirable car so why reduce the %? What about trying to get servicing included?