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

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  • DrEskimo
    DrEskimo Posts: 2,445 Forumite
    Seventh Anniversary 1,000 Posts Name Dropper
    Bolt1234 said:
    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?  
    Can I ask why not? It's saving you money (a lot of money), and this is a money saving forum? Are you really that set on donating thousands of your hard earned money to multi-billion pound finance companies?

    It strikes me as very odd as you mention why you liked the idea of leasing so you didn't have to spend a few hundred on VED a year, which at least goes towards social spending, yet don't seem phased at the idea of handing over thousands a year in interest payments that goes towards nothing but profits to finance company shareholders?

    If it's about having savings, then either get a cheaper car (used or cheaper model), or borrow just a small amount using a personal loan.
  • iwb100
    iwb100 Posts: 614 Forumite
    Part of the Furniture 500 Posts Name Dropper Combo Breaker
    edited 21 April 2022 at 7:27AM
    DrEskimo said:
    Bolt1234 said:
    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?  
    Can I ask why not? It's saving you money (a lot of money), and this is a money saving forum? Are you really that set on donating thousands of your hard earned money to multi-billion pound finance companies?

    It strikes me as very odd as you mention why you liked the idea of leasing so you didn't have to spend a few hundred on VED a year, which at least goes towards social spending, yet don't seem phased at the idea of handing over thousands a year in interest payments that goes towards nothing but profits to finance company shareholders?

    If it's about having savings, then either get a cheaper car (used or cheaper model), or borrow just a small amount using a personal loan.
    I imagine it’s risk. Paying a few hundred each month to have the use of the car with the ability to sell it and clear the finance or at very worst case hand it back at the end is of course going to cost £ in interest but you aren’t ever going to pay the full cost of the car. And you are paying an affordable monthly fee, or at least you hope so.  And if the bottom drops out of the market during ownership you lose only the interest payments which are a few hundred quid.

    If you buy the car outright then the bottom of the market drops out for any reason you have spent tens of thousands and potentially will lose thousands in value in a few years time or be stuck with the car. 

    The OP would probably lease if they could. As would I suspect a growing number of people who buy on finance since in their mind they are only ever wanting the car a few years and paying a monthly fee for the privilege of driving it. Leasing is cheaper and more accessible now. If only it wasn’t for the shortages of cars. But they don’t really care about the interest charge because it’s a simple calculation for them, how can they drive the car for three years the cheapest with minimal risk and the least amount of effort. 

    Not that I would not disagree that in this case buying with a low cost loan makes much more sense than an APR of 6.9% which is more second hand rate than new car rate. But that does now always fit into the mindset of someone who has every intention of swapping their car in a few years and would pay a bit more for the privilege of a guarantee of being able to do that without risk. Which is still most of the car buying or leasing public in this country. 
  • DrEskimo
    DrEskimo Posts: 2,445 Forumite
    Seventh Anniversary 1,000 Posts Name Dropper
    iwb100 said:
    DrEskimo said:
    Bolt1234 said:
    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?  
    Can I ask why not? It's saving you money (a lot of money), and this is a money saving forum? Are you really that set on donating thousands of your hard earned money to multi-billion pound finance companies?

    It strikes me as very odd as you mention why you liked the idea of leasing so you didn't have to spend a few hundred on VED a year, which at least goes towards social spending, yet don't seem phased at the idea of handing over thousands a year in interest payments that goes towards nothing but profits to finance company shareholders?

    If it's about having savings, then either get a cheaper car (used or cheaper model), or borrow just a small amount using a personal loan.
    I imagine it’s risk. Paying a few hundred each month to have the use of the car with the ability to sell it and clear the finance or at very worst case hand it back at the end is of course going to cost £ in interest but you aren’t ever going to pay the full cost of the car. And you are paying an affordable monthly fee, or at least you hope so.  And if the bottom drops out of the market during ownership you lose only the interest payments which are a few hundred quid.

    If you buy the car outright then the bottom of the market drops out for any reason you have spent tens of thousands and potentially will lose thousands in value in a few years time or be stuck with the car. 

    The OP would probably lease if they could. As would I suspect a growing number of people who buy on finance since in their mind they are only ever wanting the car a few years and paying a monthly fee for the privilege of driving it. Leasing is cheaper and more accessible now. If only it wasn’t for the shortages of cars. But they don’t really care about the interest charge because it’s a simple calculation for them, how can they drive the car for three years the cheapest with minimal risk and the least amount of effort. 

    Not that I would not disagree that in this case buying with a low cost loan makes much more sense than an APR of 6.9% which is more second hand rate than new car rate. But that does now always fit into the mindset of someone who has every intention of swapping their car in a few years and would pay a bit more for the privilege of a guarantee of being able to do that without risk. Which is still most of the car buying or leasing public in this country. 
    Let's be very clear about this, as this is a very common misconception.

    Your ability to trade the car in after 3 or 4 years (or whenever) is NOT contingent on having the car on finance. Trading the car into the dealership, or a garage or an online broker is exactly the same whether you have PCP or you own the car. You are never 'stuck' with a car you own. You will always have somewhere willing to buy it from you for a price.

    The only additional option you get with PCP that you don't have with owning it is the ability to 'trade it in' (or hand back) to the finance company at the set GFV. So the risk is is not whether you get stuck with a car, it's whether the cost of buying the car and then trading it in 4 yrs is going to be greater than the cost of buying it on finance, paying interest, and handing it back to the finance company.

    In this particular case, this £35k mini is going to cost you over £5k in interest to get that 'protected' trade in price offered by the finance company of £15k. That means the car will have to worth less than £10k before you got any financial gain whatsoever relative to just buying it for £35k and trading it in after 4yrs.

    What are the chances the car will be worth less than £10k? Slim to none. Even if it was as low as £9k, this PCP will only have saved you £1000. It's far far far far more likely that the car will be worth £15k or higher as trade, which means taking it on PCP has needlessly cost you over £5000 for no reason.

    The idea that PCP is always great for 'asset value protection' is so overstated and completely dependent on the specific deal. In this case, the GFV is so small and the interest cost so high that it is completely useless at mitigating any sort of risk.
  • motorguy
    motorguy Posts: 22,611 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    Bolt1234 said:
    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?  
    From the manufacturer and dealers perspective, not having to reduce the APR to sell cars is great, however its really bad news for the end customer.

    Pre COVID that car could likely have been bought with a 10% discount and at 2.9% APR, so right now you're easily paying an extra £100+ a month just because of that.

    On top of that, you'll easily end up putting another £3K of options on it for the "desirable" options they dont include as standard, so you'll likely end up paying £30K+ for the car.  If you watch what those options do to the residual value, it'll be practically unchanged (perhaps up a few hundred), so again theres another £3,000 or so you'll never see again.

    I would say on a 3 year deal with say a £2K deposit you could be looking at well over £500 a month.  On a 4 year deal and handing the car back its still an easy £450 a month.  And thats not even rolling through the deposit to get you the even higher real monthly cost.

    I'm genuinely an advocate of good PCP deals on new cars which can often be got at 2.9%, 1.9% and 0% APR.  Combined with a decent discount, monthly payments can be palatable.  

    But this is a particularly bad PCP deal.  

    The way you can mitigate the cost is by using a cheaper finding source.  To me, the easiest cheapest source is via a cheap loan at 2.8 or 2.9% APR (Tesco loans) for the £25K and pay the difference in cash.  You could literally save £,£££s doing that and you STILL have the option to "walk away" after three years by simply selling the car back to the dealer, another dealer, to one of the car buying sites or even privately.


  • motorguy
    motorguy Posts: 22,611 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    DrEskimo said:
    Bolt1234 said:
    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?  
    Can I ask why not? It's saving you money (a lot of money), and this is a money saving forum? Are you really that set on donating thousands of your hard earned money to multi-billion pound finance companies?

    It strikes me as very odd as you mention why you liked the idea of leasing so you didn't have to spend a few hundred on VED a year, which at least goes towards social spending, yet don't seem phased at the idea of handing over thousands a year in interest payments that goes towards nothing but profits to finance company shareholders?

    If it's about having savings, then either get a cheaper car (used or cheaper model), or borrow just a small amount using a personal loan.
    +1.

    And to your last point, you can get the lowest APR personal loans for up to £25,000.  That plus a deposit of £3,000 to £5,000 (which the O/P seems to be proposing anyway) still allows the O/P to retain their savings but save £,£££s.

    As you say, perhaps even borrow a lower amount and use a bit more savings.
  • iwb100
    iwb100 Posts: 614 Forumite
    Part of the Furniture 500 Posts Name Dropper Combo Breaker
    DrEskimo said:
    iwb100 said:
    DrEskimo said:
    Bolt1234 said:
    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?  
    Can I ask why not? It's saving you money (a lot of money), and this is a money saving forum? Are you really that set on donating thousands of your hard earned money to multi-billion pound finance companies?

    It strikes me as very odd as you mention why you liked the idea of leasing so you didn't have to spend a few hundred on VED a year, which at least goes towards social spending, yet don't seem phased at the idea of handing over thousands a year in interest payments that goes towards nothing but profits to finance company shareholders?

    If it's about having savings, then either get a cheaper car (used or cheaper model), or borrow just a small amount using a personal loan.
    I imagine it’s risk. Paying a few hundred each month to have the use of the car with the ability to sell it and clear the finance or at very worst case hand it back at the end is of course going to cost £ in interest but you aren’t ever going to pay the full cost of the car. And you are paying an affordable monthly fee, or at least you hope so.  And if the bottom drops out of the market during ownership you lose only the interest payments which are a few hundred quid.

    If you buy the car outright then the bottom of the market drops out for any reason you have spent tens of thousands and potentially will lose thousands in value in a few years time or be stuck with the car. 

    The OP would probably lease if they could. As would I suspect a growing number of people who buy on finance since in their mind they are only ever wanting the car a few years and paying a monthly fee for the privilege of driving it. Leasing is cheaper and more accessible now. If only it wasn’t for the shortages of cars. But they don’t really care about the interest charge because it’s a simple calculation for them, how can they drive the car for three years the cheapest with minimal risk and the least amount of effort. 

    Not that I would not disagree that in this case buying with a low cost loan makes much more sense than an APR of 6.9% which is more second hand rate than new car rate. But that does now always fit into the mindset of someone who has every intention of swapping their car in a few years and would pay a bit more for the privilege of a guarantee of being able to do that without risk. Which is still most of the car buying or leasing public in this country. 
    Let's be very clear about this, as this is a very common misconception.

    Your ability to trade the car in after 3 or 4 years (or whenever) is NOT contingent on having the car on finance. Trading the car into the dealership, or a garage or an online broker is exactly the same whether you have PCP or you own the car. You are never 'stuck' with a car you own. You will always have somewhere willing to buy it from you for a price.

    The only additional option you get with PCP that you don't have with owning it is the ability to 'trade it in' (or hand back) to the finance company at the set GFV. So the risk is is not whether you get stuck with a car, it's whether the cost of buying the car and then trading it in 4 yrs is going to be greater than the cost of buying it on finance, paying interest, and handing it back to the finance company.

    In this particular case, this £35k mini is going to cost you over £5k in interest to get that 'protected' trade in price offered by the finance company of £15k. That means the car will have to worth less than £10k before you got any financial gain whatsoever relative to just buying it for £35k and trading it in after 4yrs.

    What are the chances the car will be worth less than £10k? Slim to none. Even if it was as low as £9k, this PCP will only have saved you £1000. It's far far far far more likely that the car will be worth £15k or higher as trade, which means taking it on PCP has needlessly cost you over £5000 for no reason.

    The idea that PCP is always great for 'asset value protection' is so overstated and completely dependent on the specific deal. In this case, the GFV is so small and the interest cost so high that it is completely useless at mitigating any sort of risk.
    PCP allows you to hand it back at the end without paying the balloon. That’s a guarantee. It means that your risk is only in ‘can I afford the monthly’s to rent the car’. Worst case you do so for the period and hand it back. In the case of a loan and you own it outright should the market collapse or whatever you cannot do that and you are stuck paying off the full loan with negative equity. That’s the benefit and risk mitigation in peoples minds.
  • motorguy
    motorguy Posts: 22,611 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    edited 21 April 2022 at 9:01AM
    iwb100 said:
    DrEskimo said:
    iwb100 said:
    DrEskimo said:
    Bolt1234 said:
    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?  
    Can I ask why not? It's saving you money (a lot of money), and this is a money saving forum? Are you really that set on donating thousands of your hard earned money to multi-billion pound finance companies?

    It strikes me as very odd as you mention why you liked the idea of leasing so you didn't have to spend a few hundred on VED a year, which at least goes towards social spending, yet don't seem phased at the idea of handing over thousands a year in interest payments that goes towards nothing but profits to finance company shareholders?

    If it's about having savings, then either get a cheaper car (used or cheaper model), or borrow just a small amount using a personal loan.
    I imagine it’s risk. Paying a few hundred each month to have the use of the car with the ability to sell it and clear the finance or at very worst case hand it back at the end is of course going to cost £ in interest but you aren’t ever going to pay the full cost of the car. And you are paying an affordable monthly fee, or at least you hope so.  And if the bottom drops out of the market during ownership you lose only the interest payments which are a few hundred quid.

    If you buy the car outright then the bottom of the market drops out for any reason you have spent tens of thousands and potentially will lose thousands in value in a few years time or be stuck with the car. 

    The OP would probably lease if they could. As would I suspect a growing number of people who buy on finance since in their mind they are only ever wanting the car a few years and paying a monthly fee for the privilege of driving it. Leasing is cheaper and more accessible now. If only it wasn’t for the shortages of cars. But they don’t really care about the interest charge because it’s a simple calculation for them, how can they drive the car for three years the cheapest with minimal risk and the least amount of effort. 

    Not that I would not disagree that in this case buying with a low cost loan makes much more sense than an APR of 6.9% which is more second hand rate than new car rate. But that does now always fit into the mindset of someone who has every intention of swapping their car in a few years and would pay a bit more for the privilege of a guarantee of being able to do that without risk. Which is still most of the car buying or leasing public in this country. 
    Let's be very clear about this, as this is a very common misconception.

    Your ability to trade the car in after 3 or 4 years (or whenever) is NOT contingent on having the car on finance. Trading the car into the dealership, or a garage or an online broker is exactly the same whether you have PCP or you own the car. You are never 'stuck' with a car you own. You will always have somewhere willing to buy it from you for a price.

    The only additional option you get with PCP that you don't have with owning it is the ability to 'trade it in' (or hand back) to the finance company at the set GFV. So the risk is is not whether you get stuck with a car, it's whether the cost of buying the car and then trading it in 4 yrs is going to be greater than the cost of buying it on finance, paying interest, and handing it back to the finance company.

    In this particular case, this £35k mini is going to cost you over £5k in interest to get that 'protected' trade in price offered by the finance company of £15k. That means the car will have to worth less than £10k before you got any financial gain whatsoever relative to just buying it for £35k and trading it in after 4yrs.

    What are the chances the car will be worth less than £10k? Slim to none. Even if it was as low as £9k, this PCP will only have saved you £1000. It's far far far far more likely that the car will be worth £15k or higher as trade, which means taking it on PCP has needlessly cost you over £5000 for no reason.

    The idea that PCP is always great for 'asset value protection' is so overstated and completely dependent on the specific deal. In this case, the GFV is so small and the interest cost so high that it is completely useless at mitigating any sort of risk.
    PCP allows you to hand it back at the end without paying the balloon. That’s a guarantee. It means that your risk is only in ‘can I afford the monthly’s to rent the car’. Worst case you do so for the period and hand it back. In the case of a loan and you own it outright should the market collapse or whatever you cannot do that and you are stuck paying off the full loan with negative equity. That’s the benefit and risk mitigation in peoples minds.
    The point being made is that on this occasion the O/P could be paying anything up to £5,000 for that guarantee, when in reality theres multiple options such as sell it back to the dealer, another dealer, or one of the many online buying sites - all of which would be just as easy as a handover to hand the car back.  The other two options of course is to sell it privately (will return more but you have to deal with the general public) or simply keep the car.

  • iwb100
    iwb100 Posts: 614 Forumite
    Part of the Furniture 500 Posts Name Dropper Combo Breaker
    motorguy said:
    iwb100 said:
    DrEskimo said:
    iwb100 said:
    DrEskimo said:
    Bolt1234 said:
    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?  
    Can I ask why not? It's saving you money (a lot of money), and this is a money saving forum? Are you really that set on donating thousands of your hard earned money to multi-billion pound finance companies?

    It strikes me as very odd as you mention why you liked the idea of leasing so you didn't have to spend a few hundred on VED a year, which at least goes towards social spending, yet don't seem phased at the idea of handing over thousands a year in interest payments that goes towards nothing but profits to finance company shareholders?

    If it's about having savings, then either get a cheaper car (used or cheaper model), or borrow just a small amount using a personal loan.
    I imagine it’s risk. Paying a few hundred each month to have the use of the car with the ability to sell it and clear the finance or at very worst case hand it back at the end is of course going to cost £ in interest but you aren’t ever going to pay the full cost of the car. And you are paying an affordable monthly fee, or at least you hope so.  And if the bottom drops out of the market during ownership you lose only the interest payments which are a few hundred quid.

    If you buy the car outright then the bottom of the market drops out for any reason you have spent tens of thousands and potentially will lose thousands in value in a few years time or be stuck with the car. 

    The OP would probably lease if they could. As would I suspect a growing number of people who buy on finance since in their mind they are only ever wanting the car a few years and paying a monthly fee for the privilege of driving it. Leasing is cheaper and more accessible now. If only it wasn’t for the shortages of cars. But they don’t really care about the interest charge because it’s a simple calculation for them, how can they drive the car for three years the cheapest with minimal risk and the least amount of effort. 

    Not that I would not disagree that in this case buying with a low cost loan makes much more sense than an APR of 6.9% which is more second hand rate than new car rate. But that does now always fit into the mindset of someone who has every intention of swapping their car in a few years and would pay a bit more for the privilege of a guarantee of being able to do that without risk. Which is still most of the car buying or leasing public in this country. 
    Let's be very clear about this, as this is a very common misconception.

    Your ability to trade the car in after 3 or 4 years (or whenever) is NOT contingent on having the car on finance. Trading the car into the dealership, or a garage or an online broker is exactly the same whether you have PCP or you own the car. You are never 'stuck' with a car you own. You will always have somewhere willing to buy it from you for a price.

    The only additional option you get with PCP that you don't have with owning it is the ability to 'trade it in' (or hand back) to the finance company at the set GFV. So the risk is is not whether you get stuck with a car, it's whether the cost of buying the car and then trading it in 4 yrs is going to be greater than the cost of buying it on finance, paying interest, and handing it back to the finance company.

    In this particular case, this £35k mini is going to cost you over £5k in interest to get that 'protected' trade in price offered by the finance company of £15k. That means the car will have to worth less than £10k before you got any financial gain whatsoever relative to just buying it for £35k and trading it in after 4yrs.

    What are the chances the car will be worth less than £10k? Slim to none. Even if it was as low as £9k, this PCP will only have saved you £1000. It's far far far far more likely that the car will be worth £15k or higher as trade, which means taking it on PCP has needlessly cost you over £5000 for no reason.

    The idea that PCP is always great for 'asset value protection' is so overstated and completely dependent on the specific deal. In this case, the GFV is so small and the interest cost so high that it is completely useless at mitigating any sort of risk.
    PCP allows you to hand it back at the end without paying the balloon. That’s a guarantee. It means that your risk is only in ‘can I afford the monthly’s to rent the car’. Worst case you do so for the period and hand it back. In the case of a loan and you own it outright should the market collapse or whatever you cannot do that and you are stuck paying off the full loan with negative equity. That’s the benefit and risk mitigation in peoples minds.
    The point being made is that on this occasion the O/P could be paying anything up to £5,000 for that guarantee, when in reality theres multiple options such as sell it back to the dealer, another dealer, or one of the many online buying sites - all of which would be just as easy as a handover to hand the car back.  The other two options of course is to sell it privately (will return more but you have to deal with the general public) or simply keep the car.

    We are talking about the scenario where the bottom drops out of the second hand car market and you are in negative equity. In PCP you hand it back at the end and that’s it. In other scenarios you lose out. I’m not saying in any way a 6.9% deal is close to worth that risk mitigation. But that’s why people like to take PCP. They know what they are paying and know that ultimately should the market collapse they’ve had the car for their 3 or 4 years at a monthly price they were happy with and that’s it. It goes back.

    Its why leasing is increasingly popular. Because it’s a cheaper form of that. Car for a few years then back it goes and no risk that it’s in negative equity.

    Im merely trying to explain why people like these options. Why they are so popular with the population. Yes we know personal loans will in this case work out cheaper and certainly I’d never do a pcp at 6.9% not on your life. But for most people who want a nice monthly figure to have a car for a few years the extra risk of taking out a loan and paying back the full amount is off putting to them. As is putting their cash savings in. Even if it’s absolutely saving them money there is still a risk there that it will do the opposite. 
  • motorguy
    motorguy Posts: 22,611 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    iwb100 said:
    motorguy said:
    iwb100 said:
    DrEskimo said:
    iwb100 said:
    DrEskimo said:
    Bolt1234 said:
    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?  
    Can I ask why not? It's saving you money (a lot of money), and this is a money saving forum? Are you really that set on donating thousands of your hard earned money to multi-billion pound finance companies?

    It strikes me as very odd as you mention why you liked the idea of leasing so you didn't have to spend a few hundred on VED a year, which at least goes towards social spending, yet don't seem phased at the idea of handing over thousands a year in interest payments that goes towards nothing but profits to finance company shareholders?

    If it's about having savings, then either get a cheaper car (used or cheaper model), or borrow just a small amount using a personal loan.
    I imagine it’s risk. Paying a few hundred each month to have the use of the car with the ability to sell it and clear the finance or at very worst case hand it back at the end is of course going to cost £ in interest but you aren’t ever going to pay the full cost of the car. And you are paying an affordable monthly fee, or at least you hope so.  And if the bottom drops out of the market during ownership you lose only the interest payments which are a few hundred quid.

    If you buy the car outright then the bottom of the market drops out for any reason you have spent tens of thousands and potentially will lose thousands in value in a few years time or be stuck with the car. 

    The OP would probably lease if they could. As would I suspect a growing number of people who buy on finance since in their mind they are only ever wanting the car a few years and paying a monthly fee for the privilege of driving it. Leasing is cheaper and more accessible now. If only it wasn’t for the shortages of cars. But they don’t really care about the interest charge because it’s a simple calculation for them, how can they drive the car for three years the cheapest with minimal risk and the least amount of effort. 

    Not that I would not disagree that in this case buying with a low cost loan makes much more sense than an APR of 6.9% which is more second hand rate than new car rate. But that does now always fit into the mindset of someone who has every intention of swapping their car in a few years and would pay a bit more for the privilege of a guarantee of being able to do that without risk. Which is still most of the car buying or leasing public in this country. 
    Let's be very clear about this, as this is a very common misconception.

    Your ability to trade the car in after 3 or 4 years (or whenever) is NOT contingent on having the car on finance. Trading the car into the dealership, or a garage or an online broker is exactly the same whether you have PCP or you own the car. You are never 'stuck' with a car you own. You will always have somewhere willing to buy it from you for a price.

    The only additional option you get with PCP that you don't have with owning it is the ability to 'trade it in' (or hand back) to the finance company at the set GFV. So the risk is is not whether you get stuck with a car, it's whether the cost of buying the car and then trading it in 4 yrs is going to be greater than the cost of buying it on finance, paying interest, and handing it back to the finance company.

    In this particular case, this £35k mini is going to cost you over £5k in interest to get that 'protected' trade in price offered by the finance company of £15k. That means the car will have to worth less than £10k before you got any financial gain whatsoever relative to just buying it for £35k and trading it in after 4yrs.

    What are the chances the car will be worth less than £10k? Slim to none. Even if it was as low as £9k, this PCP will only have saved you £1000. It's far far far far more likely that the car will be worth £15k or higher as trade, which means taking it on PCP has needlessly cost you over £5000 for no reason.

    The idea that PCP is always great for 'asset value protection' is so overstated and completely dependent on the specific deal. In this case, the GFV is so small and the interest cost so high that it is completely useless at mitigating any sort of risk.
    PCP allows you to hand it back at the end without paying the balloon. That’s a guarantee. It means that your risk is only in ‘can I afford the monthly’s to rent the car’. Worst case you do so for the period and hand it back. In the case of a loan and you own it outright should the market collapse or whatever you cannot do that and you are stuck paying off the full loan with negative equity. That’s the benefit and risk mitigation in peoples minds.
    The point being made is that on this occasion the O/P could be paying anything up to £5,000 for that guarantee, when in reality theres multiple options such as sell it back to the dealer, another dealer, or one of the many online buying sites - all of which would be just as easy as a handover to hand the car back.  The other two options of course is to sell it privately (will return more but you have to deal with the general public) or simply keep the car.

    We are talking about the scenario where the bottom drops out of the second hand car market and you are in negative equity. In PCP you hand it back at the end and that’s it. In other scenarios you lose out. I’m not saying in any way a 6.9% deal is close to worth that risk mitigation. But that’s why people like to take PCP. They know what they are paying and know that ultimately should the market collapse they’ve had the car for their 3 or 4 years at a monthly price they were happy with and that’s it. It goes back.

    Its why leasing is increasingly popular. Because it’s a cheaper form of that. Car for a few years then back it goes and no risk that it’s in negative equity.

    Im merely trying to explain why people like these options. Why they are so popular with the population. Yes we know personal loans will in this case work out cheaper and certainly I’d never do a pcp at 6.9% not on your life. But for most people who want a nice monthly figure to have a car for a few years the extra risk of taking out a loan and paying back the full amount is off putting to them. As is putting their cash savings in. Even if it’s absolutely saving them money there is still a risk there that it will do the opposite. 
    Thats already factored in to the residual prices.  Do you think BMW MINI dont know thats a risk?

    Cheapest 3 year old JCW auto on A/T is £21,405.   That suggests a raw trade price of around £18K.  MINI's residual value is £13,523.  

    Not taking much of a chance there are they?

    Negative equity is only a concern if you have to sell the car / reach the end of a PCP agreement.

    The O/P wouldnt be with a personal loan - they would owe considerably less at the three year point anyway (£10,500 ish when 3 years in to a five year loan) OR they could simply drive on at the car.

    So, the O/P would be paying approx £3-5,000 in additional interest charges to protect herself against a scenario that MINI have factored in to the residual value anyway.


  • motorguy
    motorguy Posts: 22,611 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    iwb100 said:
    motorguy said:
    iwb100 said:
    DrEskimo said:
    iwb100 said:
    DrEskimo said:
    Bolt1234 said:
    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?  
    Can I ask why not? It's saving you money (a lot of money), and this is a money saving forum? Are you really that set on donating thousands of your hard earned money to multi-billion pound finance companies?

    It strikes me as very odd as you mention why you liked the idea of leasing so you didn't have to spend a few hundred on VED a year, which at least goes towards social spending, yet don't seem phased at the idea of handing over thousands a year in interest payments that goes towards nothing but profits to finance company shareholders?

    If it's about having savings, then either get a cheaper car (used or cheaper model), or borrow just a small amount using a personal loan.
    I imagine it’s risk. Paying a few hundred each month to have the use of the car with the ability to sell it and clear the finance or at very worst case hand it back at the end is of course going to cost £ in interest but you aren’t ever going to pay the full cost of the car. And you are paying an affordable monthly fee, or at least you hope so.  And if the bottom drops out of the market during ownership you lose only the interest payments which are a few hundred quid.

    If you buy the car outright then the bottom of the market drops out for any reason you have spent tens of thousands and potentially will lose thousands in value in a few years time or be stuck with the car. 

    The OP would probably lease if they could. As would I suspect a growing number of people who buy on finance since in their mind they are only ever wanting the car a few years and paying a monthly fee for the privilege of driving it. Leasing is cheaper and more accessible now. If only it wasn’t for the shortages of cars. But they don’t really care about the interest charge because it’s a simple calculation for them, how can they drive the car for three years the cheapest with minimal risk and the least amount of effort. 

    Not that I would not disagree that in this case buying with a low cost loan makes much more sense than an APR of 6.9% which is more second hand rate than new car rate. But that does now always fit into the mindset of someone who has every intention of swapping their car in a few years and would pay a bit more for the privilege of a guarantee of being able to do that without risk. Which is still most of the car buying or leasing public in this country. 
    Let's be very clear about this, as this is a very common misconception.

    Your ability to trade the car in after 3 or 4 years (or whenever) is NOT contingent on having the car on finance. Trading the car into the dealership, or a garage or an online broker is exactly the same whether you have PCP or you own the car. You are never 'stuck' with a car you own. You will always have somewhere willing to buy it from you for a price.

    The only additional option you get with PCP that you don't have with owning it is the ability to 'trade it in' (or hand back) to the finance company at the set GFV. So the risk is is not whether you get stuck with a car, it's whether the cost of buying the car and then trading it in 4 yrs is going to be greater than the cost of buying it on finance, paying interest, and handing it back to the finance company.

    In this particular case, this £35k mini is going to cost you over £5k in interest to get that 'protected' trade in price offered by the finance company of £15k. That means the car will have to worth less than £10k before you got any financial gain whatsoever relative to just buying it for £35k and trading it in after 4yrs.

    What are the chances the car will be worth less than £10k? Slim to none. Even if it was as low as £9k, this PCP will only have saved you £1000. It's far far far far more likely that the car will be worth £15k or higher as trade, which means taking it on PCP has needlessly cost you over £5000 for no reason.

    The idea that PCP is always great for 'asset value protection' is so overstated and completely dependent on the specific deal. In this case, the GFV is so small and the interest cost so high that it is completely useless at mitigating any sort of risk.
    PCP allows you to hand it back at the end without paying the balloon. That’s a guarantee. It means that your risk is only in ‘can I afford the monthly’s to rent the car’. Worst case you do so for the period and hand it back. In the case of a loan and you own it outright should the market collapse or whatever you cannot do that and you are stuck paying off the full loan with negative equity. That’s the benefit and risk mitigation in peoples minds.
    The point being made is that on this occasion the O/P could be paying anything up to £5,000 for that guarantee, when in reality theres multiple options such as sell it back to the dealer, another dealer, or one of the many online buying sites - all of which would be just as easy as a handover to hand the car back.  The other two options of course is to sell it privately (will return more but you have to deal with the general public) or simply keep the car.

    We are talking about the scenario where the bottom drops out of the second hand car market and you are in negative equity. In PCP you hand it back at the end and that’s it. In other scenarios you lose out. I’m not saying in any way a 6.9% deal is close to worth that risk mitigation. But that’s why people like to take PCP. They know what they are paying and know that ultimately should the market collapse they’ve had the car for their 3 or 4 years at a monthly price they were happy with and that’s it. It goes back.

    Its why leasing is increasingly popular. Because it’s a cheaper form of that. Car for a few years then back it goes and no risk that it’s in negative equity.

    Im merely trying to explain why people like these options. Why they are so popular with the population. Yes we know personal loans will in this case work out cheaper and certainly I’d never do a pcp at 6.9% not on your life. But for most people who want a nice monthly figure to have a car for a few years the extra risk of taking out a loan and paying back the full amount is off putting to them. As is putting their cash savings in. Even if it’s absolutely saving them money there is still a risk there that it will do the opposite. 

    I'm a strong advocate of a good PCP deal on a new car (of which there have been many), but this simply isnt a good deal.

    Whilst we can talk generally about the merits of PCP and leasing and we would no doubt agree, this particular scenario is the almost perfect storm of a high priced car in the first instance, no discounts and high interest rates.

    If the O/P "really must" get a JCW now, then the only way to try to offset that is to minimise the interest charges.

    If the O/P doesnt want to do that, then fine, but i could forsee ammortised monthly payments of £550+ for one of these.  Thats an awful lot of money for a MINI....
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