For saving money, is PCP ever a good idea?

MEM62

MalMonroe said:

MEM62 said:

You pay cash and you only suffer depreciation.  Finance the car and you suffer depreciation and interest.  It makes any period of ownership that much more expensive and gives you less to spend on the next one.  With cash you also do not have to worry about payments and potentially loosing the car if your financial circumstances take a downturn. Cash is a no-brainer.     

PCP is a great product for putting your backside into a vehicle that you otherwise could not afford.  It is not particularly cheap and at the end of the agreement and all those payments you own nothing.  Personally, never seen the point in that.     

It's not so bad if you have 0% interest PCP deal and you sell the car before the term is up so you can pay the finance off and then buy another car with the profit you make. 

You don't make any 'profit' on owning a car.  (Investing in classics excepted)  Own a car for a typical PCP period of two or three years and you will not sell it for more than you bought it for.   

ontheroad1970

MalMonroe said:

I took out a PCP because the interest rate was 0% and I couldn't afford to buy a decent car outright. It's not even a new car at that.

However, whatever it's called, it's still a loan. And it's marked down on my credit reports as such. So even though my credit history and reports are good and my credit cards are paid off in full every month, I've still got a loan on there. It's being managed well but it's an indication to any lenders that I can't afford to buy a car outright.

Which means that even if you save money by having a PCP and can get one with 0% interest, etc., your credit report will always have an outstanding loan on it until it's either paid off or you surrender the vehicle. 

If I had the money to buy a car outright, I'd do that rather than take out any type of loan. If you don't mind having a loan on your credit reports and are happy to have a PCP then there isn't a problem.

But for me, the car isn't mine and I still have that 'loan' word jumping out at me whenever I check my credit reports. It's only in the short term and I've never missed a payment but I don't like it. That's just me, of course. But I feel tied. I am tied.

Lenders only see excessive borrowing as an issue.  One loan being managed well will look good.  Paying off credit cards in full every month might actually work against you.  They want to see good debtors, for sure.  They also want good customers though - ones they can make money from.  If you're never paying interest, then, you're not a great customer for them as they then only make money on the transaction fees fro merchants.  

born_again

MEM62 said:

MalMonroe said:

MEM62 said:

You pay cash and you only suffer depreciation.  Finance the car and you suffer depreciation and interest.  It makes any period of ownership that much more expensive and gives you less to spend on the next one.  With cash you also do not have to worry about payments and potentially loosing the car if your financial circumstances take a downturn. Cash is a no-brainer.     

PCP is a great product for putting your backside into a vehicle that you otherwise could not afford.  It is not particularly cheap and at the end of the agreement and all those payments you own nothing.  Personally, never seen the point in that.     

It's not so bad if you have 0% interest PCP deal and you sell the car before the term is up so you can pay the finance off and then buy another car with the profit you make. 

You don't make any 'profit' on owning a car.  (Investing in classics excepted)  Own a car for a typical PCP period of two or three years and you will not sell it for more than you bought it for.   

EXcept in the current climate where new cars are in short supply. Meaning 2nd hand cars are in demand, as such their prices have risen.
Example I was offered £2k more than I paid for my car (ex demo) by the dealer that sold me the car at it's 1st service. So they knew exactly I had paid for it.
Once new car production & supply is back to normal, watch this crash & 2nd hand prices drop like a brick.

Lizmoretti

Harvez63 said:

DrEskimo said:

Harvez63 said:

I've PCP'd my last 2 supercars. Theres absolutely no sense in tying up your money into a car, that is fairly easy to hop out of with a PCP deal. You'll notice a lot of footballers also dont buy their cars out right even on their wages. 

Finance amongst the older generation is seen as a negative I believe. Oh if you finance it you cant afford it, therefor you shouldn't have it. I think times have moved on and the stigma around it has changed. Generations are different so thats by no means a pop at anyone. 

Also, the last 2 cars, I sold one for what I paid for it a year later, and I sold the last one back to the main dealer for an £8k profit, with a £2k repair bill for a part that had broke. 

I also typically move on every year or so, so if going by the car market at the moment, typically if I'm paying £200 a month interest, looking at £2.4k for basically owning say a Ferrari for a year. I dont think thats bad. 

Obviously somewhat car dependent, but car values are very strong now, and have been for a while now with no signs of letting up. Giving not many people can produce new cars at the moment. 

Every single example above would be exactly the same if you had bought it outright, except you wouldn't have paid interest....You can just as easily 'hop out' of a car you own. Trading in cars to dealers is nothing unique for cars on PCP.

You made £8k profit on your last one, also donated a bunch of your money to multi billion pound finance companies in interest payments. Had you bought outright, you would have made £8k profit and paid no interest.

It's finance...finance costs more money...it's not very complicated.  I'm only 34 so hardly a generation thing. It's simple maths.

Maybe I’ve done a terrible job of explaining. By keeping say £60k and using a PCP deal, if you suddenly needed £20k in a hurry, you don’t need to sell the car. If it was brought out right your money is tied into it, and unless you had other savings, you’d have to sell. Sometimes a car can take a while to sell also. 

1. It isn’t a pop, you know that, because I said so and even mentioned it wasn’t.  I have a lot of respect for everyone. To use your term here, nonsense; credit reports use your “debt” as a positive if managed properly. For example my wife has no credit cards, no loans, but a considerable lower credit rating which lenders look at.  

Good luck OP in whatever you decide to do !

Thanks…. I think.  

So you’re saying it’s better to have cash available and borrow massive amounts for a car rather than buying a car outright and borrowing some money should you desperately need to.

Seems an odd way to do things.

I’d rather not put all my money into a car and that way I have a lovely car, bought outright AND some savings.  And no loans or PCP deals.

DrEskimo

Harvez63 said:

DrEskimo said:

Harvez63 said:

I've PCP'd my last 2 supercars. Theres absolutely no sense in tying up your money into a car, that is fairly easy to hop out of with a PCP deal. You'll notice a lot of footballers also dont buy their cars out right even on their wages. 

Finance amongst the older generation is seen as a negative I believe. Oh if you finance it you cant afford it, therefor you shouldn't have it. I think times have moved on and the stigma around it has changed. Generations are different so thats by no means a pop at anyone. 

Also, the last 2 cars, I sold one for what I paid for it a year later, and I sold the last one back to the main dealer for an £8k profit, with a £2k repair bill for a part that had broke. 

I also typically move on every year or so, so if going by the car market at the moment, typically if I'm paying £200 a month interest, looking at £2.4k for basically owning say a Ferrari for a year. I dont think thats bad. 

Obviously somewhat car dependent, but car values are very strong now, and have been for a while now with no signs of letting up. Giving not many people can produce new cars at the moment. 

Every single example above would be exactly the same if you had bought it outright, except you wouldn't have paid interest....You can just as easily 'hop out' of a car you own. Trading in cars to dealers is nothing unique for cars on PCP.

You made £8k profit on your last one, also donated a bunch of your money to multi billion pound finance companies in interest payments. Had you bought outright, you would have made £8k profit and paid no interest.

It's finance...finance costs more money...it's not very complicated.  I'm only 34 so hardly a generation thing. It's simple maths.

Maybe I’ve done a terrible job of explaining. By keeping say £60k and using a PCP deal, if you suddenly needed £20k in a hurry, you don’t need to sell the car. If it was brought out right your money is tied into it, and unless you had other savings, you’d have to sell. Sometimes a car can take a while to sell also. 

No I understand, just think it's a very odd way to do things, and certainly not MSE.

Whether it's a secured loan on a car or a personal loan, I wouldn't take out finance to leave money in my savings account 'just in case'. I have an emergency fund for that and I ensure I budget for any upcoming spends. My budget for a car would not include these fund.

I work hard enough for my money that I try everything I can to not needlessly donate it to companies worth many billions for providing absolutely nothing in return, but YMMV...

The last point is this misnomer I alluded to earlier, that somehow the way you trade in a car on PCP is any different to a car you own. You can trade a car in you own to any dealer, broker or garage you like in the matter of minutes, exactly the same way as when you have it on PCP. You have the option to sell it privately, but can trade it in all the same.

Harvez63

DrEskimo said:

 No I understand, just think it's a very odd way to do things, and certainly not MSE.

Perhaps you're right here, my points are probably suited better on a motoring forum rather then MSE. 

I shall gracefully exit 

Grumpy_chap

Harvez63 said:

I've PCP'd my last 2 supercars. 

Also, the last 2 cars, I sold one for what I paid for it a year later, and I sold the last one back to the main dealer for an £8k profit, with a £2k repair bill for a part that had broke. 

I also typically move on every year or so, so if going by the car market at the moment, typically if I'm paying £200 a month interest, looking at £2.4k for basically owning say a Ferrari for a year. I dont think thats bad. 

In this scenario, there does not seem to be any consideration of the initial deposit put down to have the ownership / use of the Ferrari for a year.  Whatever that deposit amount is has also been a cost.  So have the amount of the monthly payments above the interest.  Even for the car sold back at £8k plus £2k repair as a "profit" at the end of the deal.

I am surprised that supercars are subject to the whims and fluctuations that are currently affecting the family hatchback but having never looked into it have to take your experience that they are.

Harvez63 said:

Maybe I’ve done a terrible job of explaining. By keeping say £60k and using a PCP deal, if you suddenly needed £20k in a hurry, you don’t need to sell the car. If it was brought out right your money is tied into it, and unless you had other savings, you’d have to sell. Sometimes a car can take a while to sell also. 

We might well disagree, but I am of the view if you only have £60k then you cannot afford to spend £60k on a car.  You can need to keep a healthy emergency fund and use part of it, say £20k on a car.  In that way of thinking, the choice of ploughing £60k into a car but not having £20k to meet an emergency never exists.  It really makes no sense to pay interest on £60k just to have a car that you cannot afford.

Harvez63

Grumpy_chap said:

Harvez63 said:

I've PCP'd my last 2 supercars. 

Also, the last 2 cars, I sold one for what I paid for it a year later, and I sold the last one back to the main dealer for an £8k profit, with a £2k repair bill for a part that had broke. 

I also typically move on every year or so, so if going by the car market at the moment, typically if I'm paying £200 a month interest, looking at £2.4k for basically owning say a Ferrari for a year. I dont think thats bad. 

In this scenario, there does not seem to be any consideration of the initial deposit put down to have the ownership / use of the Ferrari for a year.  Whatever that deposit amount is has also been a cost.  So have the amount of the monthly payments above the interest.  Even for the car sold back at £8k plus £2k repair as a "profit" at the end of the deal.

I am surprised that supercars are subject to the whims and fluctuations that are currently affecting the family hatchback but having never looked into it have to take your experience that they are.

I do want to bail out of this before I get torched any more. 

So the Porsche as the example, £12k deposit, brought for £82k with a £50k balloon payment, 2 year deal and £32k left to finance. Monthly deposits where something like £700, £200 which of which was interest. Sold the car to Porsche for £90k (they listed it for £97k). When Porsche brought it back, I got back £26k after the year. however yes, I made 12x £700 payments during that period, so if we're going to be finicky, I made £8k, less £2.4k, but had the car for a year and it also had some active engine mounts that where £1k each, broken .... It was more to raise a point that certain higher end cars, are generally still rising in value rather then dropping. 

I'm only defending my own stance here seeing as everyones at me, hopefully the above makes it clearer and I miss judged my crowd on this one, hold my hands up. 

Grumpy_chap

Harvez63 said:

Grumpy_chap said:

Harvez63 said:

I've PCP'd my last 2 supercars. 

Also, the last 2 cars, I sold one for what I paid for it a year later, and I sold the last one back to the main dealer for an £8k profit, with a £2k repair bill for a part that had broke. 

I also typically move on every year or so, so if going by the car market at the moment, typically if I'm paying £200 a month interest, looking at £2.4k for basically owning say a Ferrari for a year. I dont think thats bad. 

In this scenario, there does not seem to be any consideration of the initial deposit put down to have the ownership / use of the Ferrari for a year.  Whatever that deposit amount is has also been a cost.  So have the amount of the monthly payments above the interest.  Even for the car sold back at £8k plus £2k repair as a "profit" at the end of the deal.

I am surprised that supercars are subject to the whims and fluctuations that are currently affecting the family hatchback but having never looked into it have to take your experience that they are.

I do want to bail out of this before I get torched any more. 

So the Porsche as the example, £12k deposit, brought for £82k with a £50k balloon payment, 2 year deal and £32k left to finance. Monthly deposits where something like £700, £200 which of which was interest. Sold the car to Porsche for £90k (they listed it for £97k). When Porsche brought it back, I got back £26k after the year. however yes, I made 12x £700 payments during that period, so if we're going to be finicky, I made £8k, less £2.4k, but had the car for a year and it also had some active engine mounts that where £1k each, broken .... It was more to raise a point that certain higher end cars, are generally still rising in value rather then dropping. 

I'm only defending my own stance here seeing as everyones at me, hopefully the above makes it clearer and I miss judged my crowd on this one, hold my hands up. 

Thank you for clarifying.

I was not "torching" you or "at you" but genuinely thought the deposit had been ignored. 

It does not seem uncommon for people (generally) to ignore the deposit when talking about PCP deals, and that error is promoted by the car sales people who highlight the low monthly payments but conveniently fail to mention the deposit (especially when the deposit is fully met through trade-in).  

DrEskimo

Harvez63 said:

Grumpy_chap said:

Harvez63 said:

I've PCP'd my last 2 supercars. 

Also, the last 2 cars, I sold one for what I paid for it a year later, and I sold the last one back to the main dealer for an £8k profit, with a £2k repair bill for a part that had broke. 

I also typically move on every year or so, so if going by the car market at the moment, typically if I'm paying £200 a month interest, looking at £2.4k for basically owning say a Ferrari for a year. I dont think thats bad. 

In this scenario, there does not seem to be any consideration of the initial deposit put down to have the ownership / use of the Ferrari for a year.  Whatever that deposit amount is has also been a cost.  So have the amount of the monthly payments above the interest.  Even for the car sold back at £8k plus £2k repair as a "profit" at the end of the deal.

I am surprised that supercars are subject to the whims and fluctuations that are currently affecting the family hatchback but having never looked into it have to take your experience that they are.

I do want to bail out of this before I get torched any more. 

So the Porsche as the example, £12k deposit, brought for £82k with a £50k balloon payment, 2 year deal and £32k left to finance. Monthly deposits where something like £700, £200 which of which was interest. Sold the car to Porsche for £90k (they listed it for £97k). When Porsche brought it back, I got back £26k after the year. however yes, I made 12x £700 payments during that period, so if we're going to be finicky, I made £8k, less £2.4k, but had the car for a year and it also had some active engine mounts that where £1k each, broken .... It was more to raise a point that certain higher end cars, are generally still rising in value rather then dropping. 

I'm only defending my own stance here seeing as everyones at me, hopefully the above makes it clearer and I miss judged my crowd on this one, hold my hands up. 

I think I would look back over your figures, as they don't add up, and you assessment of paying ~£200/month in interest might be a substantial underestimation.

Repaying £32k over 24months on 0% APR would be £1,333/month, so not sure how you were only paying £700/month.