New PCP agreement

stuarta99

Hi all,

Possibly going to get roasted here about PCP agreements but I'm just about to start one. 

I've had the finance proposition and the monthlies are good with the standard bubble payment. Fortunately I have a nice pot of savings (emergency fund) and worked out that for every £1k of extra deposit I could save £25/month. 

I'm thinking of putting down more that what I was going to in order to get a low monthly and then with a lower monthly, I can replenish what I used for the deposit in order to be ready for the bubble. Or do I keep the monthly at the affordable and keep more in my emergency pot. The thought of saving £25/month for every £1k seems to make sense but I just worked out that an extra £4k deposit only saves around £750 interest so completely confused.

A quick look at an interest calculator on my current 2.5% I would earn £420 interest compared to saving £750.....hmmm

Oh and there is the option to pay around an extra £25/month to reduce the bubble by £1k but again not sure if that's worth it.

Many thanks

Herzlos

PCP's usually have an upper deposit limit so I'd try and aim for that.

If the borrowing APR is higher than the savings APR (almost certainly) then taking out of savings to increase the deposit makes sense as long as you leave something for a rainy day.

You'll probably be better off going down the HP route though as you'll pay less interest over the term and have more flexibility to overpay.

stuarta99

So I've done some more digging this morning on the hp route but based on a calculator with 4.9% but assuming I would get 4.9. Over a 7 year period, which is probably what I'd have PCP/final payment wise I would pay almost double the monthly at £324 and paying £4502 interest compared to a rough £8k and overpaying would be nice as I'd be hitting the capital.  But this is all banking on getting 4.9 which I probably wouldn't. I'd lose the £2250 dealer contribution but then the saving might outweigh it and the dealer only does HP over 5 years which could up the figure to around £429.

I have also looked at options for a higher monthly to reduce the final bubble but although I'd save interest it works out I wouldn't save so much so would have less left in my account.

Completely torn

stuarta99

I think for piece of mind I might put down the max deposit on PCP with lower payments so that if things do go pearshaped, I'm covered on a monthly basis although I know I'll pay more on interest. Hopefully by having a lower monthly I'll save lots and not be Mr Boring and have plenty stashed ready for the bubble.

I could I guess even look at going with the PCP for now, then if in 2 years time things are going well, pay it off early with a standard loan and save on interest

MalMonroe

Hi, I've got my car on PCP but it started with 0% interest rate and was very manageable and I don't know why you think you'd be 'roasted' on here. I did put down a healthy deposit and my payments are very low now. And I've got a very decent car. Not new but only 4 years old when I got it and with 23,000 miles on the clock. It's from Toyota.

Before you take the plunge, you could google something like "car PCP deals with 0% interest UK" and see what pops up. See if there's any deal you fancy there. Doesn't take long and doesn't cost anything to just have a look. If you do see something you like you could always phone the dealer and try to haggle. I did - and the price of the vehicle was reduced. A bit of cheek can go a long way. . . 

Oh and I would say please DO "be Mr Boring and have plenty stashed ready for the bubble." There's absolutely nothing wrong with that, either. Even if you don't have enough for the bubble, you'll have some savings. It's far better than planning to take out a 'standard loan' in the future, imho. Plus, you might decide to swap cars or return your car in the future, you never know how you'll feel towards the end of the agreement.

I'd certainly do a PCP again but I would shop around first of course and not just go with Toyota again, unless they can offer me something really good. 

MrFrugalFever

If your sole intention is to own the vehicle outright then a PCP is financial suicide, full stop.

Put down the max deposit you can on a HP (leaving at least £1k in the EF) and suck up the higher payments if you’re wanting to own the car. If you can’t stretch to the higher payments then maybe look at a used car at a lower price point with HP.

MrFrugalFever

If you are insistent on the PCP route, I would suggest maxing out the deposit (normally 40% of cash price of car but includes dealer deposit contribution) and max out the mileage (normally 25,000 per year), over 48 months. The GMFV (optional final payment) will be as low as possible and your interest will be minimised.

Herzlos

MrFrugalFever said:

If your sole intention is to own the vehicle outright then a PCP is financial suicide, full stop.

Not necessarily - taking out the PCP to get a £2.25k dealer deposit contribution, and then clearing it with a loan - may be a much better move financially.

Dandytf

MrFrugalFever said:

If your sole intention is to own the vehicle outright then a PCP is financial suicide, full stop.

Put down the max deposit you can on a HP (leaving at least £1k in the EF) and suck up the higher payments if you’re wanting to own the car. If you can’t stretch to the higher payments then maybe look at a used car at a lower price point with HP.

I can't think past HP, though that's as I don't have multi K's to 'Own' PCP Car.

stuarta99

Ok thanks guys. I know in my head HP works out better but thinking about it, although at the moment I'll probably keep it as I did with my current one and kept it 10 years from new, with the current car market, this time round it could be different. There's also a chance there could be options with my work so going to stick with PCP. 

I need to confirm next week but I'm planning on maxing the 50% deposit to lower the payment and might look at raising the monthlies to lower the GFMV. At least that way I have a bit more flexibility while trying to enjoy the car and not curse it because of the payments.