PCP mystery

Imperial926

My wife and I have bought a sequence of Honda cars on PCP. Usually the dealer waits until around 3 out of the 4 years and suggests a change and a deal to be had.
We acquired our present car in April 2022 but already the dealer has come back to me twice to suggest a change of vehicle. The model hasn't changed and I have declined because the figures are not as good as the excellent deal we seemed to get last year.
Why would the dealer be doing this so early in the life of this contract? Is it happening a lot? Is there anything to be gained in my accepting a new vehicle just 18 months into a PCP contract?

Herzlos

There's a LOT of demand for nearly new cars, so it's likely they just want yours to sell.

It may also be that they've got something else they want to clear from stock, so getting you to upgrade is a double win for them.

I suspect a lot of people will be tempted, as they'll assume the car is locked in for the full term.

Merlin139

Chasing up leads of previous customers to see if they can get another sale. The more cars the dealer sells the more money they make from the manufacturer. If the deal is not good enough for you just say no thanks, as you have said you did.

I used to get it from the Toyota garage that I used to buy my cars from. Since GDPR came in I just stated to them I did not wish to be contacted for the purpose of sales. I would decide when I wished to change my car.

Try looking at one of those online dealers like Carwow and then go back to the dealer and say I can get this from here can you match?

Plenty of places where you can get a better trade in for your present car than the dealer. If they want your business that bad you will get a better deal if you want one. 

facade

Imperial926 said:

<snip>

 Is there anything to be gained in my accepting a new vehicle just 18 months into a PCP contract?

You get to drive a brand new car, that is identical to your present one, and the chance to pay more each month for it.

(If yours is a lemon, it is a chance to get rid)

You move the date when your pcp finishes and you either have to pay up, give the car back or trade it in back another 18 months.

The 2nd service is usually expensive, you don't have to pay it next April.

The batteries in the keyfobs will be new.

The tyres will be unworn.

You can change the colour.

Can't think of anything else.

Goudy

They are touting for business.

There is a sweet spot on PCP deals, that is when you've paid off enough to cover what it's worth (or more).
This is usually towards the end of the contract, that is usually within a few months of the when the balloon payment is due, but used car prices are a bit crazy so who knows.

If you think about it, you've borrowed X amount plus interest.
They work out what it's likely to be worth after 3 or 4 year (depending on contract length), set that a side as the balloon payment and then the difference is spilt into equal monthly payments. It's all very linear.

Your car depreciates quite differently.
It loses a large chunk of value as soon as you drive it off the forecourt, then loses less and less as the years go by.

It's only when you get towards the end of the contract, near to when the balloon payment is due do both start to meet.


If the dealer can get you to swap to a new car early, you owe more than what they offer in trade in.
This means they wrap that outstanding finance into finance of your new deal.

Used car prices a silly at the moment and your current car might be worth what you still owe now, to someone at retail price, but that doesn't mean the dealer will offer you that retail price at trade in.

This all means it's win win for the dealer.
They earn more for selling another car but also more for not just selling another finance package, but a larger one. 

You can if you have the time feel them out for a deal but you need to remember that the trade in value of your car must pay off the existing finance and include a deposit towards the new car.
They will probably tell you they can't do that but you have let them know you aren't going to entertain a deal that brings existing finance into a new deal.
If they can and you fancy a new car, then all's good.

Imperial926

Thank you for these expert responses! As Goudy has illustrated what I found was that secondhnad prices on my Honda are very high at present. Meanwhile the new model has increased by £4k and the PCP interest rate has gone from 5% to 6.9% (although 8.9% on other Honda models!)
The dealer offered to match what I pay now (which includes all servicing) at £334 a month, add the protective paint package with interior seat treatment and reduce the cost of the more expensive paint option. The car in question is sitting in the showroom but not a demonstrator and is of course immaculate. The catch? I need to put in £1,000 to have the monthly payments remain the same.

My query now is whether PCP rates will continue to increase and whether this might be a good deal despite the £1k top-up. It would give me 4 years by which time interest rates may have dropped a little - who knows?

Thanks for all the help so far!

Stateofart

My friend has a Honda Civic and they're desperate for it.  It means a) they can lock him down for a new deal in a slightly more expensive model and b) they can sell the Civic 2nd hand for pretty much the same price as they did 2.5 years ago.  All the while taking the £7 in PCP plus deposit etc.

facade

Imperial926 said:

<snip>

The dealer offered to match what I pay now (which includes all servicing) at £334 a month, add the protective paint package with interior seat treatment and reduce the cost of the more expensive paint option. The car in question is sitting in the showroom but not a demonstrator and is of course immaculate. The catch? I need to put in £1,000 to have the monthly payments remain the same.

<snip>

So if you want a brand new car today it will cost you £1000 cash, and you carry on with the same monthly payment.

(The PCP will run for another 18 months, so you will pay an extra 18x £334 = £6102, but you get to borrow the car for an extra 18 months. Unless you paid the balloon on the old one you'd have had to take out a new PCP anyway to cover those extra 18 months)

If the new one is £1000 worth more appealing than the present one............... It's your money after all.

born_again

Imperial926 said:

Thank you for these expert responses! As Goudy has illustrated what I found was that secondhnad prices on my Honda are very high at present. Meanwhile the new model has increased by £4k and the PCP interest rate has gone from 5% to 6.9% (although 8.9% on other Honda models!)
The dealer offered to match what I pay now (which includes all servicing) at £334 a month, add the protective paint package with interior seat treatment and reduce the cost of the more expensive paint option. The car in question is sitting in the showroom but not a demonstrator and is of course immaculate. The catch? I need to put in £1,000 to have the monthly payments remain the same.

My query now is whether PCP rates will continue to increase and whether this might be a good deal despite the £1k top-up. It would give me 4 years by which time interest rates may have dropped a little - who knows?

Thanks for all the help so far!

That will all depend on what BOE decide to do with interest rates. 

Imperial926

Thanks everyone. The dealer contacted me AGAIN today but I have now rejected the offer. I think it was more in the interest of the dealer than the customer and, at the end of the day, I would have just had the same car but in a different colour - minus a feature i find quite useful. 2022 Honda Hr-Vs had a tailgate that could be opened by moving your foot under the rear of the car. Apparently this sensor came from the Ukraine and is no longer available. Consequently 2023 models do not have this option which is very helpful if you approach the car with both hands full of shopping!

In 2 and a half years it will be interesting to see how viable PCPs will be with increasing interest rates. I'm not tempted to buy a hybrid car outright because of the unknown life of the battery and cost of replacement.

ComicGeek

In the past I've always been able to negotiate PCP interest rates as well as vehicle price - I don't know whether that flexibility has been taken away from the dealerships now, but can make a big difference on the overall amount paid.