PCP Finance: Low deposit or high deposit, which is the most sensible?

caprimad

A couple of years ago, I "bought" a new MG4 on a PCP finance deal.

I was a bit of a smug git when EVs suddenly depreciated more than expected last year, as my PCP "guaranteed final value" would likely be £2-3K more than the car was going to be worth at the end of the deal....

... but then I got rear-ended by a bus a couple of weeks ago (100% non-fault claim) & the insurance company have written the car off. At market value, therefore, I'm left with a £4500 gap between the outstanding finance & no gap insurance to pay it. Smug no more...

Anyway - that's all water under the bridge; I need a new car, and I still think a PCP deal is the best option for buying an electric vehicle - as I think with the ever-improving technology, in 3 or so years time there'll be even better vehicles on the market than there are now. And yes, this time I'll definitely be buying gap insurance!

However, with that in mind - what's the most sensible option for the deposit?
 - Pay a low deposit and take the higher monthly cost, but in the hopefully very unlikely event I get crashed into & written off again, I won't lose so much, or
 - Pay a high deposit to reduce the monthly cost, in the knowledge that in a write-off situation I'm going to have paid more out up front & will therefore likely lose more.

Obviously, I'd rather not get written off in the first place...

Affordability is not particularly an issue for the price of car I'm looking at, whether I put down a £2k deposit or an £8k deposit (which makes about £100/month difference to the payments).

Keep_pedalling

I have a new Skoda Elroq on order and was going to go PCP but I have leased it instead, over 3 years it was a lot cheaper. 

Mildly_Miffed

Remember that you're paying interest for the entire term on ALL the money you borrow - some of which you repay over the term, some of which you defer to the end in the form of the balloon.

If you pay more up front, you borrow less. The balloon remains the same, but you have lower monthlies.

As for your last deal, if the insurance market value was so much less than the settlement, why would the market value at the end have been so much higher than the balloon...?

If you ARE seeing the market value higher than the balloon, then you've been paying too much in your monthlies - the money you "get back" is your money you already overpaid during the term.

daveyjp

PCP makes little financial sense.  Buy a 2-3 year old EV, or a newer EV with a few miles and a massive discount.

caprimad

As for your last deal, if the insurance market value was so much less than the settlement, why would the market value at the end have been so much higher than the balloon...?

It wouldn't - the balloon would likely have been well above the market value. The reason the market value dropped so far was because used EV values took a sharp dive last year. So I wouldn't have bought the car with the balloon payment; I'd have walked away & bought another one on a similar deal. Or if I did want to keep with the MG4, I'd have bought another one for the market value.

If you ARE seeing the market value higher than the balloon, then you've been paying too much in your monthlies - the money you "get back" is your money you already overpaid during the term.

Apologies if I wasn't clear, the market value is BELOW the balloon payment, just 2 years into the finance deal. Used prices would need to rise by over £1000 to get into the ballpark of the balloon payment, and that's not going to happen.

My issue is, because the car is a total loss, I now have to pay the difference between the MV (£16.5k) and the outstanding finance (£21k), as I don't have gap insurance to cover it.

The thrust of my question is: If I pay £2k deposit, higher monthlies, and the car gets written off before the end of the deal - will I be less out-of-pocket than if I put down £8k deposit for the lower monthlies (the difference in payment won't make up the difference in deposit)... actually, I think I've just answered my own question there!

caprimad

daveyjp said:

PCP makes little financial sense.  Buy a 2-3 year old EV, or a newer EV with a few miles and a massive discount.

There's no point in buying a used EV at this time (IMHO - although finally a Jaguar iPace is in-budget!); new EVs are just so much better than your typical 5-10 year old one; and in 3-5 years time, they'll be much better again:

Buying now (new OR used) is, IMHO again, a mug's game.

In 10-15 year's time, when the advances in technology have slowed up a bit (assuming they do) - that'll be the time to buy a keeper.

Mildly_Miffed

caprimad said:

There's no point in buying a used EV at this time (IMHO - although finally a Jaguar iPace is in-budget!); new EVs are just so much better than your typical 5-10 year old one; and in 3-5 years time, they'll be much better again:

Depends on your requirements.

If a 3yo or 5yo or 10yo one meets your needs, then why not save a mahoosive chunk over a new one that massively exceeds them?

prowla

I've bought cars on PCP and the transaction, payments, and bubble all went to plan.

However, were I to go for an EV (unlikely, as I don't have a place to charge it) I would likely consider a lease arrangement.

I still don't think that EV lifespans are in the same league as ICEs, so leasing absolves you of responsibility for that.

ididgetwhereiamtoday

prowla said:

I've bought cars on PCP and the transaction, payments, and bubble all went to plan.

However, were I to go for an EV (unlikely, as I don't have a place to charge it) I would likely consider a lease arrangement.

I still don't think that EV lifespans are in the same league as ICEs, so leasing absolves you of responsibility for that.

You are correct. EVs lifespan will probably be a lot longer than ICE cars. 

Typhoon2000

If your intention is to pay the ballon and keep the car, then increasing your deposit will cost you less over all. All will increasing the annual mileage allowance (as this will lower the ballon, so higher monthlies and less interest overall).

prowla

ididgetwhereiamtoday said:

prowla said:

I've bought cars on PCP and the transaction, payments, and bubble all went to plan.

However, were I to go for an EV (unlikely, as I don't have a place to charge it) I would likely consider a lease arrangement.

I still don't think that EV lifespans are in the same league as ICEs, so leasing absolves you of responsibility for that.

You are correct. EVs lifespan will probably be a lot longer than ICE cars. 

Haha - good game!

What empirical evidence do you have to support that assertion (ie. that "EVs lifespan will probably be a lot longer than ICE cars")?