First Time Buying a Vehicle Via PCP

adamapple

born_again said:

adamapple said:

Frozen_up_north said:

New cars often come with a large contribution towards finance from the manufacturer, and may include a full warranty that extends to the end of the PCP agreement. That contribution is sometimes available as a discount on a "cash" purchase too, ie you can get that discount with a loan from elsewhere, which may have a lower interest rate than the dealer offers. I had a £4000 discount on the outright purchase of a £32,000 car.

The potential downside to PCP is the condition and mileage of the car at the end of the term. This is less of an issue if you buy a new car over 3 years which includes a 3 year manufacturer warranty.

You really need to do a few calculations... For example a £22,000 brand new VW Polo with £1 deposit on VW finance at 7.9%, works out to £410 per month over 3 years with a final payment (or hand the keys back) of £9,600. A loan for £22,000 from the Nationwide Bank at 5.8% costs £420 per month over 5 years, and the car is yours without a final payment.

In the deal I've been offered the included £750 contribution, 2 years manufacturer warranty and 2 years servicing, are only provided on taking out their PCP deal which is at 10.9%.

10.9% is expensive.

Might find a new one for far less.

Who is this from & what car?

Its a Skoda Enyaq EV, direct from a dealer.


daveyjp said:

I’ll provide a more succinct response. 

PCP on a three year old vehicle. Don’t do it. 

Would be helpful to know why and to see a better deal?

DrEskimo

Why is it that you are drawn to considering PCP in the first place?

If the deal is OK, then the most cost effective approach here would be to take it on PCP, but then settle it soon after in full. That way you get the benefits but none of the interest charges.

If however, you do not have the upfront capital and are looking for finance options that minimise monthly costs, don't lose sight of what the overall cost is. PCP's lower the cost by having the balloon payment, but that comes at the price at substantially higher interest costs. Remember to factor that cost in when thinking about the potential 'safety net' that the balloon payment has in terms of having the option to return the car to the finance company. On the sort of interest rate you are quoting the net cost of any savings is likely going to be minimal/none when you consider the interest charges you have had to pay.

That being said, whilst not an typical advocate for leasing (for me personally I hate the idea of having contractual restrictions on how long and how much I can drive a car..) I know there are some particularly cheap lease contracts on the Skoda Enyaq, so may be worth researching?

Frozen_up_north

adamapple said:

In the deal I've been offered the included £750 contribution, 2 years manufacturer warranty and 2 years servicing, are only provided on taking out their PCP deal which is at 10.9%.

The requirement to take a PCP deal in order to have 2 years servicing and extended warranty is a good reason to walk away, my new car came with a £4000 discount, 2 services (the first is at 2 years), alloy and tyre insurance for 3 years and paintwork/upholstery protection. That was with an outright purchase too.
To some extent it’s a buyers market at this time of year as the September rush is over and car sales slump in winter.
A little while ago, the main dealer we bought our other car from offered to buy it back for the price we paid for it, provided we bought another new car of the same type! When sales are slack, main dealers still have to shift new cars in order to keep their franchise. Go back at the end of the month for a free coffee, keep your hands in your pockets and don’t look too keen.

jimjames

adamapple said:

Goudy said:

The GFV or balloon payment is based on the expected value of the car at the point when it's due.

So if your contact is based on high mileage, that will effect it's value at that point and the GFV will be lower. (and monthlies higher)

If it's based on lower mileage, the GFV will be higher. (and monthlies lower)

It's all pre set in the contract though, so work out your mileage carefully.

If it's based low and you go over those contracted miles you will pay for the excess mileage if you hand the car back at that point.
Trade it in at this point and you may owe more than it's value as what you owe (the GFV) is more than it's value.
Pay the GFV and keep it and it makes no difference really.

Also, if you hand it back when the GFV is due you will pay for any damage that is not fair wear and tear.
(The standards they use for this are the BVRLA's fair wear and tear guidance).

You will want to study this guide before you sign up as you don't want to pay for any damage or excess wear the car already has later.


PCP on used vehicles is not usually good value.
Interest rates are generally a lot higher than PCP on most new vehicles and with most new cars, you often get a deposit contribution from the manufacturer or finance company.

You might want to test the above and get a few quotes on new vehicles.

Obviously a PCP is a fairly large financial commitment and an older car will either be out of warranty or offered with a shorter warranty. You will be expected to maintain the car, so any major issues outside of warranty will be yours to pay for along with the finance payments. 
Quite a few people end up on the forum with major issues with a car on finance that is out of warranty and they can be painful to read.

If it comes with an extended manufacturers warranty, double check it still qualifies.
If it comes with a third party warranty, well good luck with that.

Thanks for the advice. Although the car is three years old and no longer under its standard warranty, the dealer is including a two-year manufacturer warranty (as well as a £750 contribution). My PCP agreement runs for three years, so while I’ve been told I can purchase extended cover after the two years, I’ll likely have one year without warranty protection. 

I bought a main dealer vehicle on similar PCP and got the same sort of deal from the dealer. Car was 8 years old and warranty will cover it to 10 years. PCP paid off a few days after I bought (actual term is withdrawn rather than paid off) and it's as if the PCP never existed as not shown on credit report. All the benefits of taking the PCP remain though.

adamapple

Just an update.
You all scared me off this deal, so I'm looking to lease a new one now.