PCP question.

Mgman1965

I've never leased or PCP'd a car, I've always bought outright.

I'm now in my sixties.

The brand of car I've always wanted I would never "buy" as they have shocking depreciation, the interiors don't "wear" well and have I would say moderate reliability issues.

The car brand in question is Alfa Romeo, and they (in my opinion) are as cool as your freezer and have that unique Italian sporty look.

As i would only have the car for 3 years and never own it, would PCP get around the issues of depreciation, repairs not be my problem and the same with the "fragile" interior as I would not have the car long term to worry about it starting to look tatty in a short time relative to other cars.

Car_54

I always wanted an Alfa (note spelling), but never succeeded in getting one as my company car. Like you, I would never buy one with my own money..

PCP may be attractive, but someone has to pay for the "shocking" depreciation, and it won't be the finance company. It will be reflected in the payments.

BTW I've never heard the reliability described as "moderate"!

Mgman1965

https://forums.moneysavingexpert.com/discussion/comment/82077448#Comment_82077448

I termed it as moderate as they're not the most reliable, but far from the worst (Jaguar Land Rover).

sheenas

https://forums.moneysavingexpert.com/discussion/6677121/pcp-question

PCP is a "trap", but you have the option to purchase the car at the end of the term, if you pay the balloon payment. The trap being it forces you into replacing the car every 3 years (or length of PCP). That is great if you want to change your car regularly, not so great if you keep your cars.

In terms of depreciation it's basically pay monthly and it's calculated up front rather than discovered later. They will sting you for tires or over milage and any dinks etc too.

Goudy

I wouldn't call PCP a trap if you are fully aware how they work. They aren't some sort of trick designed to catch everyone out.

However you buy it you will obviously suffer a cost for ownership/usage or as it's known, depreciation.

If you paid cash or paid via a normal HP arrangement and sold it in three years your depreciation is the difference between what you paid (with interest if it's HP) and what you sold it for. It's unknown what this amount actually is, but you can research and estimate it.

If you leased the car, the deposit and monthly payments cover the depreciation plus a profit for the leasing company.

With PCP, the depreciation is worked into the contract up front based on mileage and conditions stated in the contract. This amount is the difference between the invoice price (with interest) and the guaranteed future value (GFV).

This GFV is what they call the optional balloon payment at the end of the contract that you have options on.

This GFV as far as the finance company is set in stone. If you want to keep the car, that's what you pay.

If you want to hand it back and it's mileage and condition are within the contract, you pay nothing more.

But you are free to trade it in and it may or may not be worth more then the GFV. If it is, you gain towards your next car but if it looks like you'll lose, you don't really lose as if it isn't worth more as a trade in you are still free to hand it back to the finance company.

Most dealers will know what you still owe on it and tempt you into a new car by offering you slightly more than the GFV you still owe.

There is an area that doesn't suit this type of rolling from on car to another every few years and that's deposit. So most PCP deals offer a deposit contribution. The finance company will basically pay towards you buying the car.

As we all know there are costs involved when it comes to purchases like this.

Paying cash and you are probably losing out on interest on your savings and finance (including PCP) attracts interest. So you need to work out if some of the benefits of one of the purchase options suit you better than the others, no one really knows that expect you.

BTW, I've had a few Alfa's and they are far better than most know. Of course they are quirky in certain areas but they'll be a point when you see your refection in a shop window and it all becomes worth it.

It's also worth pointing out cars that depreciate slower are generally better value in regards to PCP than those that depreciate faster as the difference between invoice and GFV is smaller which means your monthlies should also be smaller.

You won't see the value back with most cost optional extras either, so buy the model with what you want need rather than adding stuff to a lower spec car.

Mildly_Miffed

No, PCPs don't "get around" depreciation…

Remember how they work.

You borrow the full price of the car.
You repay that, plus interest, structured so that you still owe around the expected value of the car at the end of the term.

For example:
You borrow £30k.
The car is worth £10k at the end of the term.
You repay the £20k depreciation through the term.
Then, of course, there's interest on the entire £30k you borrowed.

Repairs ARE your problem, except insofar as they're covered by warranty.

The Alfa range currently is a funny one, in Stellantis terms.
The Junior is a 208/2008, Corsa/Mokka, 600.
The Tonale is the last knockings of the old Fiat Punto platform seen under 20yo Corsas, Alfa MiTo, Fiat Qubo van, Jeep Renegade/Compass etc.
The Giula and Stelvio are actually on non-shared platforms… <faints with 21st century shock>

Keep_pedalling

if you have no intention of buying at the end of the contract, leasing (PCH)maybe the better option. My current leased EV (Škoda Elroq) would have cost over £3K more on PCH over the three year term.

MyRealNameToo

https://forums.moneysavingexpert.com/discussion/6677121/pcp-question

why do you think that PCP gets you around depreciation?

Its the basic principle of how PCP works… todays value - balloon (which is basically the anticipated value at end of the agreement) straight lined with interest plus the interest on the balloon which remains fixed throughout the period.

What you are protected from is the variability of the depreciation, if its worth much less at the end then you simply walk away, if its worth more then you buy the car and either sell it or keep it.

Repairs are your problem, you have to maintain the vehicle and will have to pay for anything thats considered more than fair wear and tear if you decide to surrender the vehicle.

motorguy

if you really just want the car for three years then hand it back, then you'll likely get a better deal via leasing.

BUT, you will still have a significant monthly payment.

Watch for big deposits. I see offers like £299 a month for three years but theres maybe £8K down which is really £521 a month when ammortised.

Also, interest rate plays a big factor with PCP as you're borrowing the full price of the car, so aim for 0% APR of 1.9% or 2.9% at worst.

Also if PCPing, negotiate hard on the purchase price of the car. Try the online brokers, get the best price you can. Dont be fooled in to thinking their headline offer on their website is their best deal.

daveyjp

Investigate the options for an Alfa extended warranty. It it can be extended to 5 or 6 years old. buy a 2-3 year old model and use the money saved to buy the warranty.

If after 3 years the interior is wearing badly its probably a car to avoid anyway.

motorguy

https://forums.moneysavingexpert.com/discussion/comment/82079658#Comment_82079658

I'd concur RE: interiors. I never found FIAT / Alfa interiors to wear that badly. I'd a really !!!!!! old FIAT Marea at one point (cost me £70 and i drove it for about 9 months). Interior was great in it. Floorpan… not so much. But then it was maybe 15 years old at the time.