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  • FIRST POST
    • drc90
    • By drc90 15th May 19, 8:32 PM
    • 36Posts
    • 0Thanks
    drc90
    PCP finance - what's the catch?
    • #1
    • 15th May 19, 8:32 PM
    PCP finance - what's the catch? 15th May 19 at 8:32 PM
    Hi all.

    I'm new to PCP financing so don't fully understand it.

    There's a car that I can buy from Ford for 19,750 cash outright. However, the same car I can also buy on finance:

    * 2,000 customer deposit
    * 2,250 deposit allowance
    * 209.16 x 38 monthly payments
    * 7,552 optional final payment
    * 0% APR

    Assuming the deposit allowance is paid for by Ford and not me, and assuming my maths is correct, this means if I buy the car at the end of the term, my total payments will be 17,500.08, which is considerably less than the 19,750 list price.

    Can someone tell me what I'm missing? I know a lot of people say "0% finance is too good to be true", so what's the catch?

    Thanks
Page 1
    • zx81
    • By zx81 15th May 19, 8:39 PM
    • 22,078 Posts
    • 24,090 Thanks
    zx81
    • #2
    • 15th May 19, 8:39 PM
    • #2
    • 15th May 19, 8:39 PM
    There isn't one for you.

    For the dealer, the risk is that you will pay off the finance immediately meaning they lose their commission.

    But that's a risk they take, rather than you.
    • DrEskimo
    • By DrEskimo 15th May 19, 8:40 PM
    • 511 Posts
    • 381 Thanks
    DrEskimo
    • #3
    • 15th May 19, 8:40 PM
    • #3
    • 15th May 19, 8:40 PM
    Hi all.

    I'm new to PCP financing so don't fully understand it.

    There's a car that I can buy from Ford for 19,750 cash outright. However, the same car I can also buy on finance:

    * 2,000 customer deposit
    * 2,250 deposit allowance
    * 209.16 x 38 monthly payments
    * 7,552 optional final payment
    * 0% APR

    Assuming the deposit allowance is paid for by Ford and not me, and assuming my maths is correct, this means if I buy the car at the end of the term, my total payments will be 17,500.08, which is considerably less than the 19,750 list price.

    Can someone tell me what I'm missing? I know a lot of people say "0% finance is too good to be true", so what's the catch?

    Thanks
    Originally posted by drc90
    Have you checked what discounts are available from online brokers, like CarWow, Coast2Coast, OrangeWheels, Broadspeed, etc.?

    Sometimes the 0% offer cannot be used in conjunction with discounts, so you end up paying more despite 0% finance. But this isn't always the case. Sometimes you can get the higher discount (on top of the deposit contribution) and 0% finance. Typically people will got for the PCP to get the finance contributions, but then settle within 14days to not pay interest, but at 0% there is little need.

    Of course the most obvious question is how much can you save by going used....? What is the value of brand new over a used model, and is it worth the price difference? If the answer is just the warranty, these can typically be extended by the dealership at a cost much less than the amount saved at list price.
    • drc90
    • By drc90 15th May 19, 8:54 PM
    • 36 Posts
    • 0 Thanks
    drc90
    • #4
    • 15th May 19, 8:54 PM
    • #4
    • 15th May 19, 8:54 PM
    There isn't one for you.

    For the dealer, the risk is that you will pay off the finance immediately meaning they lose their commission.

    But that's a risk they take, rather than you.
    Originally posted by zx81
    Thanks. The thing I'm struggling to get my head around is why they're offering a 2k+ deposit contribution, as I thought this was designed to entice you into a finance deal that ends up being more expensive; but at 0% finance, what benefit are they getting?
    • Nebulous2
    • By Nebulous2 16th May 19, 4:26 AM
    • 2,307 Posts
    • 1,513 Thanks
    Nebulous2
    • #5
    • 16th May 19, 4:26 AM
    • #5
    • 16th May 19, 4:26 AM
    Thanks. The thing I'm struggling to get my head around is why they're offering a 2k+ deposit contribution, as I thought this was designed to entice you into a finance deal that ends up being more expensive; but at 0% finance, what benefit are they getting?
    Originally posted by drc90
    You would need to know more than you will be allowed to about their internal finances to make sense of it. Just be grateful if the figures add up for you.

    Some thoughts.

    Most new cars are on finance nowadays. Manufacturers like it, partly I think because more people return to them at the end of their deal.
    If sales are slow 0% is an alternative to giving discounts. It makes for good advertising. Many people just grab it instead of looking for the catch as you're doing.
    Matching production with sales is difficult, sometimes it gets out of kilter and they need to shift cars. In the past they sometimes gave really good offers on motability cars to do that.
    • foxy-stoat
    • By foxy-stoat 16th May 19, 8:18 AM
    • 4,183 Posts
    • 2,446 Thanks
    foxy-stoat
    • #6
    • 16th May 19, 8:18 AM
    • #6
    • 16th May 19, 8:18 AM
    The dealer hopes you have no chance of paying the 7550, only hand the car back and pay another deposit for a new car and start the process all over again. That way they can rent out another new car and have a secondhand car to sell in a few years time.
    • BoGoF
    • By BoGoF 16th May 19, 8:22 AM
    • 4,408 Posts
    • 3,947 Thanks
    BoGoF
    • #7
    • 16th May 19, 8:22 AM
    • #7
    • 16th May 19, 8:22 AM
    Is this a brand new car, i.e. you will be the first registered keeper? Or is it pre-registered?
    • tacpot12
    • By tacpot12 16th May 19, 9:23 AM
    • 2,374 Posts
    • 2,106 Thanks
    tacpot12
    • #8
    • 16th May 19, 9:23 AM
    • #8
    • 16th May 19, 9:23 AM
    If they will sell you it for 17,500 on finance, there is no way you should be paying 19,500 for it cash. The dealer is trying it on. Tell them you will pay 17,000 cash - take it or leave it.
    The comments I post are my personal opinion. While I try to check everything is correct before posting, I can and do make mistakes, so always check official information sources before relying on my posts.
    • aphill24
    • By aphill24 16th May 19, 9:54 AM
    • 102 Posts
    • 37 Thanks
    aphill24
    • #9
    • 16th May 19, 9:54 AM
    • #9
    • 16th May 19, 9:54 AM
    If you want the car, take the finance offered and pay it off within the first 14 days. You will be getting it at the discounted price. Make sure there is nothing in the contract that penalises you from doing this but as an employee I know lots who do it and there is no catch.
    Personally I buy 2nd hand as the value plummets on new ford cars in the first 3 years. You get much more value buying a 2nd hand Audi from 2 years old in my opinion.
    • meer53
    • By meer53 16th May 19, 10:05 AM
    • 9,453 Posts
    • 13,827 Thanks
    meer53
    You're missing the fact that you're paying over the odds whether you pay cash or PCP. If you have cash, buy a second hand nearly new car and save yourself a shed load of money. They're obviously ripping you off either way if they'll accept 19k cash but 17k on finance !
    • SuperHung
    • By SuperHung 16th May 19, 10:16 AM
    • 1 Posts
    • 1 Thanks
    SuperHung
    The catch is that you are paying for the car depreciation, you lose 20% just by driving your new card out of the showroom.
    • Exodi
    • By Exodi 16th May 19, 10:44 AM
    • 619 Posts
    • 792 Thanks
    Exodi
    The cash price is being used as an anchor to convince consumers that they're getting a 'good deal/discount' with the finance option as the majority of customers will not be walking in with 20,000 in their back pocket. Perception of savings has been one of the most successful sales tools out there.
    Know what you don't
    • AnotherJoe
    • By AnotherJoe 16th May 19, 10:46 AM
    • 14,293 Posts
    • 17,032 Thanks
    AnotherJoe
    If you want the car, take the finance offered and pay it off within the first 14 days. You will be getting it at the discounted price. Make sure there is nothing in the contract that penalises you from doing this but as an employee I know lots who do it and there is no catch.
    Personally I buy 2nd hand as the value plummets on new ford cars in the first 3 years. You get much more value buying a 2nd hand Audi from 2 years old in my opinion.
    Originally posted by aphill24

    Its 0% APR. There's no particular rush to do that.
    Please dont criticise my spelling. It's excellent. Its my typing that's bad.
    • foxy-stoat
    • By foxy-stoat 16th May 19, 11:48 AM
    • 4,183 Posts
    • 2,446 Thanks
    foxy-stoat
    The catch is that you are paying for the car depreciation, you lose 20% just by driving your new card out of the showroom.
    Originally posted by SuperHung
    Oh F me that old one.....I 100% agree with you if you DID drive it out of the showroom and straight to another showroom to sell it on.....ANYONE in the UK or the World has ever done that?

    Thought not - so statement is BS.
    • iolanthe07
    • By iolanthe07 16th May 19, 1:53 PM
    • 5,174 Posts
    • 4,867 Thanks
    iolanthe07
    Oh F me that old one.....I 100% agree with you if you DID drive it out of the showroom and straight to another showroom to sell it on.....ANYONE in the UK or the World has ever done that?

    Thought not - so statement is BS.
    Originally posted by foxy-stoat
    Absolutely. Of course brand new cars depreciate rapidly, but I would much rather buy a car where I am the first owner for all sorts of reasons, admittedly some not very money saving. The depreciation hits wears off in time.
    I used to think that good grammar is important, but now I know that good wine is importanter.
    • Silvertabby
    • By Silvertabby 16th May 19, 3:46 PM
    • 4,180 Posts
    • 6,445 Thanks
    Silvertabby
    The thing with PCP is that the finance company doesn't expect you to have the balloon payment at the end of your contract, so you either hand in the car and walk away with nothing, or commit to another new car/contract.

    We like PCP because of the dealer's deposit - and we do pay the balloon payment at the end of contract (or before if it isn't an interest free deal) thus leaving us with the upper hand at trade in time.

    Yes, we know that new cars depreciate - but they are a luxury that we both enjoy and can afford.
    • DrEskimo
    • By DrEskimo 16th May 19, 5:21 PM
    • 511 Posts
    • 381 Thanks
    DrEskimo
    Yes, we know that new cars depreciate - but they are a luxury that we both enjoy and can afford.
    Originally posted by Silvertabby
    Hope you don't mind me asking, but what exactly is it about brand new cars that makes you enjoy them more than used cars, and therefore pay more for the privilege of owning them....?

    I had a new car once and I honestly didn't see it being any better than any of the used ones I've bought, or could have bought that were the same model/spec/trim. Side by side, if you covered up the odometer and reg plate I could not tell you which cars were brand new, and which were 1/2yrs old....

    It has brought me to the conclusion that I see absolutely no value in brand new, despite being able to afford it, but I am guessing others see something I don't!
    • Silvertabby
    • By Silvertabby 16th May 19, 8:25 PM
    • 4,180 Posts
    • 6,445 Thanks
    Silvertabby
    Hope you don't mind me asking, but what exactly is it about brand new cars that makes you enjoy them more than used cars, and therefore pay more for the privilege of owning them....?

    I had a new car once and I honestly didn't see it being any better than any of the used ones I've bought, or could have bought that were the same model/spec/trim. Side by side, if you covered up the odometer and reg plate I could not tell you which cars were brand new, and which were 1/2yrs old....

    It has brought me to the conclusion that I see absolutely no value in brand new, despite being able to afford it, but I am guessing others see something I don't!
    Originally posted by DrEskimo
    Don't mind at all, Dr E. It's because they are NEW and not only do we know the vehicles history, we also know that no-one has smoked or thrown up in it. We don't do flash - our next car will be about 21K.

    Horses for courses. We don't see any value in spending 3K or 4K a year on foreign holidays, which leave you with nothing but a few photographs, sunburn and a dicky tum - but lots of people do.
    Last edited by Silvertabby; 16-05-2019 at 8:29 PM.
    • Tarambor
    • By Tarambor 17th May 19, 12:26 AM
    • 5,077 Posts
    • 3,995 Thanks
    Tarambor
    Hope you don't mind me asking, but what exactly is it about brand new cars that makes you enjoy them more than used cars, and therefore pay more for the privilege of owning them....?

    It has brought me to the conclusion that I see absolutely no value in brand new, despite being able to afford it, but I am guessing others see something I don't!
    Originally posted by DrEskimo
    So you buy everything second hand, clothes, furniture in your house, your TV, the computer you posted this message using, the mobile phone you have? Have you never bought anything new? Have you never bought something new because you really wanted it?

    Personally for me if I was buying a new car it would be to have the new car smell, that new car feeling, something that is fault and damage free not even having the lightest of scratches, sitting in the driver's seat knowing someone elses sweaty ball sack hasn't spent thousands of hours perspiring on it, holding a steering wheel that isn't covered with someone else's mucus, having something that is wholly and entirely mine from the start.

    If you have ever bought anything new that isn't essential for survival then you know the reasons why. If you have plenty of money to afford to without having to resort to credit then why not? After all if nobody buys new cars where do the decently priced nearly new ones come from?
    Last edited by Tarambor; 17-05-2019 at 12:29 AM.
    • DrEskimo
    • By DrEskimo 17th May 19, 7:18 AM
    • 511 Posts
    • 381 Thanks
    DrEskimo
    Oh I agree, I don't spend thousands on holidays either!

    Well yes my house is second hand. It's a Victorian terrace so I'm guessing quite a few have lived here! Although I did completely gut it and renovate it so that would solve any irrational fear I had of naked, chronic sneezers living there before me....

    I don't buy many of the other things second hand because the cost saving relative to the benefits of brand new (easy to return when faults occur, longer warranty that are very costly to extend, etc.) are not nearly as large, but sure, I've bought ex display TVs, second hand computers (most of the components in my custom PC are from eBay) and phones in the past.

    I don't think there is the same second hand market on those things like there is with cars though. I bought a 2yr old car recently with just 5k miles on it. It still has the new car smell and is completely unmarked. The small price of extending the warranty for an extra year (289) and the need to disinfect the steering wheel is worth the nearly 5k I saved IMHO...

    I guess I'll be just as perplexed about why people spend the extra thousands as I am about people who spend thousands each year on holidays....!

    As you say i should be thankful for supplying me with good used cars...!
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