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  • FIRST POST
    • mp80
    • By mp80 9th Jul 18, 10:10 PM
    • 186Posts
    • 38Thanks
    mp80
    PCP optimisation
    • #1
    • 9th Jul 18, 10:10 PM
    PCP optimisation 9th Jul 18 at 10:10 PM
    Hi

    I'm looking at one of the DriveTheDeal Audi Q5s - this is an S Line 2.0 190PS with Pano, Tech, Comfort pack. The saving on list is getting on for £10,000.

    The GMFV I've been quoted is £21.5k on c. £430 / month PCP deal with 4k deposit in on 48k miles - which is by a long way the cheapest I've come across including lease comparisons through quite a lot of brokers.

    Now we've paid c. 400-420 a month for car finance for about 8 years now, so it's now a normal operating cost for us.

    My question, given the high MGFV which is obviously priced to sell and not for equity - I will definitely not keep the car, therefore does it make more financial sense to

    a) Pay a bigger deposit

    B) still pay 4k deposit, and lump sum the 'rental' part of the PCP in one go after the first payment to get it down to 50 quid a month without affecting the capital balloon (i was told you can do that?) - I'm aware I will still be charged interest on the balloon, however I will have avoided 4 years worth of interest accrual on payments I'm contractually obliged to make, will have significantly reduced payments and also be closer to the VT point in case of financial catastrophe down the line.

    All advice welcome, except the usual advice I should have bought an 8 year old wreck for £1500. I don't want to own the car, I want something nice and it's within means. I'm trying to optimise the deal as best as I can.

    M
Page 1
    • neilmcl
    • By neilmcl 10th Jul 18, 7:49 AM
    • 11,231 Posts
    • 8,039 Thanks
    neilmcl
    • #2
    • 10th Jul 18, 7:49 AM
    • #2
    • 10th Jul 18, 7:49 AM
    Could you not do better leasing? PCP isn't really designed for buyers who have no interest in a final purchase.
    • geeovana
    • By geeovana 10th Jul 18, 8:35 AM
    • 51 Posts
    • 42 Thanks
    geeovana
    • #3
    • 10th Jul 18, 8:35 AM
    • #3
    • 10th Jul 18, 8:35 AM
    Hi

    Now we've paid c. 400-420 a month for car finance for about 8 years now, so it's now a normal operating cost for us.

    M
    Originally posted by mp80


    That's £40K plus anymore you have put down with deposits.


    If you had saved and invested that monthly amount you would have well over £50K now.


    Food for thought.
    • mp80
    • By mp80 10th Jul 18, 8:44 AM
    • 186 Posts
    • 38 Thanks
    mp80
    • #4
    • 10th Jul 18, 8:44 AM
    • #4
    • 10th Jul 18, 8:44 AM
    The cheapest lease I!!!8217;ve found was about 100 per month more expensive. Like for like
    • mp80
    • By mp80 10th Jul 18, 8:50 AM
    • 186 Posts
    • 38 Thanks
    mp80
    • #5
    • 10th Jul 18, 8:50 AM
    • #5
    • 10th Jul 18, 8:50 AM
    I could have done many things with the benefit of hindsight, I could have had a heart attack three years ago, I could have lost hundreds of thousands on the stock market crash, I could have won the lottery

    havenít done any of these things and I have a specific question, so how is your comment relevant or helpful to the here and now ?
    • geeovana
    • By geeovana 10th Jul 18, 11:06 AM
    • 51 Posts
    • 42 Thanks
    geeovana
    • #6
    • 10th Jul 18, 11:06 AM
    • #6
    • 10th Jul 18, 11:06 AM
    I could have done many things with the benefit of hindsight, I could have had a heart attack three years ago, I could have lost hundreds of thousands on the stock market crash, I could have won the lottery

    havenít done any of these things and I have a specific question, so how is your comment relevant or helpful to the here and now ?
    Originally posted by mp80


    I was simply stating the 'Moneysaving' facts.


    You couldn't have lost hundreds of thousands on the stock market crash with the money you have spent on the car could you? The 'crash' was 2007 - 2008 and you stated you have been spending on car finance for the last 8 years. That put's the start date at 2010 by my calculations. The S&P 500 has risen over 140% since then excluding dividends, so you would in fact have a lot more than £50K if you have put the money into a global index tracker. The above £50K+ was assuming 7% growth / year, (standard market return).


    I agree with your comment regarding the heart attack and balance is very important. However, stating you could have won the lottery so you need not save for the future is slightly worrying. Is that your pension plan for the future?


    I was simply trying to point out how much money you have spent on car finance in the past 8 years. I meant no offence, honestly. I myself think car finance is a colossal waste of money, however who's to say I am right. I have no idea of your financial situation. £50K + may be a drop in the ocean to yourself. I was simply stating some facts I thought may interest you, as you consider your next finance agreement.
    • Mercdriver
    • By Mercdriver 10th Jul 18, 11:44 AM
    • 1,752 Posts
    • 1,163 Thanks
    Mercdriver
    • #7
    • 10th Jul 18, 11:44 AM
    • #7
    • 10th Jul 18, 11:44 AM
    That's £40K plus anymore you have put down with deposits.


    If you had saved and invested that monthly amount you would have well over £50K now.


    Food for thought.
    Originally posted by geeovana
    While that is true, the OP would have had no car in the meantime.
    • geeovana
    • By geeovana 10th Jul 18, 12:08 PM
    • 51 Posts
    • 42 Thanks
    geeovana
    • #8
    • 10th Jul 18, 12:08 PM
    • #8
    • 10th Jul 18, 12:08 PM
    While that is true, the OP would have had no car in the meantime.
    Originally posted by Mercdriver


    Clearly, I was making a point. Let's get the thread back on track so the OP can get the answer he was after in the first place.


    He clearly doesn't want advice on anything other than what he believes is right.


    He appears really mature liking your post.
    • motorguy
    • By motorguy 10th Jul 18, 12:21 PM
    • 16,937 Posts
    • 10,070 Thanks
    motorguy
    • #9
    • 10th Jul 18, 12:21 PM
    • #9
    • 10th Jul 18, 12:21 PM

    Clearly i was making a point.
    Originally posted by geeovana
    Yes. You were.


    He clearly doesn't want advice on anything other than what he believes is right.
    Originally posted by geeovana
    Exactly.

    What suits your beliefs / financial constraints does not suit others.

    He asked for advice on the deal, not on how he choses to spend his money.
    "We have normality. I repeat, we have normality. Anything you still can't cope with is therefore your own problem."
    • motorguy
    • By motorguy 10th Jul 18, 12:26 PM
    • 16,937 Posts
    • 10,070 Thanks
    motorguy
    Hi

    I'm looking at one of the DriveTheDeal Audi Q5s - this is an S Line 2.0 190PS with Pano, Tech, Comfort pack. The saving on list is getting on for £10,000.

    The GMFV I've been quoted is £21.5k on c. £430 / month PCP deal with 4k deposit in on 48k miles - which is by a long way the cheapest I've come across including lease comparisons through quite a lot of brokers.

    Now we've paid c. 400-420 a month for car finance for about 8 years now, so it's now a normal operating cost for us.

    My question, given the high MGFV which is obviously priced to sell and not for equity - I will definitely not keep the car, therefore does it make more financial sense to

    a) Pay a bigger deposit

    B) still pay 4k deposit, and lump sum the 'rental' part of the PCP in one go after the first payment to get it down to 50 quid a month without affecting the capital balloon (i was told you can do that?) - I'm aware I will still be charged interest on the balloon, however I will have avoided 4 years worth of interest accrual on payments I'm contractually obliged to make, will have significantly reduced payments and also be closer to the VT point in case of financial catastrophe down the line.

    All advice welcome, except the usual advice I should have bought an 8 year old wreck for £1500. I don't want to own the car, I want something nice and it's within means. I'm trying to optimise the deal as best as I can.

    M
    Originally posted by mp80
    If you have no intentions of keeping the car, i'd either leave it as is or reduce the deposit and treating it wholly as a rental, which it is.

    Your ammortised monthly cost is £513, so you're getting a slight false positive with the heavy ish deposit.
    "We have normality. I repeat, we have normality. Anything you still can't cope with is therefore your own problem."
    • Mercdriver
    • By Mercdriver 10th Jul 18, 1:38 PM
    • 1,752 Posts
    • 1,163 Thanks
    Mercdriver
    Clearly, I was making a point. Let's get the thread back on track so the OP can get the answer he was after in the first place.


    He clearly doesn't want advice on anything other than what he believes is right.


    He appears really mature liking your post.
    Originally posted by geeovana
    You might say he is not being very MSE, but he isn't asking how he can best save money overall. He is asking for the most efficient way of doing what he wants to do. You might suggest that he should get a 3 year old Dacia Duster and put the remainder of the money in the bank. But he knows what it is he wants, and is looking for the most efficient way of getting what he wants.
    • motorguy
    • By motorguy 10th Jul 18, 1:43 PM
    • 16,937 Posts
    • 10,070 Thanks
    motorguy
    You might say he is not being very MSE, but he isn't asking how he can best save money overall. He is asking for the most efficient way of doing what he wants to do. You might suggest that he should get a 3 year old Dacia Duster and put the remainder of the money in the bank. But he knows what it is he wants, and is looking for the most efficient way of getting what he wants.
    Originally posted by Mercdriver
    MSE is about doing what you want to do in the most efficient way.

    Ensuring that what you want to do is done in the most cost effective way possible is MSE, not not doing it but replacing it with something you dont want to do.

    Enuring yo get the great foreign holiday you want, cheap is an example of the spirit of the MSE site, not "dont go on foreign holidays but go to Bognor Regis in a tent instead".
    "We have normality. I repeat, we have normality. Anything you still can't cope with is therefore your own problem."
    • Mercdriver
    • By Mercdriver 10th Jul 18, 1:45 PM
    • 1,752 Posts
    • 1,163 Thanks
    Mercdriver
    MSE is about doing what you want to do in the most efficient way.

    Ensuring that what you want to do is done in the most cost effective way possible is MSE, not not doing it but replacing it with something you dont want to do.

    Enuring yo get the great foreign holiday you want, cheap is an example of the spirit of the MSE site, not "dont go on foreign holidays but go to Bognor Regis in a tent instead".
    Originally posted by motorguy
    that was my point! I wasn't using third person singular. I was suggesting that geeovana might think it not MSE
    • motorguy
    • By motorguy 10th Jul 18, 1:57 PM
    • 16,937 Posts
    • 10,070 Thanks
    motorguy
    that was my point! I wasn't using third person singular. I was suggesting that geeovana might think it not MSE
    Originally posted by Mercdriver
    Sorry, yes, i was agreeing with you
    "We have normality. I repeat, we have normality. Anything you still can't cope with is therefore your own problem."
    • lopsyfa
    • By lopsyfa 10th Jul 18, 2:11 PM
    • 68 Posts
    • 36 Thanks
    lopsyfa
    Hi

    I'm looking at one of the DriveTheDeal Audi Q5s - this is an S Line 2.0 190PS with Pano, Tech, Comfort pack. The saving on list is getting on for £10,000.

    The GMFV I've been quoted is £21.5k on c. £430 / month PCP deal with 4k deposit in on 48k miles - which is by a long way the cheapest I've come across including lease comparisons through quite a lot of brokers.

    Now we've paid c. 400-420 a month for car finance for about 8 years now, so it's now a normal operating cost for us.

    My question, given the high MGFV which is obviously priced to sell and not for equity - I will definitely not keep the car, therefore does it make more financial sense to

    a) Pay a bigger deposit

    B) still pay 4k deposit, and lump sum the 'rental' part of the PCP in one go after the first payment to get it down to 50 quid a month without affecting the capital balloon (i was told you can do that?) - I'm aware I will still be charged interest on the balloon, however I will have avoided 4 years worth of interest accrual on payments I'm contractually obliged to make, will have significantly reduced payments and also be closer to the VT point in case of financial catastrophe down the line.

    All advice welcome, except the usual advice I should have bought an 8 year old wreck for £1500. I don't want to own the car, I want something nice and it's within means. I'm trying to optimise the deal as best as I can.

    M
    Originally posted by mp80
    You haven't told us the interest rate of the deal. That will determine how best to "optimise" the deal. For example, if the interest rate is 0 or close to 0%, it is better to put the overpayment in several high interest savings accounts (or high dividend fund/etfs, this one, for example, https://www.youinvest.co.uk/market-research/FUND:B87HPZ9 pays close to 7%) and then add to the interest (or dividend) every month to pay the PCP every month. This has the advantage that you will have access to the money in case you need it but you need to be discipline not to use the money for something else. Also, in the case of investing in funds/etf, the value of the investment may go lower.


    If however, the interest rate of the deal is high (say more than 7%), you will most likely be better off doing what you suggested but that money will be "locked in" and cannot be recovered except you sell the car (because you'll be in positive equity initially).

    It it was me, I will probably go with option one.
    Last edited by lopsyfa; 10-07-2018 at 2:15 PM.
    • geeovana
    • By geeovana 10th Jul 18, 3:21 PM
    • 51 Posts
    • 42 Thanks
    geeovana
    You might say he is not being very MSE, but he isn't asking how he can best save money overall. He is asking for the most efficient way of doing what he wants to do. You might suggest that he should get a 3 year old Dacia Duster and put the remainder of the money in the bank. But he knows what it is he wants, and is looking for the most efficient way of getting what he wants.
    Originally posted by Mercdriver
    MSE is about doing what you want to do in the most efficient way.

    Ensuring that what you want to do is done in the most cost effective way possible is MSE, not not doing it but replacing it with something you dont want to do.

    Enuring yo get the great foreign holiday you want, cheap is an example of the spirit of the MSE site, not "dont go on foreign holidays but go to Bognor Regis in a tent instead".
    Originally posted by motorguy


    I understand. I hope people appreciate I was not attempting to be hostile. I was merely attempting to show the OP 'in my opinion' is spending a lot of unnecessary money.


    However, on the flip side perhaps I should be pushing the OP to buy the new car and waste his money. After all, if we convinced everybody that they shouldn't 'rent' new cars from manufacturers and buy houses that they cant afford etc. we would go into another recession and my investments wouldn't grow.


    Do as you please.
    • mp80
    • By mp80 10th Jul 18, 7:09 PM
    • 186 Posts
    • 38 Thanks
    mp80
    Thanks

    The deal is 6 pc

    The way I see it (may be wrong) is I am contractually obliged to pay the monthly rental for 47 months so the optimisation would be

    - pay lowest deposit
    - pay off the entire rental portion to avoid accrued interest

    This would

    - save interest
    - reduce monthly payments
    - make it an asset in positive equity / closer to the VT point so if I needed to sell I would recover some of the equity

    Even with leasing they weee asking 9 months up front and 520 a month
    • lopsyfa
    • By lopsyfa 10th Jul 18, 9:09 PM
    • 68 Posts
    • 36 Thanks
    lopsyfa
    Thanks

    The deal is 6 pc

    The way I see it (may be wrong) is I am contractually obliged to pay the monthly rental for 47 months so the optimisation would be

    - pay lowest deposit
    - pay off the entire rental portion to avoid accrued interest

    This would

    - save interest
    - reduce monthly payments
    - make it an asset in positive equity / closer to the VT point so if I needed to sell I would recover some of the equity

    Even with leasing they weee asking 9 months up front and 520 a month
    Originally posted by mp80
    You are right but you need to compare against the other opportunity costs of not paying the rental part - one opportunity cost is "what can you get from lump the payment if invested or saved in interest bearing account." At 6% interest and given that the historical returns of the stock market (using the S&P 500 as a gauge) is ca 7%, I will say you are probably better off paying off the rental portion because there is not much difference to risk investing the money and I don't think you can get any account paying more than 6% interest.


    No you are not "contractually obliged" to pay the 47 monthly payments: you can either pay the 47 monthly payments, voluntary terminate once you have paid half of the payments or settle it early. The reason I highlight that once you have paid this lump sum, the money is gone and cannot be recovered is assuming for some reasons (government legislations, autonomous driving & electric car developments or economic crash) used cars values crash. In this scenario, you'll lose all the positive equity in the car and even on voluntary termination, you don't get anything back if you have paid in excess of the 50% of the finance value. In that scenario, paying the lowest deposit will be best because to VT you just need to pay enough to satisfy the 50% requirements. I am not saying this will happen, just telling you what you need to consider.
    • Mercdriver
    • By Mercdriver 10th Jul 18, 9:16 PM
    • 1,752 Posts
    • 1,163 Thanks
    Mercdriver


    No you are not "contractually obliged" to pay the 47 monthly payments: you can either pay the 47 monthly payments, voluntary terminate once you have paid half of the payments.
    Originally posted by lopsyfa
    Just to make sure no misunderstanding, it isn't half the payments, but 50% of all sums due including interest, fees and the balloon payment.
    • mp80
    • By mp80 10th Jul 18, 10:25 PM
    • 186 Posts
    • 38 Thanks
    mp80
    Yeah that's right, the VT point comes right at the end usually after about 85% of the term has run

    Bear with me and sorry about this, but another mad idea I had was to pay the 13k cash in, refinance the balance straight away on to a personal loan over 60 months, I allegedly can get 2.8pc APR on this from my lender meaning repayments of about 440 a month which is almost parity to the PCP. Part of the deal is £1k dealer contribution as well, so I'd make a gain there.

    I've not done a TCO calculation comparison as I'm on mobile so I'm guessing at this point, even though the term runs for 12 months longer, the net cost should? be lower, the ownership/GFV problem is gone and it should always be in positive equity throughout it's lifetime (obviously considering the risk profile you already mentioned re: diesel, economics etc)??
    Last edited by mp80; 10-07-2018 at 11:09 PM. Reason: dealer bit
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