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  • FIRST POST
    • xzibit
    • By xzibit 7th Aug 18, 11:33 PM
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    xzibit
    Carwow offer prices lower for PCP
    • #1
    • 7th Aug 18, 11:33 PM
    Carwow offer prices lower for PCP 7th Aug 18 at 11:33 PM
    Just used carwow to get some prices on a new car. I planned on paying cash however the prices drop about 15% when PCP is selected.

    Is this due to the kickbacks the dealer get?

    Anyone ever got a price on a new car on PCP then at the last minute switched to paying cash and hope they don't change the price?

    I'm not keen on getting finance on a car as they only depreciate, and at least paying cash I am never in negative equity.
Page 2
    • neilmcl
    • By neilmcl 8th Aug 18, 8:23 PM
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    neilmcl
    Fixation on monthly cost (sometimes even ignoring any upfront payments) takes away from the costs that matter; is the level of predicated depreciation acceptable, and is the cost of interest on the amount you are borrowing acceptable. On new cars, and on PCP, my answer to those is now generally Ďnoí....
    Originally posted by DrEskimo
    Totally irrelevant in the case of a PCP, the finance company takes all the risk in terms of depreciation.
    • DrEskimo
    • By DrEskimo 8th Aug 18, 8:40 PM
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    DrEskimo
    Totally irrelevant in the case of a PCP, the finance company takes all the risk in terms of depreciation.
    Originally posted by neilmcl
    It's not totally irrelevant at all. It's precisely what the cost (the combination of the deposit and monthly payment) is based on, obviously bundled in with large interest costs.

    Every deal will be different, but when you are buying something like a Audi or BMW with higher APR, It's hardly a risk to the finance company, as they are predicting the lowest possible GFV based on rock bottom market values, and furthermore greatly negating any risk of shortfall with large amounts of payable interest.

    As pointed out, interest payable can be as high as £5k. What probability is there that the car will be worth more than £5k less than the predicted GFV? At most I've seen £1-2K. Even then, that can be completely avoided by selling to other garages as it's usually based on low P/X offers.
    • Cornucopia
    • By Cornucopia 8th Aug 18, 9:05 PM
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    Cornucopia
    It's not totally irrelevant at all. It's precisely what the cost (the combination of the deposit and monthly payment) is based on, obviously bundled in with large interest costs.
    Originally posted by DrEskimo
    It's irrelevant in the sense that the PCP deal completely encapsulates the depreciation, makes it transparent to the customer and underwrites it at a particular figure. That process potentially involves a cost, but it is as it purports to be.

    I agree with your previous comments about de-emphasising of the downpayment. I think this is a particular issue within car advertising, and I'm slightly surprised that the ASA hasn't done anything about it, yet. I'd suggest that no car that has a downpayment that is more than 2x monthly payment can be described as "just" the monthly payment, and any car with a downpayment that is more than 10x should have the mandatory wording "from £X per month, plus significant downpayment".

    Every deal will be different, but when you are buying something like a Audi or BMW with higher APR, It's hardly a risk to the finance company, as they are predicting the lowest possible GFV based on rock bottom market values, and furthermore greatly negating any risk of shortfall with large amounts of payable interest.
    I doubt that they are particularly low GMFVs because that would make the payments artificially high, putting off customers. Cars depreciate, new cars doubly so.

    It would be an error to think that the depreciation of cars varies depending on how they are financed. You just see the depreciation more clearly with PCPs and Leases than with other forms of purchase.

    As pointed out, interest payable can be as high as £5k. What probability is there that the car will be worth more than £5k less than the predicted GFV? At most I've seen £1-2K. Even then, that can be completely avoided by selling to other garages as it's usually based on low P/X offers.
    Have you compared PCP, Lease and HP like-for-like? There's nothing special about "£5k" of interest. If you look at Mortgage interest on houses you will see figures vastly more than that. If you borrow a lot of money, you will likely pay a lot of interest. That's how finance works.

    Has anyone in the car industry told you that interest on PCPs will be offset by equity at the end of the term? I'd hope not.
    Last edited by Cornucopia; 08-08-2018 at 9:15 PM.
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    • DrEskimo
    • By DrEskimo 8th Aug 18, 9:24 PM
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    DrEskimo
    It's irrelevant in the sense that the PCP deal completely encapsulates the depreciation, makes it transparent to the customer and underwrites it at a particular figure.


    I doubt that they are particularly low GMFVs because that would make the payments artificially high, putting off customers. Cars depreciate, new cars doubly so.


    Have you compared PCP, Lease and HP like-for-like? There's nothing special about "£5k" of interest. If you look at Mortgage interest on houses you will see figures vastly more than that. If you borrow a lot of money, you will likely pay a lot of interest. That's how finance works.
    Originally posted by Cornucopia
    Yes, but it sort of highlights the point I was trying to make. The fixation on monthly cost, which itself can be manipulated by upfront costs, moves attention away from the actual costs that make for more accurate comparisons. If I was buying a new car with cash, I would be looking at how long I intended to keep it, and what the predicted depreciation would look like. People looking at PCP should be doing exactly the same thing (which, if they factor in the total cost, they are indirectly).

    PCP and new cars tend to get conflated in these discussions, which is why I separate the costs of depreciation and interest. Depreciation costs are high because it's a new car, irrelevant of how the car is financed or bought. Interest costs are high because the structure of a PCP loan means you are not paying back a large proportion of the amount borrowed. If you want to reduce these costs, you don't buy new, or you look for cheaper finance. PCP doesn't magically make it cheaper. On the contrary it often makes it more expensive. It certainly makes it more attainable by offsetting the cost, but that is at the expense of higher interest.

    Since depreciation and cost of finance make up a significant proportion of the total cost of ownership, PCP often is the most expensive way to drive cars. Irrelevant of how long you keep your cars (never understood why the adage 'if you swap cars every few years, PCP is better'...convenient yes, but certainly not cheaper).

    The GFV's are low relative to what someone could get from a garage without wanting significant mark ups, or selling privately. But I appreciate your point, there is a balance that the dealership has to make to ensure the car is affordable.

    Yes. In most cases, borrowing the amount of money you are borrowing is considerably cheaper when done through a personal loan, even at the same APR. Mathematically it has to be, as you are not paying down the principal as much, so the interest is calculated on a higher number each month. If the cost of the car is low, the GFV is low, or the APR is small, I appreciate the differences can be pretty negligible though.

    Going back to the OP, when you can buy the car for the same price (whether that be taking the PCP incentives and settling within 14days), and the trade in figure is irrespective of the way the car was bought, then the only difference is the interest you are charged.

    Now leasing I get, since you are actively looking for a deal where it works out cheaper than the predicted depreciation, and that's before interest is included. However just because it's cheaper than a PCP, doesn't make it 'cheap'. It's still on a brand new car that has heavy depreciation relative to nearly new/used, despite being slightly less than predicted (and the costs I've found often get compared to RRP, not discounted, and to the aforementioned 'low' GFV's, when infect it could be sold for more using other methods).
    • Cornucopia
    • By Cornucopia 8th Aug 18, 9:37 PM
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    Cornucopia
    Yes, but it sort of highlights the point I was trying to make. The fixation on monthly cost, which itself can be manipulated by upfront costs, moves attention away from the actual costs that make for more accurate comparisons. If I was buying a new car with cash, I would be looking at how long I intended to keep it, and what the predicted depreciation would look like. People looking at PCP should be doing exactly the same thing (which, if they factor in the total cost, they are indirectly).
    Originally posted by DrEskimo
    On MSE, we generally re-calculate the monthly payment to spread the initial payment across it. That gives a better, more comparable view of the total cost. Also the actual total cost or the total cost per year, or per mile can be a useful figure.

    PCP and new cars tend to get conflated in these discussions, which is why I separate the costs of depreciation and interest. Depreciation costs are high because it's a new car, irrelevant of how the car is financed or bought. Interest costs are high because the structure of a PCP loan means you are not paying back a large proportion of the amount borrowed. If you want to reduce these costs, you don't buy new, or you look for cheaper finance. PCP doesn't magically make it cheaper. On the contrary it often makes it more expensive. It certainly makes it more attainable by offsetting the cost, but that is at the expense of higher interest.
    Yes... to an extent. When you start to examine the figures properly you may find that it is not as straightforward than that.

    Since depreciation and cost of finance make up a significant proportion of the total cost of ownership, PCP often is the most expensive way to drive cars. Irrelevant of how long you keep your cars (never understood why the adage 'if you swap cars every few years, PCP is better'...convenient yes, but certainly not cheaper).
    Again, not necessarily. Clearly keeping a car for longer reduces its cost per year and per mile (usually). However, comparing like for like in terms of different options for shorter-term ownership may not show the kind of differences you may think it would.

    The GFV's are low relative to what someone could get from a garage without wanting significant mark ups, or selling privately. But I appreciate your point, there is a balance that the dealership has to make to ensure the car is affordable.
    To echo a point made earlier, Dealers do not set finance rates, deposit levels or depreciation rates.

    Yes. In most cases, borrowing the amount of money you are borrowing is considerably cheaper when done through a personal loan, even at the same APR. Mathematically it has to be, as you are not paying down the principal as much, so the interest is calculated on a higher number each month. If the cost of the car is low, the GFV is low, or the APR is small, I appreciate the differences can be pretty negligible though.
    Yes... but I think you are putting too much emphasis on the maths, rather than the practicality. Of course it costs more to borrow on a PCP-shaped repayment profile than HP - that's because you owe more money (and therefore have spent less in repayments).

    Now leasing I get, since you are actively looking for a deal where it works out cheaper than the predicted depreciation, and that's before interest is included. However just because it's cheaper than a PCP, doesn't make it 'cheap'. It's still on a brand new car that has heavy depreciation relative to nearly new/used, despite being slightly less than predicted (and the costs I've found often get compared to RRP, not discounted, and to the aforementioned 'low' GFV's, when infect it could be sold for more using other methods).
    I've actually done comparisons in the past between buying new (perhaps on a PCP) and buying nearly new (say from years 3-6). The difference is not as much as you might think, assuming that you plan only to keep the car for the same 3-4 year period.

    What happens is

    (a) Finance rates are higher on used cars than new (generally).

    (b) There are few incentives on used cars (generally).

    (c) In both cases, you are following the depreciation curve, just a different part of it.

    (d) In both cases, the trade-in value will be reduced by the Dealer's anticipated margin on resale (unless you sell privately). The simple act of trading one fairly new car for another will cost at least £1000.

    I'm actually looking at a lease now, and I think that to obtain the use of a new car for a monthly payment of around 1% of its total cost is not a bad price. I'm not sure what price you would consider "fair"?
    Last edited by Cornucopia; 08-08-2018 at 9:42 PM.
    I'm a Board Guide on the Phones & TV, Techie Stuff, In My Home,
    The Money Savers Arms and Food Shopping boards. I'm a volunteer to help the boards run smoothly, and I can move and merge threads there. Any views (especially those on the UK TV Licence) are mine and not the official line of moneysavingexpert.com.

    Board guides are not moderators. If you spot an inappropriate or illegal post then please report it to forumteam@moneysavingexpert.com
    • DrEskimo
    • By DrEskimo 8th Aug 18, 10:06 PM
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    DrEskimo
    On MSE, we generally re-calculate the monthly payment to spread the initial payment across it. That gives a better, more comparable view of the total cost. Also the actual total cost or the total cost per year, or per mile can be a useful figure.


    Yes... to an extent. When you start to examine the figures properly you may find that it is not as straightforward than that.


    Again, not necessarily. Clearly keeping a car for longer reduces its cost per year and per mile (usually). However, comparing like for like in terms of different options for shorter-term ownership may not show the kind of differences you may think it would.


    To echo a point made earlier, Dealers do not set finance rates, deposit levels or depreciation rates.


    Yes... but I think you are putting too much emphasis on the maths, rather than the practicality. Of course it costs more to borrow on a PCP-shaped repayment profile than HP - that's because you owe more money (and therefore have spent less in repayments).


    I've actually done comparisons in the past between buying new (perhaps on a PCP) and buying nearly new (say from years 3-6). The difference is not as much as you might think, assuming that you plan only to keep the car for the same 3-4 year period.

    What happens is

    (a) Finance rates are higher on used cars than new (generally).

    (b) There are few incentives on used cars (generally).

    (c) In both cases, you are following the depreciation curve, just a different part of it.

    (d) In both cases, the trade-in value will be reduced by the Dealer's anticipated margin on resale (unless you sell privately). The simple act of trading one fairly new car for another will cost at least £1000.

    I'm actually looking at a lease now, and I think that to obtain the use of a new car for a monthly payment of around 1% of its total cost is not a bad price. I'm not sure what price you would consider "fair"?
    Originally posted by Cornucopia
    The problem you have with making these comparisons is that the used market has such wide variation of pricing of the same car. Location, time, condition, spec, colour, particular sales targets met by the dealer, etc etc will all influence the price. More often than not there are a range of used cars on AT and dealers websites that are massively overinflated, which if doing a cursory search to compare costs to PCP/lease can lead to false conclusions that it's not much more expensive. Reality is that a used car priced fairly (which do exist, but admit they are hard to come by...!) with low, or preferably no finance will be many magnitudes cheaper.

    As with getting good discounts and incentives on new, looking for a used car at a good price is just as much work!

    I tend to look at RRP, then spend time looking for what the highest discounts are, and what the GFV's are. I then use that to gauge whether the used prices are a fair reflection. Trying to ensure the 'discount' of buying used with mileage is accounted for appropriately.

    Then of course personally I see absolutely no value whatsoever in 'brand new'. I didn't see any difference in the brand new car, vs. the old car other than the price. Obviously others will think differently, and it's not for me to say otherwise! What was quite surprising to me was the psychology of ownership...! I really missed owning the car, and even just thinking about the possibility of settling the PCP and owning it at one point completely changed how I thought about the car.

    Yes I would absolutely not consider used car finance (but then it's probably pretty obvious I don't consider finance at all when I can help it!). There are other factors, such as risk when it comes to borrowing on a highly depreciating asset, which is another topic(!), but if I do need to borrow money, I pay no attention to the monthly cost. If I borrow money I want to pay the most amount I possibly can as fast as I can to save on interest. It's the interest cost I am focussed on. What it costs per month is irrelevant to me....but in general, I avoid consumer based debt where possible.

    The other term that gets used a lot is 'affordability', however I've found that's a pretty subjective notion too, and we all have our own idea of what is defined as 'affordable'..!
    • DrEskimo
    • By DrEskimo 8th Aug 18, 10:18 PM
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    DrEskimo
    Sorry just to pick up on a couple of specific points:

    Yes... but I think you are putting too much emphasis on the maths, rather than the practicality. Of course it costs more to borrow on a PCP-shaped repayment profile than HP - that's because you owe more money (and therefore have spent less in repayments).
    Originally posted by Cornucopia
    Not sure i follow this, you do not borrow more money, you just repay it back slower? You owe the same amount of money on a PCP or a HP, but you offsetting a large proportion to the final payment.

    E.g.
    HP of £20,000 over 60months @ 5% APR = £376. Interest paid £2,584.
    Most of the £376 is capital repayment, so the interest calculated each month is lower.

    PCP of £20,000 over 60months @ 5% APR with GFV of £10,000 = £230. Interest paid £3,822.
    Smaller proportion of £230 is to capital repayment, so the interest calculated each month is higher.

    Obviously 30 months into the HP you will have paid off >£11,000 of the car, whereas on PCP you have only paid <£7,000.


    (c) In both cases, you are following the depreciation curve, just a different part of it.
    Originally posted by Cornucopia
    Yes absolutely, the shallower part of it that doesn't cost as much!
    • Cornucopia
    • By Cornucopia 8th Aug 18, 10:38 PM
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    Cornucopia
    Not sure i follow this, you do not borrow more money, you just repay it back slower? You owe the same amount of money on a PCP or a HP, but you offsetting a large proportion to the final payment.

    E.g.
    HP of £20,000 over 60months @ 5% APR = £376. Interest paid £2,584.
    Most of the £376 is capital repayment, so the interest calculated each month is lower.

    PCP of £20,000 over 60months @ 5% APR with GFV of £10,000 = £230. Interest paid £3,822.
    Smaller proportion of £230 is to capital repayment, so the interest calculated each month is higher.

    Obviously 30 months into the HP you will have paid off >£11,000 of the car, whereas on PCP you have only paid <£7,000.
    Originally posted by DrEskimo
    I'm not sure "offsetting" is a useful term, but yes.

    At the 30 month point, your HP payments will have cost you £11,280, but your PCP payments will have cost £6,900. So, yes, you will owe more, but you will have paid less.

    Yes absolutely, the shallower part of it that doesn't cost as much!
    As I said, when you look into it, the practical difference may not be that much.

    A few weeks ago, I was looking at a Renault Kadjar (but I've since moved on).

    This vehicle, new, would have cost (on a PCP):-
    £299 deposit + £299 pm = £14,651
    A similar nearly new one (2016) from a Dealer (also on a PCP) would be:-
    £2899 deposit + £207 pm = £12,835
    So new is more expensive, but it is not "magnitudes".

    Leasing from new costs:-
    £1971 deposit + £219pm = £12,264
    Leasing new costs less than buying nearly new on a PCP.

    Buying new for cash might cost (in depreciation alone): £11,031
    Last edited by Cornucopia; 08-08-2018 at 11:18 PM.
    I'm a Board Guide on the Phones & TV, Techie Stuff, In My Home,
    The Money Savers Arms and Food Shopping boards. I'm a volunteer to help the boards run smoothly, and I can move and merge threads there. Any views (especially those on the UK TV Licence) are mine and not the official line of moneysavingexpert.com.

    Board guides are not moderators. If you spot an inappropriate or illegal post then please report it to forumteam@moneysavingexpert.com
    • DrEskimo
    • By DrEskimo 8th Aug 18, 11:26 PM
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    DrEskimo
    I'm not sure "offsetting" is a useful term, but yes.

    At the 30 month point, your HP payments will have cost you £11,280, but your PCP payments will have cost £6,900. So, yes, you will owe more, but you will have paid less.
    Originally posted by Cornucopia
    Yes, but come the end of the deal when you decide to either pay the balloon on the PCP, or trade in the HP, the costs will be identical in term of depreciation, but different in terms of interest (with the HP saving you around £1,300).

    As I said, when you look into it, the practical difference may not be that much.

    A few weeks ago, I was looking at a Renault Kadjar (but I've since moved on).

    This vehicle, new, would have cost (on a PCP):-
    £299 deposit + £299 pm = £14,651
    A similar nearly new one (2016) from a Dealer (also on a PCP) would be:-
    £2899 deposit + £207 pm = £12,835
    So new is more expensive, but it is not "magnitudes".

    Leasing from new costs:-
    £1971 deposit + £219pm = £12,264
    Leasing new costs less than buying nearly new.

    Buying new for cash might cost (in depreciation alone): £11,031
    Originally posted by Cornucopia
    What was the rate on the used PCP? Could this be negotiated (i've been able to get it down to around half the advertised rate on nearly all i've enquired). Was the 2016 reasonably priced or was it a dealer chancing his arm on a punter that didn't know you could discount a new one by X amount?

    What about private sale? On a car under warranty, what does the mark up from a dealer give you?

    What about personal loan instead of PCP on both new and used?

    What about straight cash on used?

    Again it comes back to the main point I was trying to make. Focusing on monthlies just distracts from the actual value of the underlying asset. How much is the car, how much is it expected to depreciate and how much is the finance going to cost if needed. These are what I personally focus on, and look at new/nearly new/used, and PCP, HP, personal loan and cash.

    I just aim to minimise these as much as possible, whilst balancing it against what I want, and what I want to spend. Not monthly spend, but total spend. Since depreciation is the biggest cost involved, new always loses out. Particularly as to me personally it adds absolutely no value whatsoever...
    • xzibit
    • By xzibit 8th Aug 18, 11:27 PM
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    xzibit
    Interesting discussions so far.

    To answer a couple of questions I've seen, I've been looking at cars 1-3 years old, but wanted to see what the true differences were between new as an option too. I am one of these people that love to know the complete history of a car and as I'll be wanting to keep to car for a minimum 5-7 years I am looking as new as an option, however letting go of that small insecurity and buying a nearly new car will save me some money and a week into ownership I won't care anyway.

    So I was just interested in the prices the dealers supplied (I'm aware carwow is merely and intermediary) and that finance got you a reasonable discount. Now I get it.

    I see that you can get PCP deals on nearly new cars, so perhaps that's an option if the discount is still there. Then paying it off straight away.
    • DrEskimo
    • By DrEskimo 8th Aug 18, 11:49 PM
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    DrEskimo
    Interesting discussions so far.

    To answer a couple of questions I've seen, I've been looking at cars 1-3 years old, but wanted to see what the true differences were between new as an option too. I am one of these people that love to know the complete history of a car and as I'll be wanting to keep to car for a minimum 5-7 years I am looking as new as an option, however letting go of that small insecurity and buying a nearly new car will save me some money and a week into ownership I won't care anyway.

    So I was just interested in the prices the dealers supplied (I'm aware carwow is merely and intermediary) and that finance got you a reasonable discount. Now I get it.

    I see that you can get PCP deals on nearly new cars, so perhaps that's an option if the discount is still there. Then paying it off straight away.
    Originally posted by xzibit
    Just make sure you look at what the actual best price on a new car will be to help you gauge the value of a nearly new car. It's very common to see dealers have nearly new with some mileage higher than discounted brand new, purely on the chance they will get someone less informed and present it as "XX% from RRP!", and they think it's great.
    • Mercdriver
    • By Mercdriver 9th Aug 18, 12:27 AM
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    Mercdriver
    Remember also that the actual rate you will get will depend on your credit rating. Dr Eskimo, I hope you haven't been having credit checks done to get all these quotes, as you might struggle to get finance at all. A dealer might tell you that he can get you a deal at 3.9% (I got used at 0%) but when you come in and they do the credit check, you might not qualify for that rate.

    People should definitely check what deals they might get, but I would advise against getting credit checks done until you have made a decision on the car that you want.

    Yes, you can go armed with your 'clearscore' or Experian Credit Expert score, but these are representative of what a lender might see but not necessarily what they use to decide your credit worthiness.
    • DrEskimo
    • By DrEskimo 9th Aug 18, 7:29 AM
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    DrEskimo
    Very good point.

    No I just ask what the best rate they can do, have never taken it further. Only finance Iíve taken out is one new car PCP. But itís a great point that you might not get the rate they offer.

    Itís been over a year since I sold my car that was on PCP, as I havenít needed one since! I do miss owning one though, so sometimes enquire on certain cars and just see what they can do and what sort of prices are realistic.
    • Cornucopia
    • By Cornucopia 9th Aug 18, 9:49 AM
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    Cornucopia
    I see that you can get PCP deals on nearly new cars, so perhaps that's an option if the discount is still there. Then paying it off straight away.
    Originally posted by xzibit
    PCPs on used cars are distinctly different to PCPs on new cars:

    - No manufacturer incentives

    - Finance rates often at 9.9% or higher, meaning that the key disadvantage of paying interest on the GFMV is made worse.

    There are third party providers of PCPs, and if I were looking to buy a used car on PCP, I would definitely be getting a quote from them. (ISTR providers include Halifax and Admiral).
    I'm a Board Guide on the Phones & TV, Techie Stuff, In My Home,
    The Money Savers Arms and Food Shopping boards. I'm a volunteer to help the boards run smoothly, and I can move and merge threads there. Any views (especially those on the UK TV Licence) are mine and not the official line of moneysavingexpert.com.

    Board guides are not moderators. If you spot an inappropriate or illegal post then please report it to forumteam@moneysavingexpert.com
    • Cornucopia
    • By Cornucopia 9th Aug 18, 10:24 AM
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    Cornucopia
    Yes, but come the end of the deal when you decide to either pay the balloon on the PCP, or trade in the HP, the costs will be identical in term of depreciation, but different in terms of interest (with the HP saving you around £1,300).
    Originally posted by DrEskimo
    We are simply saying the same thing in different ways. The rate of payment on the PCP will be slower than HP, so the interest will be higher. That's a basic fact. It's not a flaw in the PCP, as such.

    What was the rate on the used PCP? Could this be negotiated (i've been able to get it down to around half the advertised rate on nearly all i've enquired).
    Are you sure about this? I've been quoted as high as 29% APR in recent years, with no real scope for negotiation, other than taking finance elsewhere. I guess it depends on how many finance providers the Dealer has access to.

    Was the 2016 reasonably priced or was it a dealer chancing his arm on a punter that didn't know you could discount a new one by X amount?
    It is a typical vehicle from my local Renault Main Dealer. Therefore Main Dealer price, and possibly with some wriggle room built in for those customers who might require a discount. Maybe we could expect £500-750 off the windscreen price. However, between me looking a couple of weeks ago and yesterday, several of the prices have already been reduced by the Dealer, so maybe reducing the potential for additional discount?

    The underlying thing, though, is that this is a fluid market. What a used car is worth is what people are prepared to pay for it. As such, and the price books notwithstanding, there will always be flexibility, especially if a transaction is in progress and just needs that little extra push.

    What about private sale? On a car under warranty, what does the mark up from a dealer give you?

    What about personal loan instead of PCP on both new and used?

    What about straight cash on used?
    All good questions.

    - Personally, I would be very cautious about buying a c. £15000 car privately.

    - In many cases, a personal loan will not attract the same manufacturer incentives on a new car. It's certainly worth comparing figures, and if I had one plea across all of this, it is for buyers to understand their figures and compare them between different buying options.

    - The cash price of the used car in question is £14495. Borrowing £13000 over 48 months at 2.9% APR would cost £286pm.

    Again it comes back to the main point I was trying to make. Focusing on monthlies just distracts from the actual value of the underlying asset. How much is the car, how much is it expected to depreciate and how much is the finance going to cost if needed. These are what I personally focus on, and look at new/nearly new/used, and PCP, HP, personal loan and cash.
    Again, the nature of PCP and Lease is that the costs of ownership over the term are all wrapped up already. Deposit+Monthlies ARE the costs of buying. By all means try to get a more accurate view of what the car might be worth at the end of the term, but ultimately only the GMFV is underwritten. I have occasionally seen variations in GMFV on the same car, and it would be interesting to know why that happens.

    I just aim to minimise these as much as possible, whilst balancing it against what I want, and what I want to spend. Not monthly spend, but total spend. Since depreciation is the biggest cost involved, new always loses out. Particularly as to me personally it adds absolutely no value whatsoever...
    You have a particular view, which is fine. However, one of the things that we all have a tendency to do is to assume that everyone sees a situation in the same way we do, but that's rarely the case once you get into the issues.

    For me, personally, Leasing a car for less than it would cost to finance a similar used car is a no-brainer. If I'm going to own/keep a depreciating asset, I'd ideally like a backstop on that depreciation, and I'd also like my entire period of ownership to be covered by Warranty.

    But YMMV (your mileage may vary) - quite literally.
    Last edited by Cornucopia; 09-08-2018 at 10:28 AM.
    I'm a Board Guide on the Phones & TV, Techie Stuff, In My Home,
    The Money Savers Arms and Food Shopping boards. I'm a volunteer to help the boards run smoothly, and I can move and merge threads there. Any views (especially those on the UK TV Licence) are mine and not the official line of moneysavingexpert.com.

    Board guides are not moderators. If you spot an inappropriate or illegal post then please report it to forumteam@moneysavingexpert.com
    • Penelopa.Pitstop
    • By Penelopa.Pitstop 9th Aug 18, 2:25 PM
    • 326 Posts
    • 127 Thanks
    Penelopa.Pitstop
    Let!!!8217;s be honest, when there is the prospect of a brand new car, you tend to exhibit every psychological bias going to convince yourself it!!!8217;s a good idea...

    (...)
    Fixation on monthly cost (sometimes even ignoring any upfront payments) takes away from the costs that matter; is the level of predicated depreciation acceptable, and is the cost of interest on the amount you are borrowing acceptable. On new cars, and on PCP, my answer to those is now generally !!!8216;no!!!8217;....
    Originally posted by DrEskimo
    I don't consider used cars at all, so don't have to convince myself that new one is better.

    It's best to look at total cost of ownership of the car over the years you plan to keep it. Looking at monthly cost only is always bad idea. That's why you have so many adverts with "from £299 a month" when in fact to get £299 a month, you have to pay quite a lot upfront. It's to temp people who can't calculate total costs.

    The same goes for new vs nearly new on PCP. It could be cheaper to get new with discount and support from manufacturer than used one with high APR. Nearly new one could be an option if paying by cash and there's considerable discount.

    • motorguy
    • By motorguy 9th Aug 18, 4:11 PM
    • 17,109 Posts
    • 10,248 Thanks
    motorguy
    The same goes for new vs nearly new on PCP. It could be cheaper to get new with discount and support from manufacturer than used one with high APR. Nearly new one could be an option if paying by cash and there's considerable discount.
    Originally posted by Penelopa.Pitstop
    +1

    Agreed
    "We have normality. I repeat, we have normality. Anything you still can't cope with is therefore your own problem."
    • DrEskimo
    • By DrEskimo 10th Aug 18, 12:47 PM
    • 182 Posts
    • 115 Thanks
    DrEskimo
    We are simply saying the same thing in different ways. The rate of payment on the PCP will be slower than HP, so the interest will be higher. That's a basic fact. It's not a flaw in the PCP, as such.
    Originally posted by Cornucopia
    Yea I'm getting that impression about are entire discussion..!

    You are right, I was perhaps suggesting it was a flaw, which I agree it isn't, but certainly something to be aware of. For example I have seen commentary from buyers that compare the APR of a HP with that of a PCP and say "PCP is lower APR than HP, so it must be cheaper", which is not true. The APR may be lower, but in terms of actual cost of interest charged, PCP may still be higher (obviously depending on the difference in rate). Again, it comes to the fact that I look at actual cost of each 'component' (interest, depreciation, fuel, servicing, etc.).

    Are you sure about this? I've been quoted as high as 29% APR in recent years, with no real scope for negotiation, other than taking finance elsewhere. I guess it depends on how many finance providers the Dealer has access to.
    Originally posted by Cornucopia
    Oh yea, when looking at used cars I very often got the APR halved from ~10% to ~5% by simple asking. Generally it was around the 7% mark, but obviously manufacturers will differ.

    It is a typical vehicle from my local Renault Main Dealer. Therefore Main Dealer price, and possibly with some wriggle room built in for those customers who might require a discount. Maybe we could expect £500-750 off the windscreen price. However, between me looking a couple of weeks ago and yesterday, several of the prices have already been reduced by the Dealer, so maybe reducing the potential for additional discount?
    Originally posted by Cornucopia
    Ah fair enough. I have seen very wide variation in pricing of similar models across dealerships. Most asking for very high prices relative to indie/private market.

    The underlying thing, though, is that this is a fluid market. What a used car is worth is what people are prepared to pay for it. As such, and the price books notwithstanding, there will always be flexibility, especially if a transaction is in progress and just needs that little extra push.
    Originally posted by Cornucopia
    Absolutely, very hard to gauge...!

    You have a particular view, which is fine. However, one of the things that we all have a tendency to do is to assume that everyone sees a situation in the same way we do, but that's rarely the case once you get into the issues.

    For me, personally, Leasing a car for less than it would cost to finance a similar used car is a no-brainer. If I'm going to own/keep a depreciating asset, I'd ideally like a backstop on that depreciation, and I'd also like my entire period of ownership to be covered by Warranty.

    But YMMV (your mileage may vary) - quite literally.
    Originally posted by Cornucopia
    Absolutely, I write all my statements based on my personal opinion. Everyone will have different wants/needs and expectations.

    All I will say is, with respect, your comparisons with used cars to seem to be 'gamed' towards the most expensive way to purchase them, so it's unsurprising that you are concluding that new PCP/lease is similar in cost.

    I would never look to buy a nearly new/used for a large cost, and will always make sure it accounts for the current new car discounts available + having one owner + having mileage. If this is not reflected in the price I wouldn't buy it. Much in the same way that some dealers won't always offer good discounts on new cars. Just because there are examples of nearly new cars being sold for high prices, doesn't mean that's reflective of the entire market.

    Secondly I would never consider used PCP, for the reasons you have stipulated.

    When you look at used cars for fair prices, with cheaper forms of finance, it will invariably be cheaper than new on PCP and indeed lease. In my experience by quite some margin...
    Last edited by DrEskimo; 10-08-2018 at 12:51 PM.
    • Cornucopia
    • By Cornucopia 10th Aug 18, 1:03 PM
    • 10,462 Posts
    • 10,605 Thanks
    Cornucopia
    I agree with pretty much your whole post, except this:-

    All I will say is, with respect, your comparisons with used cars to seem to be 'gamed' towards the most expensive way to purchase them, so it's unsurprising that you are concluding that new PCP/lease is similar in cost.
    Originally posted by DrEskimo
    I'm not sure that "gamed" is right. What I am doing is recognising that (a) we are talking about a fair comparison, so like-for-like is important, and (b) not everyone will be able to access the cheapest possible finance in terms of interest rate, or want to. Other considerations like funding the car from income rather than savings come into play. Also, as we have already discussed the cheapest finance is not necessarily the one with the lowest interest rate - the repayment profile comes into question, too. The reason why a lot of people focus on the monthly payments is because they are an important indicator of affordability for them.

    When you look at used cars for fair prices, with cheaper forms of finance, it will invariably be cheaper than new on PCP and indeed lease. In my experience by quite some margin...
    It would be good to see some examples of what might be possible.

    In the distant past, I certainly wandered around car lots and marvelled at the 2-year old Granadas for £4500 (25-35% of list), but I get the impression that those days are gone (even accounting for inflation).
    I'm a Board Guide on the Phones & TV, Techie Stuff, In My Home,
    The Money Savers Arms and Food Shopping boards. I'm a volunteer to help the boards run smoothly, and I can move and merge threads there. Any views (especially those on the UK TV Licence) are mine and not the official line of moneysavingexpert.com.

    Board guides are not moderators. If you spot an inappropriate or illegal post then please report it to forumteam@moneysavingexpert.com
    • DrEskimo
    • By DrEskimo 10th Aug 18, 1:31 PM
    • 182 Posts
    • 115 Thanks
    DrEskimo
    I agree with pretty much your whole post, except this:-


    I'm not sure that "gamed" is right. What I am doing is recognising that (a) we are talking about a fair comparison, so like-for-like is important, and (b) not everyone will be able to access the cheapest possible finance in terms of interest rate, or want to. Other considerations like funding the car from income rather than savings come into play. Also, as we have already discussed the cheapest finance is not necessarily the one with the lowest interest rate - the repayment profile comes into question, too. The reason why a lot of people focus on the monthly payments is because they are an important indicator of affordability for them.


    It would be good to see some examples of what might be possible.

    In the distant past, I certainly wandered around car lots and marvelled at the 2-year old Granadas for £4500 (25-35% of list), but I get the impression that those days are gone (even accounting for inflation).
    Originally posted by Cornucopia
    Ha...well we did pretty well in agreeing with most of what we said :P

    Maybe this comes back to the affordability thing and how people define it. Personally I wouldn't pay over the odds on finance just to get the car. Whether the monthly cost is low or high is irrelevant to me as already stated. It's the actual cost. If I couldn't get the car for the monthly cost I have budgeted using finance, then my options are; 1) to borrow for longer, 2) find cheaper finance, or 3) borrow less. Invariably option three is what I go for because I'm able to get low rates, so cheaper finance is rarely an option, and I want to reduce interest, so I avoid borrowing for longer. Waiting and saving more to borrow less both saves me in interest, and reduces risk, so is always my preferred option.
    But then that moves into a debate about the risks associated with loans and borrowing money from your future earnings (what all loans are...), which is one I don't fancy getting into

    But I take your point about like for like comparisons.

    Yea that's a very good point regarding examples, and I found using specific examples helps illustrate the actual difference much better than discussing hypotheticals and generalisations. As has been noted already, every model and manufacturer will be different, so always worth looking at all the options each time, and indeed everyone's situation is different, so that's probably the only real way to do this. A case by case basis!
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