Self Drive Demo

[DaveHerns]

Somewhere I read PCPs are the next PPI fiasco waiting to unfold. How would that be? If the finance companies get the depreciation figures wrong, surely they'd be the ones suffering, not the renters?

 

[Doggit]

No, they underestimatedthe residual value of the vehicle, and increase the repayments accordingly; then they value the car at the lower end of the residual figure, and that increases their profits. The system is designed to give you enough residual amount to let you put it down as a deposit on the next vehicle, and that keeps them selling new cars, and make a healthy margin from the interest.

 

[DaveHerns]

This is all a mystery to me. So do you get a discount off the deposit on your next new car if you stick with the same company? Someone told me that sometimes you get offered a new car midway through your existing contract to keep you tied in. I can see the benefits but being old I was taught that if you want something you save up until you can afford it.

 

[Brigadier]

I haven't done the figures but, being someone who has always only bought what I have the cash for (bar the mortgage), the whole car-buying / pcp thing seems odd to me.

Buy a £20k car for cash, new.
After two years, what's it worth? Half that?
Effectively, £500 per month payment, and you still have to drive a two year old car.

Seems to me that buying a new car outright doesn't make financial sense, unless you expect it to last for a decade, and intend to keep it that long.

 

[Doggit]

The idea being the PCP system, is that it locks you in to getting a new car every 3 years, and it uses the residial value of the previous car, as the deposit for the next one.; hence they don't want to value the car too highly at the end of the contract, or they'll have to give you money back. I think there's about £95bn woth of cars on PCP deals at the minute, and it's in danger of all going south as there's about to be a lot of cars getting repossesed and flooding the second hand car market soon.

You can go onto a lot of sites on autotrader, and the dealers will give you an online idea of how much the costs will be, but it's only when you go into a showroom, that you'll get the proper figures. And then it's only at the end of the contract when they look at the condition of the car, and then tell you it's not worth as much as they expected it to be, that you find you've got to continue with the next car, but if you pay off the contract, you can then go anywhere else to use the car as a deposit for the next PCP.

 

[DaveHerns]

I'll have a serious look at PCP next time round. Only do a low mileage and look after my cars so should be OK . Must confess I don't understand how they can use the residual value of the current car as deposit for the next, surely the car remains theirs ?

 

[Brigadier]

The ads that I have seen state stupid things like (for a business edition Merc C class estate, for example), 10k miles p.a. limit; which is clearly ridiculously low for 99% of the people who would have such a car.

However (and I have not personally verified this), a colleague has a Jag on pcp, and says that, provided she has her next car on pcp from the same provider, the terms are that the mileage she has done is not subject to limit. This would make sense insofar as it "traps" the person into rolling pcps over, and over, and over....

 

[Doggit]

surely the car remains theirs

Of course it does, just as a hire purchase car belong to the finance company, but at the end of the PCP contract, there is a balloon payment to be made for you to be able to purchase the car outright, but there is still a certain value to the car that started with the deposit you put down, and the payments that you made. It's not overly complicated, but it's certain weighted in the garage and the financiers favour.

 

[motorbiking]

I'm very much old school like the others - never finance a depreciating asset. cars n boats, very much fit that category. The whole finance model stacks up in a number of ways.

1. they get big discounts from the car manufacturers and are often subsidiaries of them. 30% discount can make the whole thing work.
2. the comparison is always new and own for 3-5 years.

If you are the type of person who wants a new car every 2-3 years then it stacks up.

So if you look at a typical alphabet deal (part of bmw) a 45k bmw can be "yours" for 2 years for about 12-15k all in. Drive the same cash car out of the showroom and you'd be lucky to sell it for £30k after 2 years.

I can see it for cars, most people need a car. It amazes me how/why people do it for boats, that then sit in a marina at 500 quid a month unused.

 

[nickso]

error.

 

[nickso]

Of course it does, just as a hire purchase car belong to the finance company, but at the end of the PCP contract, there is a balloon payment to be made for you to be able to purchase the car outright, but there is still a certain value to the car that started with the deposit you put down, and the payments that you made. It's not overly complicated, but it's certain weighted in the garage and the financiers favour.

Not all Deals end with you keeping the car.

My van deal means I will never own it and don't have any option to do so, simply hand it back after 4 years and walk away, not locked in to anything after that period.

The big problem with these deals is the residual value. They will crucify you for damage and an agreed pence per mile if you go over but they will give you sod all if you are under the agreed mileage which I almost certainly will be.

As usual it's heavily weighted against you.

 

[Doggit]

Sorry to hear that Nickso, most people I know have cars, and are done on a three year basis, so it looks as though they really had you over a barrell. Would it have been cheaper to hire it, and offset the hire costs against your tax, or could you still do that with the PCP payments.

 

[Corgigrouch GTi]

Not all Deals end with you keeping the car.

My van deal means I will never own it and don't have any option to do so, simply hand it back after 4 years and walk away, not locked in to anything after that period.

The big problem with these deals is the residual value. They will crucify you for damage and an agreed pence per mile if you go over but they will give you sod all if you are under the agreed mileage which I almost certainly will be.

As usual it's heavily weighted against you.

That sounds more like a straight forward lease, I have leased my current van as I was unsure about how good the Transit custom would be for me, turns out it has proven to be a pretty decent van. I too will be having the minor dings repaired before it goes back but the big issue is that with ten months left on the agreement and only 2000 miles left before I hit 30k where I will be charged per mile. The cheapest option that I have is to buy a cheap rat box to run round in using the Transit for quoting only... I've just got my hands on a Doblo Taxi that has failed its pass off for £400 and when I replace it with a new van, break it for spares and get my money back

 

[Doggit]

Well spotted Firebrand; I'd forgotten about old fashioned leases. But I assumed that as we were discussing PCP's his was a variation of one.

 

[Judy in the sky]

.I used to watch Posh Pawn on Ch 4 or 5 and you'd have these people living in luxury, flash cars, big houses in Weybridge etc etc and yet they have to pawn some prized possession to raise a few £K. Sad.

I read somewhere that one chap pawned his car for a fortnight whilst he went on holiday. Said it was cheaper than parking it at the airport long stay car park, and next to no chance of getting damaged.