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This PCP malarkey...
- Thread starter ColinG
- Start date
Martin_172
ClioSport Club Member
as long as the car is no older than 5yrs when the term finishes as far as i know so yes as long as its upto 2yrs old
An orange one
So is HP just like regular car finance where you end up owning the car?
It's only a second car but I want something better than my 1.2 Clio cause its flipping dullsville! Really looking into these twingo 133's at the moment, I can imagine a year old one would be very cheap on a pcp deal with my Clio as a trade in...
It's only a second car but I want something better than my 1.2 Clio cause its flipping dullsville! Really looking into these twingo 133's at the moment, I can imagine a year old one would be very cheap on a pcp deal with my Clio as a trade in...
Martin_172
ClioSport Club Member
apparently ford were doing new shape Ka's for something silly like £69 a month, citroen were doing something similar on their aygo like thing!
Martin_172
ClioSport Club Member
DCi106!
Yes thats the difference, if you end the car at the end or not.
PCP they look up the value of the car at the end of the deal, and that becomes the final payment which you pay by handing the car back.
Where as HP you pay right down to zero and then own the car.
PCP if you have a big deposit (a car in your case) can be VERY cheap as you end up with very little capital repayment, however you still have to pay interest on the whole balloon amount for the duration of the loan, and of course you end up going from positive equity now to zero at the end of the deal.
An orange one
So say I see a car at approx £9000'
Minus trade in say £1500?
£7500 left to pcp, take away the GFV I'd guess around £3k in 3 years time..so I'm borrowing £4500 over 36 payments..but like you say have nothing left at the end unless I pay the remaining £3000
It's a very tough decision to make..
Minus trade in say £1500?
£7500 left to pcp, take away the GFV I'd guess around £3k in 3 years time..so I'm borrowing £4500 over 36 payments..but like you say have nothing left at the end unless I pay the remaining £3000
It's a very tough decision to make..
No, you are borrowing 7500, so if its a flat rate of 4% for example (fairly typical based on the couple of car manufacturers I wrote finance software for) you will be 4% per annum flat on the 7500 amount.
So thats 300 pounds interest per year essentially, so on a 3 year deal it would be 8700 total to pay for 7500, 3000 as the final payment so the other 5700 you would pay in 36 payments of 158 quid a month. (probably come out at about 10% apr or so based on those numbers)
Flat rates can be high on secondhand vehicles though, so forgive me if im 20 quid a month under or something!
TBH if I were you I would just sell the clio, and buy a 172, I would really try and avoid debts against any depreciating asset, its just poor financial planning in general TBH
Martin_172
ClioSport Club Member
millage limits only apply if your handing it back and walking away though, not if your trading it in or planning on keeping.
Martin_172
ClioSport Club Member
No it doesnt, ive done it with my last 2 cars. The traded in car is being bought by the dealer not returned to the finance company, dealer settles the outstanding finance on your behalf and any extra is yours towards your deposit or any short fall is added onto your new agreement.
In that situation though, you are essentially still buying it. Then you just hand it over as a deposit on a new deal, and get a lower value back for it accordingly, so you still end up out of pocket for the extra mileage.
Martin_172
ClioSport Club Member
you are still paying for the millage by the amount it has de valued the car, as you would with any car. your not paying the excess millage charge as this is charged by the finance company when the car is inspected before being returned to them, in the case of a trade in though its not going anywhere near them, the dealer is simply just paying the outstanding ballance on your agreement.
Yes can see what you mean now, you still end up out of pocket for the extra miles as you are essentially buying the car at the original GFMV but its now worse less than that in the deal you then go onto do with it again a new car, but you are correct its not at the exact excess mileage rate specified in the agreement.
Bottom line I was trying to get at was if you do more miles or damage the car, you end up paying more if you do anything other than keep the car, but I worded it badly, thanks for clearing it up
Clio 172
To be fair Chip unless the mileage agreed was exceeded by 20,000 miles the price for a px would vary very little and certainly not enough for a dealer to walk away from a deal. Condition of car on a px is far more important that a few miles more even on a pcp agreement. To the OP I'd recommend you look at new car deals as some of the current rates and deals on offer are silly cheap and could well work out a better deal for you in the long run than a used pcp deal where the flat rate will be higher and discounts will be less. I know Renault still offer a 4 year pcp which is the equivilant of a 6 year HP agreement so monthly payments are low. I'd certainly look ata ll options before going for a usec car just because the retail price is lower. Also Renault at the moment are having a very hard time in the market place and about to close 30% of their UK dealers so you'd probably find a ridiculously good deal available if you shop around.
It depends on the mileage in the initial agreement, if its 30K miles per annum on a 3 year deal then 10K extra wont effect the price much as 90 or 100 are both high miles anyway (although perhaps ive picked a bad example as 100K is a bit of a psychological one, lol), if its 10K per annum on a two year deal then it will as the difference between 20k and 30k is quite marked though.
So I dont quote agree with your blanket statement that mileage doesnt matter, but I take your point that it wont be at the rate in the agreement of course.
And I did already mention that damage will be charged if handing the car back, or effect the value against a new deal if traded in so I agree with you about condition.
Agreed, plus at least you then have warranty for the full term so you know that the costs you are looking at will be all you have to pay, no risk of repair bills.
Although as I mentioned before personally I would just buy a cheaper secondhand car he can afford outright rather than line the pockets of a finance company, I wrote the software used by a couple of car manufacturers to work out PCP deals and the amount of interest you pay is pretty high due to the fact that the balloon payment is charged interest against for the full term of the loan.
The GFMV on a new car will be higher than a used on too of coure, which will also narrow the figures a little more than just looking at the car prices would imply.
Martin_172
ClioSport Club Member
i was told by the dealer (not sure how true it is) that you get a much better rate on a pcp deal on a brand new car than you do on a 2nd hand one i dont know if its down to the actual interest rate its self or if its manufacturer support or what not
Ive written finance software for a couple of manufacturers so know a little about that side of things, and I would say that the dealer is largely correct.
The manufacturer will often cash incentivise the finance company in order to get the sales, so this means that the finance company can then offer a better rate accordingly.
In some cases its as low as zero percent, you will NEVER find that on a used car unless its one that is massively marked up in the first place!
I think a lot of people miss that with PCP the lions share of what you are paying is the depreciation, so picking a car that doesnt depreciate much makes it far more affordable.
Minis when they first came out you could have for less money per month than many other new cars that costed far less to actually buy outright.
Minis when they first came out you could have for less money per month than many other new cars that costed far less to actually buy outright.
Clio 172
GFV Are designed to leave equity in the cars thats the point of them, the trick with a pcp is to put in a small deposit so you don't have deposit erosion. If you put in £3000 to get a lower monthly payment the GFV is calcualted on the car bought, the mileage your doing. Lets say the equity is fixed at £750, You would have lost £2250 and the reduced payments wouldn't account for £2250 worth of interest and if you don't end up buying the car its really lost money.
Chip in respect to mileage on cars your wrong. The condition of a car is worth more than mileage agianst a book value. I'd never lose sleep over a car over miles any more than I'd satnd a car up thats low on miles as that just simply never happens. The only time you would ever be penalised on a pcp is if you were hadning the car back to the finance company or VT'ing the car. In these cases the finance company will charge for excess mileage and damage as its their vested interest to get their money back before they send the car to a closed auction. If a car came in px on a pcp and had a ridiculous amount of miles over what was agreed (say 60,000 on a 30k agreement) then clearly the customer would lose out. However if the car came back in 15k over there is enough magin in cars and enough good deals on for it not to affect the deal (certainly wouldn't be as good a deal if the car came in on or below miles). The condiiton however is far more important, it costs £150 to paint a door etc so a damaged door, broken bumper and knackered wheels have far more impact thana car over book miles ven on a pcp agreement. I have seen cars come in looking like they have finished the Dakar rally and people oblivious to the fact that they need to look after the cars for 2/3/4 years and not just abuse them.
In respect to cars that hold their value better there will clearly be a premium involved in buying them in the first place so quite possibly putting the OP off. Mini for one might have good residules but they like Honda and Volvo also have their own market where by their cars are worth far more back to them than anyone else so creating a bubble that in can be very hard to get out of. I for one have no end of issues with Volvo customers and the fact the trade doesn't see the values in the cars anything like the dealers do. This means when you call for an underwrite you are low balled by a dealer and traders and yet Volvo will give their own customers ridiculous value on their cars (I digress from the main point slightly but ou get my drift).
In the last ten years alone the market has changed massively with respect to PCP's. I remember working for Renault when they forst introduced pcp's and offering people 6% apr on a pcp vs 18/25% apr on a 5 year HP agreement. PCP is a massive part of Renault now and they offer rates from as little as 2% apr. So irrelevant as to how the car will depreciate its still going to work out a very strong deal. The manufacturer I work for no longer supports pcp's but has the strongest new car offer in the market place at present and makes the point of a pcp null and void against the offer.
For the OP look about, consider new cars, look at the benefits that dealers are offering as there are alot at present and certain brands (Renault being one) are in alot of trouble in respect to new car sales. Use this as a stick to aid you in getting the best deal possible. If it still seems expensive then you still have the option of a straigh forward hp agreement on a used vehicle. No need then to use the dealers finance as there are deals in the market place for over £5k of 7% apr. At present it is a buyers market so take advantage of that. Any question with reference to buying drop me a pm I have a little bit of insider knowledge
Chip in respect to mileage on cars your wrong. The condition of a car is worth more than mileage agianst a book value. I'd never lose sleep over a car over miles any more than I'd satnd a car up thats low on miles as that just simply never happens. The only time you would ever be penalised on a pcp is if you were hadning the car back to the finance company or VT'ing the car. In these cases the finance company will charge for excess mileage and damage as its their vested interest to get their money back before they send the car to a closed auction. If a car came in px on a pcp and had a ridiculous amount of miles over what was agreed (say 60,000 on a 30k agreement) then clearly the customer would lose out. However if the car came back in 15k over there is enough magin in cars and enough good deals on for it not to affect the deal (certainly wouldn't be as good a deal if the car came in on or below miles). The condiiton however is far more important, it costs £150 to paint a door etc so a damaged door, broken bumper and knackered wheels have far more impact thana car over book miles ven on a pcp agreement. I have seen cars come in looking like they have finished the Dakar rally and people oblivious to the fact that they need to look after the cars for 2/3/4 years and not just abuse them.
In respect to cars that hold their value better there will clearly be a premium involved in buying them in the first place so quite possibly putting the OP off. Mini for one might have good residules but they like Honda and Volvo also have their own market where by their cars are worth far more back to them than anyone else so creating a bubble that in can be very hard to get out of. I for one have no end of issues with Volvo customers and the fact the trade doesn't see the values in the cars anything like the dealers do. This means when you call for an underwrite you are low balled by a dealer and traders and yet Volvo will give their own customers ridiculous value on their cars (I digress from the main point slightly but ou get my drift).
In the last ten years alone the market has changed massively with respect to PCP's. I remember working for Renault when they forst introduced pcp's and offering people 6% apr on a pcp vs 18/25% apr on a 5 year HP agreement. PCP is a massive part of Renault now and they offer rates from as little as 2% apr. So irrelevant as to how the car will depreciate its still going to work out a very strong deal. The manufacturer I work for no longer supports pcp's but has the strongest new car offer in the market place at present and makes the point of a pcp null and void against the offer.
For the OP look about, consider new cars, look at the benefits that dealers are offering as there are alot at present and certain brands (Renault being one) are in alot of trouble in respect to new car sales. Use this as a stick to aid you in getting the best deal possible. If it still seems expensive then you still have the option of a straigh forward hp agreement on a used vehicle. No need then to use the dealers finance as there are deals in the market place for over £5k of 7% apr. At present it is a buyers market so take advantage of that. Any question with reference to buying drop me a pm I have a little bit of insider knowledge
You'll need to explain that a bit better IMHO as it makes no sense currently, either that or you are just mistaken.
All of the software I have written for car companies to do PCP deals actually restricts the deposit you are allowed to put in as its such bad news for the finance company if you put too big a deposit in as it means they collect so much less interest.
So I really think you are mistaken there!
If you put 3K down as a deposit, it will save your MORE than 3K on the payments as you will be paying less interest as right from month 1 there is less outstanding finance so hence less interest to pay.
On a typical 3 year 4% flat rate, putting a 3k deposit down instead of a 750 pound deposit will save you 270 quid on the "total amount payable" in fact.
Im sure you are correct about all the aspects relating to secondhand value, im not a secondhand car salesman so yield to your experience on those points (depsite what book values might tell me) but in terms of the actual maths involved on the numbers my knowledge is absolute on this as I have spent large chunks of time actually writing software concerning all of the algorythms used for these deals.
Clio 172
Ok to clarify my point (I went off on a bit of a tangent), Pcp's are mostly capped at a deposit level of around 35% (some are slightly lower some higher). If you put down the maximum deposit say £3500 on a £10,000 car you will reduce your payments. The issue that will arise (ignoring the saving on interest which is negligible vs the money initially put down) is that when you get to the end of the agreement you will nort get £3500 back and therefore if you go into another car of the same value on the exact same deal your payments will rise quite substantially (appox £33 per £1000 on a 3 year pcp) so you could end up paying £70 a month more for three more years for the same car due to the deposit put down last time round. Now the likes of Black Horse were doing deals 5/6 years ago where they increased the GFV (PCH not PCP) and this meant people had low monthly payments but had no choice but to hand the cars back at the end of the agreements as there was no equity. To summarise briefly unless you are planning on putting a large deposit in every time you change a pcp there is no point in putting down more than £500-£1000 maximum. If you have a px and it exceeds that then get cash back and use that to pay your payments with. The erosion element is that all people ever remember is their monthly payments and forget that they put the maximum deposit in last time to pay less and then get a nasty suprise at the end when the car is worth next to nothing or the equity is nothing. Put yourself in the position of a customer who bought a car 4 years ago before the bottom fell out of the car market. The residule values were concrete and based on current market conditions, he puts down his 35% deposit and is happy with his monthy payments of £100. Howevere when he comes to change his car due to the market collapse he now has £1500+ negative equity and although the dealer can get him out of the car his payments will be over £150/£200 a month more than he was paying before. He has two option bite the bullet and give the car back to the finance company (loses the least money), swith to another pcp on a lesser spec'd car to keep payments the same or look for an alternative in the market place with no deposit to put down. Its a very difficult conversation as a delaer to have with a customer never mind being a customer and being in that situation. If none of this makes sense let me know and I'll see if I can clarify it.
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That makes NO sense at all. And I suspect that no matter how many times you try and explain it that it never will as it goes against the maths of what actually happens. Its just wrong and thats the end of it as far as I can see.
If you put down 3K deposit, you then pay 3270 less in payments during the term of the loan, so you put that to one side and then on the next car you have a 3270 deposit to put in.
The less finance you have, the better, as ALL finance (unless its 0% apr) is losing you money, so always go for the biggest possible deposit you can afford, the money isnt lost as its saved off your monthly expenditure, so just put it to one side each month so you still have it and you gain the interest you have saved.
In your example if the customer had left his deposit in the bank rather than put it down it would have been eroded away by the higher monthly outgoings and he'd have ended up losing more in interest too.
A smaller deposit always costs you more money, thats the bottom line. (unless you can put it in an account that pays more interest than the loan costs of course!)
If you put down 3K deposit, you then pay 3270 less in payments during the term of the loan, so you put that to one side and then on the next car you have a 3270 deposit to put in.
The less finance you have, the better, as ALL finance (unless its 0% apr) is losing you money, so always go for the biggest possible deposit you can afford, the money isnt lost as its saved off your monthly expenditure, so just put it to one side each month so you still have it and you gain the interest you have saved.
In your example if the customer had left his deposit in the bank rather than put it down it would have been eroded away by the higher monthly outgoings and he'd have ended up losing more in interest too.
A smaller deposit always costs you more money, thats the bottom line. (unless you can put it in an account that pays more interest than the loan costs of course!)
Clio 172
In theory what your saying is right, but noone puts the diference to one side. Thats the issue, as I stated people only remember what they pay monthly not what they put in to get to that deposit. Your looking on it on the basis that you'd save the money, history has shown that never happens. If people have £100 more a month they'll spend it.
I'm not fussed either way but eleven years of experience shows me that we don't live in an ideal world where people listen to what you tell them. I'd sell you a car with £1 deposit or £5000 deposit I get paid either way. But for a pcp it is better for the customer and a more manageable change over into another car on a pcp without putting down a large deposit. As said whether the maths make sense isn't the issue its the basis of how a pcp works and can be renewed which is the issue.
Apologies for the 'Not fussed' but its not a point of how PCP should work but how they actually work in the real world.
I'm not fussed either way but eleven years of experience shows me that we don't live in an ideal world where people listen to what you tell them. I'd sell you a car with £1 deposit or £5000 deposit I get paid either way. But for a pcp it is better for the customer and a more manageable change over into another car on a pcp without putting down a large deposit. As said whether the maths make sense isn't the issue its the basis of how a pcp works and can be renewed which is the issue.
Apologies for the 'Not fussed' but its not a point of how PCP should work but how they actually work in the real world.
Clio 172
Chip I'm sure you'd make a great drinking buddy with some of the discussions we could have. I guess we'll have to agree to see less than eye to eye on this.
I tend not to talk about car finance when out drinking TBH mate, lol
Im not actually disagreeing with you by the way with regards to your last post about people not saving like I was saying they should if using a larger deposit to bring their payments down, im sure you are right that most punters dont do the sensible things.
I was only disagreeing when I thought you were saying there was a mathmetical advantage to a smaller deposit, not a psychological one.
Im not actually disagreeing with you by the way with regards to your last post about people not saving like I was saying they should if using a larger deposit to bring their payments down, im sure you are right that most punters dont do the sensible things.
I was only disagreeing when I thought you were saying there was a mathmetical advantage to a smaller deposit, not a psychological one.
An orange one
Thanks for all the inputs guys, I guess I will pop into my local dealer on saturday and just enquire about what sort of deals are available on twingo RS and Clio 200...
I'm sure like you say, they will be glad to see me through the door lol
Out of interest, is servicing etc included in pcp deals?
I'm sure like you say, they will be glad to see me through the door lol
Out of interest, is servicing etc included in pcp deals?
Martin_172
ClioSport Club Member
you can add servicing packages and other extras. just remember mate its a tough market out there, the balls in your court, i was in the dealership for 2 and a half hours fighting for the deal on my 200, i just threttned to walk away twice by just simply getting the salesman excited then saying hmmm na i really cant justify that, think im going to have to leave it for 6 months, ended up getting what i was looking for on my dci AND getting a cracking deal on the 200!
GiT
ClioSport Club Member
Shit little Yaris...
My 200 deal was pretty epic really...
£500 Deposit on a car the RRP'd to £18,890 - discounted to £15,500. £15,000 to Finance.
£275 a month over 2 years - kept for 1 year 1 month, sold to Trader - who cleared the finance RCI were awaiting (£12,250 odd). Clio gone.
So it worked fine for me - would still have it if doing the miles.
Oh and forget servicing rubbish - £160 after 12k or 2 years. Whichever first.
£500 Deposit on a car the RRP'd to £18,890 - discounted to £15,500. £15,000 to Finance.
£275 a month over 2 years - kept for 1 year 1 month, sold to Trader - who cleared the finance RCI were awaiting (£12,250 odd). Clio gone.
So it worked fine for me - would still have it if doing the miles.
Oh and forget servicing rubbish - £160 after 12k or 2 years. Whichever first.
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