“1. Save your cash in case your roof blows off your house ( im insured!) “
Old line we were encouraged to use to sell finance. Keep your money in the bank for emergencies and borrow it from us at an extortionate rate and I’ll pocket the commission thanks.
“2. You can hand the car back at year 3 and walk away”
You can do the same if you pay cash or take a bank loan. Sell it, keep it or part-exchange it. You’ve more options outside a PCP.
“3. You will loose more in depreciation if you own it outright”
Wrong. This may be true with a lease if you get a good deal though as leasing firms get massive discounts. More likely with expensive £25k plus metal. It is not the case with a PCP.
“4. The interest rate is irrelevant because you hand the car back just see it as a cheap way to rent a car”
Eh?! Paying over the odds is irrelevant??
“5. Most customers go with pcp these days and save their cash for other things”
“Most customers” know nothing about buying cars and waste a fortune unnecessarily.
Exactly my views as well !
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I suspect that the only time I would have an interest in a PCP is if I knew, 100%, that I could get a better discount on the price of a new car by having a PCP compared to NOT having a PCP ...... and that I knew, 100% that I could cancel it within a few days and keep the discount and pay the whole thing off in cash
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PCP’s only make sense when they’re subsidised by the dealer or manufacturer, almost always on new cars. With used cars PCP interest rates are almost always uncompetitive compared to straight HP or better yet a simple bank loan. I’m amazed at how much money people throw away by not shopping around for finance. It can add thousands to your deal.
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I’ve always bought my cars outright since I’ve been able to afford to. Although I consider myself fairly savvy in matters of finance, there has always seemed to be an element of smoke and mirrors in car financing and I have avoided PCPs, leasing and HP like the plague. The salesman know the finance tricks inside out , but vehicle finance seems to be its own science and not one that the average savvy customer can crack.
However, all that changed when I bought my wife’s car. The on the road price was £33,702 and the dealer, after a bit of arm twisting, agreed to a cash price of £30,500. For me, that would have been it, but the salesman then started talking about PCP and the contribution from the manufacturer and the dealership and - crucially - that I could pay off the finance within 14 days of taking delivery. This all seemed too good to be true, but it was all perfectly above board, so the figures worked out as follows:
On the road price after new car discount £32,309
Manufacturer contribution £1500
Dealer contribution £1900
Final on the road price £28,909
I had paid a £1000 deposit on ordering the car and was required to pay a further £4,000 on handover, leaving 23,909 to settle within 14 days. 2 days later I rang the finance company and paid the balance. And that was it. So, as SLO76 says above, if there is a decent dealer contribution, PCP can work out cheaper than outright purchase in the traditional way.
I will certainly look into the PCP approach in future if it works as well as it did with my wife’s car.
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.................... So, as SLO76 says above, if there is a decent dealer contribution, PCP can work out cheaper than outright purchase ...............................
Does anyone else think this is symptomatic of everything that is wrong with the world (or at least the UK) today? Basically someone is always making a buck out of doing f-all?
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PCP’s only make sense when they’re subsidised by the dealer or manufacturer, almost always on new cars. With used cars PCP interest rates are almost always uncompetitive compared to straight HP or better yet a simple bank loan. I’m amazed at how much money people throw away by not shopping around for finance. It can add thousands to your deal.
Yes, that seems to be the case. When we bought the Picanto we didn't want a PCP, but we did the maths and with the manufacturer's contribution it worked out cheaper to 'buy' the car with PCP with the largest deposit possible, so that's what we did. The interest rate of this particular PCP deal was about 2% higher than say one taking out a >10k loan with the Nationwide, but like all things you need to work things out, and choose what works for you, what you can afford etc. A lot of people I know like to budget, and there is an attraction to knowing exactly what something is going to cost over a term.
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“5. Most customers go with pcp these days and save their cash for other things” “Most customers” know nothing about buying cars and waste a fortune unnecessarily.
"Most customers want a flashy car to impress the neighbours, but can't afford it without the PCP"?
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Just like the old days when you had something you could not afford on the "drip" even if it did cost more
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Whenever I'm told something else is better than cash, I look in a Brighthouse window.
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We have the cash to buy but do the sums when we are buying and use the cheapest method.
3 of our last 4 cars have been bought on PCP which we have paid back within 2 weeks in each instance keeping the deposit contribution. On the Leon it was £2,000, on the Note it was £2500 and on the Fabia it was £2000. That is a saving of £6,500 over turning up with cash. On all the cars the brokers discount remained the same regardless of how we paid for the car. The saving over list has totalled about £13,700.
The Superb had a choice of PCP with contribution but a lower discount or 0% finance at the higher discount. Went for the 0% on that car. Saving over list was about £4000.
All you need a a calculator and a bit of paper to compare deals but like with all car purchases remember the 3 golden rules.
1) All salesmen are liars
2) All salesmen are liars
3) Refer to rules 1 and 2 above.
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We have the cash to buy but do the sums when we are buying and use the cheapest method.
3 of our last 4 cars have been bought on PCP which we have paid back within 2 weeks in each instance keeping the deposit contribution. On the Leon it was £2,000, on the Note it was £2500 and on the Fabia it was £2000. That is a saving of £6,500 over turning up with cash. On all the cars the brokers discount remained the same regardless of how we paid for the car. The saving over list has totalled about £13,700.
The Superb had a choice of PCP with contribution but a lower discount or 0% finance at the higher discount. Went for the 0% on that car. Saving over list was about £4000.
All you need a a calculator and a bit of paper to compare deals but like with all car purchases remember the 3 golden rules.
1) All salesmen are liars
2) All salesmen are liars
3) Refer to rules 1 and 2 above.
Lol ref the 3 golden rules! No discount was available for pcp only interest and terms I never bothered to go into as saw no benefit. Sounds like you had some excellent deals, I cant see how the dealer or pcp underwriting dept make any money offering the huge discounts to reel you in and then let you pay of the loan in weeks, it’s certainly a crazy set up!
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I got my Golf R on pcp. Got 2 free services,an extra years warranty and 2 years breakdown, which they wouldn't give me on a cash sale.
I paid it off a week after I bought the car, so almost no interest.
I will do exactly the same on my next car.
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I cant see how the dealer or pcp underwriting dept make any money offering the huge discounts to reel you in and then let you pay of the loan in weeks, it’s certainly a crazy set up!
Its the law of the land. You are entitled to cancel and agreement and settle it only paying the interest calculated to the settlement date. They cannot stop you, if thye tried they would be in breach of the law, simple as that.
But most PCP buyers pay the full term thus they loose only a tiny amount of their income.
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“ I cant see how the dealer or pcp underwriting dept make any money offering the huge discounts to reel you in and then let you pay of the loan in weeks, it’s certainly a crazy set up!”
We used to see similar promotions but the finance company wouldn’t pay out any commission until a set time after the deal was concluded and after the first payment was made by the customer. Skidpan is an expert at getting a deal on a PCP but I’d avoid buying from your local main dealer in this way as you’ll certainly not endear yourself to them or likely see any goodwill. Not a worry though, I’d do the same but I’d buy from another dealer and keep your local for servicing and warranty work.
They fund it by lending at a higher interest rate. It’ll be far higher than a bank loan and if taken for the full term will add thousands to a typical new car.
Edited by SLO76 on 25/04/2019 at 21:27
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It must depend on some decent offers from dealer or pcp plan. Unfortunately none were on offer in my recent purchase to take advantage of and then pay of early as many suggest as a good way of making decent savings.
I Found online a illustration for the same new 19 plate car that I paid £13500 cash for with 3 year service plan included, its clearly much dearer on pcp and no obvious service plan included. Despite the dealer implying its a cheap way to have a new car for 4 years I tend to disagree looking at how much it is actually costing in that period below ....
48 monthly payments of £169
Customer deposit £2,300
Cash price £14,400
Total amount of credit £12,100
Optional final payment £6,566
Total amount payable £16,978
Duration 49 months
Fixed interest rate p.a. 6.9%
6.9% APR Representative
Cost of credit £2,578
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All depends on interest rate, manufacturer/dealer deposit and any other incentives. Monthly payments can be so low that it’s a fairly insignificant amount of money compared to tieing up a lump of cash in a depreciating “asset “. Each to their own but in a low interest environment such as we have now borrowing at low interest rates can make a lot of sense.
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