Talk Morgan Forums Community The Malvern Arms Disposal of PCP Daily Driver

I have never done a PCP and recently have bought daily drivers at 6 years old when the cars has done the majority of its piano down a shaft value loss and get rid of at 10 years old when they are worth buttons.

I know there is also PCH where you just hire the car for say 2 or 3 years and hand back to the finance company.

Therefore for those readers on the forum who have bought a £30k to £60k daily driver on PCP and taken it back after the term say 3 years what happens.

1 The dealer offers a trade in above the balloon payment and the difference pays for or makes a good dent in the deposit for the next PCP.

2 The dealer did not want to know as they are basically now front men for putting you on a PCP and advised you return it to the finance company.

3. Some other outcome.

My interest is that some dealers offer very low monthly payments in comparison to the notional new price of the cars and in these cases there is nothing to assist in paying for the next PCP deal that you would have had in the old days of HP after the full term.

If I understand PCP correctly (and I may be deluding myself) it is utterly unregulated credit designed to keep the manufacturers products moving through the supply chain to customers.

It is a loan, often funded by the manufacturer, where cash flow is everything.

Used cynically, a PCP makes it possible to get 3 years unsecured interest only credit at a -ve interest rate, followed by a purchase at the end.

So, if you can't quite afford to buy the car or don't want to spend the full amount PCP makes sense as it unlocks an unique discount, called "dealer contribution' and then requires low monthly payment and then makes it possible to purchase the car at a discounted rate.

An example.

Car cost is £54k.
Deposit is £25K, including £5k "dealer contribution"
PCP payments, 36 @ £199 = £7.1k
Purchase price is £25k
Total cost is £57K so £3k interest over 3 years but the dealer paid £5k so no real interest.

They get really unhappy when you pay off the final amount and own the car. The last time we did this I had multiple calls from the dealer and the car company finance company asking me why I didn't want another car.

This is an unsustainable system that is causing concern and I and others feel could end up just like the bank crisis of 2007/08.

Enjoy whilst you can....

I have been through this game a few times. Way too much to put into a simple post.

Whats the goal.

Minimum outlay for a time
Minimum outlay for a nice car
Maximising the fun from a given outlay

Observations.
1. The dealer makes money from selling the PCP and so is keen you take the product.
2. If you are flexible on the car you can make big savings.
3. Calculate the total cost of the car over the term no matter what mechanism is used.
4. Look at any termination clauses for penalties.
5. What is the APR regardless of the term or model used.
6. Buy when the car is hot so selling will have best retained value. e.g. Velar is hot now so resale should be good.
7. Buy cheap and sell retail.

I have used a few different products.
Personal Contract Hire. 3x23 (3 up front and 23 following payments) at which point the car is collected and I have nothing. Mercedes were offering a stunning deal and so supporting the price. I ended up with a car I could not have afforded on a traditional deal.

I used an Audi PCP. I ordered the car through CARWOW and got the best discount. I did not enjoy the car and so at the end of year 1 sold the car to a dealer. I got a good price as it was still popular and few were on the secondhand market. Total outlay for 1 year of superestate was £9k.

I look on it as making the most of my companies car allowance and so do not look to build up equity.

I do recommend the carwow site to find deals, you can still get PCP etc through them. Look who is pushing tin and so supporting the price. Mercedes are pushing a lot of cars as they try and beat Audi and BMW in the premium sector. Minis keep value, Nissan price support heavily.

Just calculate your downpayment+total monthly+closing payment for the real total cost. Most of the PCP programs are designed to allow you to upgrade mid term so have decent termination clauses. Personal Hire is more fixed term so has worse termination clauses.

http://www.nicheleasing.co.uk/ these guys are well connected with MB and know what the best supported lease models are at any moment. They do MB finance so offer both PCH and PCP.

Ensure you are getting prices that include VAT as the contract hire is often less VAT.

PCP needs the car to retain value so buy a hot car and don't be scared to step out prior to the end of the contract if the figure work. PCHire means you don't car and so an end of range model with heavy subsidy can be attractive.

MB are about to replace the CLS. Diesel is suddenly so last year. MB are supporting resellers to move excess stock http://www.nicheleasing.co.uk/Mercedes/CLS_Coupe/Mercedes_CLS_Coupe_220d_AMG_Line.html

DM me if there is anything specific I can help a fellow furry slippered member.

interesting thread. I have asked nicheleasing for a quote on an F type - will let youknow what they say.

Did you specify the engine size?

Beware that JLR are one of the best managed discount structures around on the market from my experience. You may not be able to see big discounts. Sometimes there are models within the range that get greater discount if you are flexible in your desire.

When buying the big bad Audi I also got quotes for MB and Range Rover. The MB quote was more highly discounted than the Audi but the CARWOW portal got literally nothing for the RR. I spoke to the Carwow people and they said almost no-one gets discount on JLR as they manage their dealers very well. So you may see some short term end of life discounts but not much normally. Best to speak to the broker and let them do some work for you. Jag seem to run their business well.

DO look on carwow and a couple of the others of the same type. That discount was unbeatable on the MB/Audi. I was offered 10% on purchase and 15.5% on PCP IIRC.

In a nutshell the finance options are:

Hire Purchase - standard loan which is made up from:
£ Purchase price less deposit £
Plus interest on outstanding amount £
/ Divided by total term. At the end of the term you own the car, however this usually makes the car quite expensive, as you are paying for it all over a standard term usually of 60 months.

Example:
30k car less 1k deposit.
29k outstanding at 5% interest equals total of £32,747.49.
Monthly cost £545.79.

Pros are if you keep the car long term it is cheaper as you are paying it off faster and thus with less overall interest. You could also take a bank loan at a lower %APR than the car finance, which would save money and mean the car can be sold without having to clear the finance first.

Cons are if you wish to sell the vehicle before you own it say in 2 or 3 years you stand to lose more than on a PCP, this is because you are paying more per month on a less incentivised deal that isn't underwritten. In effect there are cheaper ways to finance the vehicle on a short term basis, leasing is usually the cheapest but I won't go into that for now!
Also PCP is now the preferred method of finance, so more incentives are pushed this way.


Second method is PCP.
This involves the price of the car £
Minus deposit £ as per above,
Plus interest calculated over the total remaining balance £.

Where it differs is the manufacturer will underwrite a price for the vehicle at a set period and mileage, either at 24/36 or 48 months and then guarantee (pending condition criteria) to purchase the car back at this price.
This in effect means you only have to pay the depreciation on the car during the initial period, plus interest on the whole balance. This generally means a car is more affordable, as you never actually own anything.

Example:
30k car less 1k deposit.
29k outstanding at 5% interest equals total of £32,747.49.
Guaranteed Manufacturers Future Value (GMFV) in 3 years at 36k miles of £13'000, add interest of £3'747.49 divided by 36 months gives:
Monthly cost £465.20

As you can see the monthly cost is less, and over a smaller time period. Of course you still have the final payment to deal with (the GMFV) but most people are only interested in the monthly price. This is also quite a conservative estimate, if the car has strong residuals then the cost gap can increase making PCP even more attractive.

Once you reach the end of period you have 3 options:
1- Finance the balloon payment, the final guaranteed value - whatever they want to call it. So in effect you have to take out hire purchase (as per first finance option above) on the balloon and pay for that over 4/5 years to own the car. Because this is more expensive than doing this from the start, few people choose this option. Even fewer people have the cash available to pay this balloon off.
2 - Hand it back and walk away subject to condition and mileage criteria.
3 - Change to a new car - this is what 95% of customers do.

The reason PCP is so effective is people will be able to afford a car with a value higher than what they could afford on standard hire purchase with the same monthly figure, so in effect the cash flow of the manufacturer is increased. There are many moral debates and positive/negatives towards this so I shall try to keep it simple and cover a few.

Negatives:
People are suckered into just focusing on the monthly payment, people overlook where the next deposit will come from, equity etc. So when they reach the end of the term they get a rude awakening.

Sales and conditioning towards a throw-away society means people don't trust older items as much now and many will see a car with 50/60k on it as high mileage, they will want support of a new car warranty and ease of use. This places the manufacturers in a very strong position to levy PCP with this.

Usually the balloon payment will work out at roughly the same cost per month as the initial PCP. So for instance in my example above the £13'500 outstanding is roughly £405PM over 36 months. Of course with no warranty, additional running costs etc, you can see why people do not find this attractive when they want a shiny new car instead.

Also with the rapid expanse of technology most cars just a few years old are missing new features, like an iPhone the younger generation want this.

Most deals are so heavily thrown towards PCP that you have to take them, as they offer discounts and deposit contributions/finance incentives etc to get you on the roundabout. Easy way around this is to take it and clear it a few weeks later, if you are a cash buyer.

Positives:
If you change your car regularly, your onto a winner. The monthly cost is far less than it used to be with less risk if the market collapses due to an underwritten value, you can also afford a far better car for the monthly cost than you might expect.
Certain cars have great residuals, so on a short term basis you could find that a 50k desirable car, is cheaper to own (per month) than a 30k rep mobile that depreciates far more quickly. So you can get bargains, it also pays to look at leasing for short-term however as this is generally even cheaper, but I find ironically people like to "own" their cars (in the most loose sense of the word as they don't with the finance..) so don't like to lease.

Hope that makes sense, appreciate its a bit wordy but I could write an essay on car finance - its a bit of a nightmare and one day the wheels will come crashing off. In the meantime if you like to change your car often, enjoy it.

Yes. The three litre 380 bhp one.

Why not the big V8????
F Type R..
550 bhp!
Excess should always be taken to the limit....