I took out a PCP last summer on a Citigo SE Greentech for my daughter. My finances were such that I had the 30% deposit to put down and my budget can run to the very reasonable £76 a month for three years (which includes breakdown cover and free servicing). People are asking the question "what happens after three years?" My response is hopefully a common sense one. By then, my daughter will have that question to answer, not me. She has three years' notice of what to expect - hand the car back and walk away without a car; save up the money to pay off the outstanding amount and keep the car; have enough money saved up to decide for herself what to do about getting her next car. I see the PCP as an ideal way for her to have a new car at a time when she needs reliable transport to maximise her job prospects and generally get settled into adult life. At the same time it offers her some responsibility for getting her head round how to manage her own finances when her dad pulls the plug at the end of the PCP. Like others on the forum, I don't get the big deal about owning the car. It's an asset whose value plummets over time and one that will pile up growing repair bills if we are to believe the tales about the clutch and gearbox issues on the Citigo.

 

One reason why there are fewer dangerous old wrecks on our roads and a bigger number of newer, safer cars is the availability of schemes like the PCP. It is clear that the manufacturers benefits from PCP because they are able to plan future production better, based around the three year PCP cycle. But what's wrong with that?

 

In a word, I get a chance to put my daughter on the decent car ladder. She gets three years' notice of the need to figure out how to stay on it. What's there not to like?

We ran the bangernomics principle for over 10 years - buy sub-£500 (and you can get some tasty motors if you look hard enough) with a long MoT and with a bit of maintenance/fixing get a year out of it and sell it on/scrap it for a low loss (if any).  Downside was the possibility of it going wrong (often) and now I have a company car and work long hours wifey wanted something I didn't have to keep fettling and was guaranteed to start whenever she wanted to use it.  She also wanted a new(ish) car ideally.

 

So - we start looking around.  Went looking for a 3/4 year old Fabia automatic (not much choice about it must be said) but the figures made a new Citigo on PCP cheaper - plus the free servicing and the knowledge of a 3 year warranty.  It fails, she calls Skoda Assist or the dealer and they fix it, rather than me.  Extra upsides from getting a Citigo were cheap tax and low(er) insurance which cover 2 months payments a year overall to start with.  

 

She gets a brand spanking new car - happy wife.

I know I don't have to touch it - happy me.

Financially not much in it over something in the 4-10 year bracket, and (hopefully) no unexpected bills - happy us.

 

At the end of the term, we will have some equity in it due to low mileage (she does less than the lowest option available).  I know I've paid for that equity up front, but that's effectively the deposit for the next one - whatever it might be.  Or walk away with enough for another banger...

 

For those with the cash, use the 0% to your advantage - even if the bank pays 1%, that's 1% better than handing it all to the dealer.  Add in any other incentives at the time (i.e. free servicing as ours was, or dealer deposit contributions) and it's a no brainer IMHO.  If you want to pay it off, I believe you could still take out the PCP, get the goodies and pay it off early without penalty.  Even if it's a 4% or even 7% PCP, others have done it within a week or two and only paid £20 or so interest to get free servicing AND the money off at the start.

 

It won't suit everyone - many prefer the "I've paid for it, it's mine" philosophy and fair do's to them.  It is a nice feeling and I'm not going to knock anyone for wanting to own something outright.  I'd like to own my house outright, but that's a few (lot) years away yet!

My wife wanted an Up!, the Citigo is on 0% PCP, which makes the car about £1500 cheaper over the term of the contract. I'd rather pay £120 a month for a new car, than get stung randomly with a £500 bill keeping my 10 year old 307 on the road. And selling the 307 on eBay for £800 covers my deposit.

Also have an 11-plate Ibiza Tsi on PCP finishing this year, although there is interest on this, I got the car when the dealer was heavily discounting, so it works out about the same as list price. Again, I'm really looking at monthly affordability, just need to find £4500 to keep it this summer as I have no intention to change what is still to me a new car.

With all the examples of how they can work, Can we finally say that they do have their Plus points and deserve to not be hated 

 

If you can afford to pay cash and own outright, fair play to you.

 

For others who can't, this option is a good thing

Can I ask a question?

 

I've never used PCP and haven't borrowed money to buy a vehicle since I was 16 (a motor bike) and only have a rudimentary grasp on PCP's principles but gather loads of people do it and further gather that if you buy new and get  0% PCP then they're better still.

 

I see stacks of comparisons with PCP's and various forms of finance options...but have never seen a comparison between taking out a PCP and paying cash with your own money that you've kept in your savings account/bank etc.

 

I tend to buy new and keep them for something over two and a half years or more.....I'll keep my Yeti for more.  I'll keep my i10 for more as it has 5 yrs warranty and my Mrs. likes it.

 

My mileages are low on both cars.

 

I keep my cars immaculate - bordering on pristine. Garaged, serviced, cherished even.

 

I pay cash and seek the best deal available to me and haggle as best I can.

 

BUT

 

If I was to fancy another new Yeti or something similar (Qashqai, perhaps) how in the world do I compare which is financially better for me?

 

I suppose the trouble comes when I want to sell one or both and have to decide whether to risk private sales (scammers, muggers, timewasters bounced cheques etc etc. or sell via 'We Buy Any Car' or sell to a dealer or part exchange them (and risk getting less discount).

 

Genuine question asked from a position of ignorance of the various finance options open.

I've just ordered a 5DR Mii Toca and though I could have paid cash, I took the non 0% PCP because I guess it allowed the dealer to throw more bones my way.

 

White Paint- £175.

Spare wheel- £145. ( would have been dealer supplied price because the car is in stock)

3yrs MAP (GAP) -£399. They chucked this in. 

3yrs servicing- not sure how much that is worth?

 

£2500 Deposit

£103 PM X 35

£4770 GMFV

 

Probably not the best deal ever but with the total payable a touch under £11k (if I keep it) it was better than taking the 0% PCP with little/no movement on the £10520 (inc white paint) with none of the extras?

 

I would have gone with a Citigo if it wasn't for the ~16 week wait if factory ordered and the fact I have just had a bad experience with the dealer group who have recently taken over the Skoda dealer here. Also needed the car ASAP.

I've just ordered a 5DR Mii Toca and though I could have paid cash, I took the non 0% PCP because I guess it allowed the dealer to throw more bones my way.

 

White Paint- £175.

Spare wheel- £145. ( would have been dealer supplied price because the car is in stock)

3yrs MAP (GAP) -£399. They chucked this in. 

3yrs servicing- not sure how much that is worth?

 

£2500 Deposit

£103 PM X 35

£4770 GMFV

 

Probably not the best deal ever but with the total payable a touch under £11k (if I keep it) it was better than taking the 0% PCP with little/no movement on the £10520 (inc white paint) with none of the extras?

 

I would have gone with a Citigo if it wasn't for the ~16 week wait if factory ordered and the fact I have just had a bad experience with the dealer group who have recently taken over the Skoda dealer here. Also needed the car ASAP.

 

 

Your case is quite a good example of the uncertainties I outlined in my previous question.

 

1) You could have paid cash (and presumably got a discount and haggled over the price and what extras would be included)

2) You took the non 0% PCP and had extras included.

3) You could have taken the 0% and had no extras included.

 

So which of those three options would have been the most financially advantageous if, for arguments sake, you keep it in good condition for three years?

 

I suspect no-one is actually going to give me a hard and fast answer......maybe because there isn't one?  But you'll see why I asked my question earlier.

Your case is quite a good example of the uncertainties I outlined in my previous question.

 

1) You could have paid cash (and presumably got a discount and haggled over the price and what extras would be included)

2) You took the non 0% PCP and had extras included.

3) You could have taken the 0% and had no extras included.

 

So which of those three options would have been the most financially advantageous if, for arguments sake, you keep it in good condition for three years?

 

I suspect no-one is actually going to give me a hard and fast answer......maybe because there isn't one?  But you'll see why I asked my question earlier.

 

The way I see it is that the financial differences are little, but I get the benefit of hassle free motoring for 3 years (3 yrs servicing, GAP) and protection from losing out more if residual values of the car tank in 3 years (GMFV).

 

That is my man maths and I'm sticking to it now! 

You'll also usually get a better deal on finance (cash isnt king anymore) as the dealer gets commision from the finance company.

 

As for whats a better deal over 3 years, i guess it depends on the total package and what you are buying but on something like a Yeti costing 20K surely the 0% option is always the best one?

 

My maths  is that if you buy a car for 10k cash after 3 years your cash is now worth ~4 - 4.75K, total loss 5.25-6K

 

You lease a car on a PCP you can get it for about £250 deposit and £125 per month, total spend ~4.75K. However if the cars value bombs you dont have to worry about that. If its worth more then you can use that equity as a deposit for another one.

 

If you change your cars @ 2-3 years I'd personally look into PCPs but if you can afford to spend 20K that often why worry

Thanks for your thoughts there.

 

Reference this bit........

 

"If you change your cars @ 2-3 years I'd personally look into PCPs but if you can afford to spend 20K that often why worry ;)"

 

It is specifically because I try to be diligent in who I give my money to, and how much I give them, that I can afford to spend 20k on a car.

 

Agreed I should look at PCP's but, like pensions, annuities, stocks and shares etc. etc. you listen to advice with skepticism because you wonder how much their advice is solely based on how much THEY are getting out of it rather than telling me what the best deal for ME is.

Another thing I'm going to do is with the cash I was using to buy the car outright can now go into a ISA earning me another few hundred quid.

Thanks to PCP I now drive a brand new car that I love. Otherwise I'd be paying off a loan for something older and probably less reliable. Free servicing as part of the finance deal can't be sniffed at either.