I paid a visit to my local dealer yesterday and got talking to a salesman about a new octavia 1.2 se on a 0% pcp deal. He was was unwilling to give me a value on my yeti but he gave me an example Giving Me 41 Payments Of £140 pm With A Final Payment Of £6,500. He advised me to pay a small deposit rather than a large one. I don't fully understand why. My question is, are these pcp deals worth doing ? I've never had more than a couple of grand to buy a car before my yeti so have always relied on very small loans. I bought my yeti with money from a house sale so it looks like my next purchase is definitely going to be on some kind of finance.

PCP's are a good way to get lower monthly payments with a guaranteed future value.

Possibly the reason for advising a lower deposit was due to 0% so why tie your money up .... but that's a guess.

The good thing for the dealers is there is a strong chance after the term length you would trade in for another new car, so it helps them too.

The other plus the finance company has, is if you don't have the balance at the end, but want to keep the car, they can put you on further finance but charge interest.

Alternatively you can just hand the car back and owe nothing, effectively having "hired" the car for the term.

As long as your prepared to pay the settlement at the end to keep, hand the car back, or lose £6500 from any PX value, go for it.

PCPs work well for those who change cars regularly (somewhat regardless of the actual finance term) or those who wish to have more of a lease style ownership on a vehicle rather than full ownership like a typical HP agreement.

What you are essentially doing is deferring a large portion of the vehicle payment to the end of the term in order to take advantage of lower monthly payments; at the end you either pay the balloon payment (determined to be roughly market trade money for a car based upon a set mileage as per your agreed allowance and it being in reasonable condition). You either pay the balloon and keep the car, trade it against another though it may be worth more or less than the balloon figure (a risk you take) or give it back - if clean and within the agreed mileage fine but otherwise the finance company will look to clobber you a bit for excess charges.

I run my car under a PCP, my company car allowance majority funding it. I pile a bit of extra money away just in the event I find myself in the position of being in a position of owing the finance company money though its all rather a gamble.

My advice, if you plan to buy the car and keep it long term pay for it using regular HP, unless of course you have the money to cover the balloon at the end otherwise it doesnt make alot of difference.

If you go for a PCP personally dont see much point paying a big deposit, rather have the money in my bank account and deal with slightly higher monthly rentals than effectively burn a few K in moments by pumping it into a car. Id personally say look to put no more than £500 in, any equity you get our of your old car stick in high interest (if there is such a thing at the moment) savings or pay into your mortgage. Just my humble opinion.

Edited 10 March, 201412 yr by pipsyp

any equity you get our of your old car stick in high interest (if there is such a thing at the moment) savings or pay into your mortgage. Just my humble opinion.

Earning next to FA in interest rather than offsetting FA interest, it makes sense only if you haven't got a morgage you can pay a lump off instead and save a greater rate of interest either way cars lose money so, why put more into one than you have to.

 

Regards

T

Edited 10 March, 201412 yr by themanwithnoaim

A 3 year PCP with the deal I got means having a brand new car of choice with lower monthly payments, under full warranty, zero % finance, free servicing throughout , RAC Breakdown service , and by planning to trade it in at the end of the agreement for another Skoda, I shouldn't have to fork out for anything, like MOT's, cam belt swaps, even tyres with a bit of luck, and with even the bi annual brake fluid change included I reckon the Skoda PCP plan is a no-brainer !

JKW

It's even more tempting when you put it like that JKW. I'd just be concerned I wouldn't have enough to do it again.

It's even more tempting when you put it like that JKW. I'd just be concerned I wouldn't have enough to do it again.

 

Ideally, the future value will at the end of the PCP, providing you have stayed within the mileage and kept the car in good condition, the car will hopefully be worth more than the future value, so you should have some equity in the car that will act as your deposit for another car in 3 years time, its in the interest of the manufacturer to make sure this happens, as it will be a good selling point for the next PCP they will want you go on!

 

For me, like JKW has said, the finance deal on my vRS is a no brainer, 0%, free servicing, free breakdown etc and with me doing low enough mileage to not worry about wear and tear items I have a car with costs that I can control every month, yes some people say 'oh you will never own the car etc' but I also don't get any huge MOT bills every year, my car is cheap to tax and insure compared to some older cars etc etc overall, providing you can get your head around not owning the car and looking at the car as being something that is just a monthly expense like your mortgage or insurances etc then it will work for you.

 

The current 0% deal is extremely good, and well worth doing.

It sounds very good. My only concern is that I'd be getting rid of my yeti which I own outright to then be paying monthly for a car.

The one thing to consider with a PCP is that if second hand (hence trade-in) values fall like a stone during your term, you don't get stung at the end as long as you keep to the mileage etc.  I guess we all know that a car loses a dirty great chunk of its value as soon as you drive it away and whilst you're only effectively renting the car, if it holds it value better, you win come hand-back or trade-in time.  If it loses more, you don't lose out as a result.

It sounds very good. My only concern is that I'd be getting rid of my yeti which I own outright to then be paying monthly for a car.

 

That's purely a personal thing, only you know if keeping the current car and having no payments is of value over a new car and monthly payments.

If your Yeti is still doing what you want, keeping it would certainly be a lot more cost effective option, but we all love to have something new.

If you definitely want a new car then the current Skoda 0% pcp deal is very hard to beat.