Hi all.

Like a fair few of us I guess, I have a PCP arrangement on my VRs.

Now I appreciate it's a long way off just now but there will come a time when I have to decide what to do regarding renewing the deal / giving the car back or paying the balance.

Having not had a deal like this before, my question is this. Assuming I want to 'roll' the PCP on again so to speak with a new car, how long before the deal ends should I start discussions assuming a new car if I ordered one would typically have a lead time of a few months.

I know I could ask my local stealer to clarify but at 9.49pm they're closed the miserable lot.

The dealer you purchased from will call a while before it's due as they want your business again. You aren't obliged to take it back to them though. You can go to any make/dealership and they can make you an offer.

Ok! cool, cheers!

What James said, but if you have a car in mind it may be worth keeping an eye on waiting times (Mk 3 VRS?) and starting sooner if your dealer has not contacted you.

Be proactive with the dealer if you see an interesting deal e.g. whilst VAT free offer applies. Otherwise they'll call you by schedule and not necessarily when the best deal (for you) is available. They will handle the migration of old to new deal and can be quite flexible, so not strictly 36 months or whatever...

Just be wary of the lead time, my deal ends this month and I should have my new car by then. Didn't think it would be this tight when I ordered in November. They have offered to extend my contract if the car doesn't arrive by this point but I guess this option is dealer dependent.

I'm planning to contact the dealer with 6mths to go unless a blinder of a deal kicks in.beforehand.

I got rid of my last pcp 18months in traded it in against the mk3 had £4500 equity in my mk2 which is what i put down on it so only cost me my monthly payments. Don't worry about sticking to the term, the dealers treat them as a normal car so for instance if you like a vw golf, got to vw they'll give you what the cars worth (as with any car you took) look at how much you have finance outstanding pay that off and give you whats left, don't even need to worry about the milage

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I have NEVER got to the end of a PCP, and always speak to the dealer when I feel it's time for a change, in recent times we have swapped cars at 2 1/2yrs (twice), 2yrs and my current Yeti Elegance is just over one year old, but on a relatively expensive PCP at 6.9%.  Went into the dealer when passing there last month as I knew there were 0% offers on and wanted to see what the numbers were.

 

It was cheaper for me to hand my Yeti in and start a new PCP on a brand new car than to keep going on my current deal, so have ordered a new Octavia Elegance (already built and waiting for shipping) that should be here this month.

 

The 0% deal and the residual value meant that a car that costs around £3k more to buy new, actually works out around £25 per month less to pick up on a PCP.  Assuming the Octavia is fine, I will likely keep it for 2yrs or look at changing when the right offer is available.

 

Obviously doing it this way means in I effect rent my car, but why would I want to buy something that depreciates?

Solid advice there guys, thank you.

As you may be aware, my VRs was a cancelled order so I took what was on offer, as the details for the 2015 model become a little clearer, I might chop mine in early and get another VRs specced exactly the way I want it. Obviously interest rates play a part but the wait doesn't bother me too much as I already have one!

Obviously doing it this way means in I effect rent my car, but why would I want to buy something that depreciates?

PCP is just an alternative form of financing. You own the car, you just have financed it on a asset secured basis with a final lump sum payment. It the same as buying a house with a mortgage. If you don't meet the repayments, the finance company can seize the house against recovering monied owed.

Like you, I view PCP as a very flexible way of financing a car and rarely keep my two main use cars longer than four years so it suits me too.

I must say, in all the time I've had cars on PCP, with various makes, I have never once had a dealer or manufacturer contact me near the end of my loan to discuss buying a new car. Plenty of constant contact about new vehicles, new offers etc, but none in reference to a loan arrangement finishing.

Cheers

Steve

I bought my VRS estate for £28k on PCP with a view to keeping it for 10 years. I did this with a V6 4motion Golf and it works out pretty well. My VRS is my first PCP purchase.

This is primarily the reason why I felt justified loading it up with the extras I wanted as 10 years is a long time to live without functionality you wish you had included. I also have 4 years warranty.

So over 10 years, that makes my VRS £233.33/month. As nearly all family cars will depreciate to almost nothing over 10 years, the monthly cost seems pretty good to me considering the car is excellent and covers all bases for the foreseeable future.

What you guys are talking about here has me thinking about my strategy. Generally speaking, if I hand back my car after 3ish years for another one, as long as I don't have to put extra money down, the monthly payment remains the same and the car is equal to or better spec, I'm getting better value for money right? Same monthly cost, better car.

Am I missing something or is this better than my 10 year strategy?

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Just remember to watch the excess mileage charges at the end of the term as they can be quite punitive, although they only apply (I think) if you hand the car back at the end and walk away. I guess if you px against another car then the excess mileage will just be reflected in the px price offered.

 

Personally we have always gone to the end of the deal, paid the balance (or got the purchaser to do it for us) and then sold the cars privately. For us, this seems to offer the best deal and gives us more flexibility. We usually get back our initial deposit (some times quite a bit more, notably the Yeti and occasionally a bit less), though this does depend on the size of the deposit put down.

So over 10 years, that makes my VRS £233.33/month. As nearly all family cars will depreciate to almost nothing over 10 years, the monthly cost seems pretty good to me considering the car is excellent and covers all bases for the foreseeable future.

....

Am I missing something or is this better than my 10 year strategy?

 

 

You've done the maths based on your own circumstances. But £233 a month would get you a brand new car ever 3 years on a PCP with admittedly a slightly lower spec, but you'd get warranty etc.

I'm expecting calls from our dealer about 2 years into the PCP on the Citigo - should be some equity in it as we're well down on mileage versus the plan (and we had the lowest anyway).  3k per year, and it's done 2k in 18 months..

 

Wifey has already started looking at what's about and still keeps coming back to the Citigo for her needs (popping around town and can get her 84 year young mum in it).  So she might have the same again but in a different colour...although she was taken by the look of a Rapid Spaceback.  I've told her to see what the new Fabia comes out like.

Just remember to watch the excess mileage charges at the end of the term as they can be quite punitive, although they only apply (I think) if you hand the car back at the end and walk away. I guess if you px against another car then the excess mileage will just be reflected in the px price offered.

That's correct. The excess mileage charge will only come into play if you hand it back to Skoda. Any other dealership and you won't pay anything although some may reflect it in the PX value.

A colleague did the "cash for car" at his previous job and took out a PCP (then left the company, so ended up with a car not being funded by his new job).  He consequently went well over the mileage and it worked out cheaper to buy the car at the end than the excess mileage charges alone..

I bought my VRS estate for £28k on PCP with a view to keeping it for 10 years. I did this with a V6 4motion Golf and it works out puretty well. My VRS is my first PCP purchase.

This is primarily the reason why I felt justified loading it up with the extras I wanted as 10 years is a long time to live without functionality you wish you had included. I also have 4 years warranty.

So over 10 years, that makes my VRS £233.33/month. As nearly all family cars will depreciate to almost nothing over 10 years, the monthly cost seems pretty good to me considering the car is excellent and covers all bases for the foreseeable future.

What you guys are talking about here has me thinking about my strategy. Generally speaking, if I hand back my car after 3ish years for another one, as long as I don't have to put extra money down, the monthly payment remains the same and the car is equal to or better spec, I'm getting better value for money right? Same monthly cost, better car.

Am I missing something or is this better than my 10 year strategy?

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I have (might become had) a similar 10 year strategy. I think the cost benefit of changing every 3 years is in having practically fixed maintenance costs. After 3 years warranty is up we're rolling a dice that a major failure doesn't occur, also there will extra maintenance costs such as cam belt, tyres, brakes etc.

Edited 8 May, 201412 yr by classic

So over 10 years, that makes my VRS £233.33/month. As nearly all family cars will depreciate to almost nothing over 10 years, the monthly cost seems pretty good to me considering the car is excellent and covers all bases for the foreseeable future.

Am I missing something or is this better than my 10 year strategy?

On your logic above, at the end of your ten years you'd have £28K to spend on your next car by putting away £233.33 per month. The only issue is that in ten years time £28K will not get you as much as now. Assuming you'd be putting this away in a savings account you are going to get some benefit there, but to be safe I'd assume you need to put ~20-25% extra away, so about max ~£290 a month

As per jlwah, I've tended to get required deposit on new car back in equity difference between outstanding payment and sale price on the existing one. This is much harder to do with a part ex, but still possible if you get a good deal at initial purchase or have a car that performs better in residual values than expected, like the Yeti. Otherwise in most cases you'll need to sell privately to get all or greater than initial deposit back. The safest way to look at it is to assume that you would need to top up deposit every 3-4 years with ~£1000.

As pointed out above, you do have the advantage of forward visibility of no surprising costs due to being in warranty and a good degree of visibility of service costs over term of PCP. Both are harder to predict over a 10 year term.

Edited 8 May, 201412 yr by stevehg

A colleague did the "cash for car" at his previous job and took out a PCP (then left the company, so ended up with a car not being funded by his new job).  He consequently went well over the mileage and it worked out cheaper to buy the car at the end than the excess mileage charges alone..

 

A quick calculation based on £10k residual value and 7.5p per mile excess means 133,333 miles over the limit. Was he running a 24/7 minicab?

I think that's not far off the truth - he took it out on a 10k pa contract and promptly did 35-40k pa for 4 years - I think,  It was an Insignia, not a Skoda, so the residual value would be about 74p..

With pcp you are only pay for the depreciation. People say to me but you dont own the car, well yes you do in the same way you own a car on normal finance however you are spending less of your monthly budget to have trouble free motoring.

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Wouldnt you be paying a deposit everytime you went for a new car though? Or do they take the car you hand back as the deposit for the new vehicle? Surely not.

You PX your old car, they pay the finance off and the remaining left over is your deposit.

Wouldnt you be paying a deposit everytime you went for a new car though? Or do they take the car you hand back as the deposit for the new vehicle? Surely not.

 

Let's say the final "option to buy" payment at the end of the PCP is £10k.  This isn't the value of the car, just what you will owe at the end to pay off the finance.  The value of the car, in good condition and with the agreed mileage, should be more than this.  This is, of course, dependent on many things, but that's the way PCP finance is constructed.  If the value of the car is £12k, then you'll have £2k deposit for your next car.  If you put in a massive deposit up front, then you're not going to get that back, but if you didn't put anything in up front, then you're in a better position because now you have a deposit.  That's why (especially with 0% finance) putting in as small a deposit as you can is nearly always best.

 

So, if you're going to change your car every 2-3 years, then the theory is that you'll always have a deposit to put down on the next one without having to put more money in yourself.  Of course, if you do put more money in, then the monthly payments would be less... and if the APR is high, then this will save you money over the course of the deal, but you obviously have to have that lump sum to put in.

 

And, of course, your car will always be under warranty, which is another bonus.  And if you always manage to get 3 years' free servicing, then even better :-)