Iv always put maximum deposit in, so i have low monthly payments and found 14-22months i get the deposit i paid back and just as someone said rented the car, which im happy with

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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.

 

I would point out that you're not just paying for the depreciation, you're also paying interest on the loan. Unless of course the finance deal is 0%.

Excess mileage charges only tend to apply if you want to hand the car back and walk away then they charge you for those added miles you do

 

If you decide to keep the car or as most do trade it in for another then yes your mileage is a factor as it is with any car whether owned outright or on hp for a trade in value but no salesman has ever said to me well your pcp was for 6k per annum and in 2 years you've done 22k so you owe us the excess miles charge.

 

Most of the recent cars I've had have been on 6k per annum pcp deals well I know i do double that in a year but as above unless you wanted to hand it back and walk away this becomes a moot point.

 

Im awaiting delivery of my 3rd octavia now on a 3 year pcp to get the free servicing and the first two I had 18 - 24 months and not a word was said about me doing more miles than my agreement on either.

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 :-)

Perfect. That makes perfect sense. Sorry, my knowledge (as with the OP) is quite vague when it comes to the end of the PCP, and what happens.

I havent really considered anything but keeping the car long term.

I actually put a bit of a deposit in, as i wanted to keep the final payment down. I wont see that back, but id be more likely to have a decent amount left over for a deposit on a new vehicle if i so decided to go down that route. Would keep the monthly payments down.

You should also be aware, that assuming your PCP is through Skoda or rather Volkswagen Finance, you could also migrate it to another car in the VW range. I believe this is true of any way you've financed it with a VW Finance product.

Excess mileage charges only tend to apply if you want to hand the car back and walk away then they charge you for those added miles you do

If you decide to keep the car or as most do trade it in for another then yes your mileage is a factor as it is with any car whether owned outright or on hp for a trade in value but no salesman has ever said to me well your pcp was for 6k per annum and in 2 years you've done 22k so you owe us the excess miles charge.

Most of the recent cars I've had have been on 6k per annum pcp deals well I know i do double that in a year but as above unless you wanted to hand it back and walk away this becomes a moot point.

Im awaiting delivery of my 3rd octavia now on a 3 year pcp to get the free servicing and the first two I had 18 - 24 months and not a word was said about me doing more miles than my agreement on either.

That's interesting as I don't usually do pcp due to the cost increasing vastly when I say my mileage is 20-25k per annum.

That's interesting as I don't usually do pcp due to the cost increasing vastly when I say my mileage is 20-25k per annum.

 

Seconded here, never been a problem at all, they value the car and use that as the amount to cover the balance to settle and any deposit on the new deal - never even mentioned the mileage at the time of change.

 

Even with that I tend to go for 12k per year just in case there's a problem,  VW group have always offered deals with 10K miles on but asking for the fee for 12K miles made no difference at all to the monthly payment.

I actually put a bit of a deposit in, as i wanted to keep the final payment down.

 

Putting in a deposit doesn't (usually) alter the final payment - it just brings the monthly payment down.  The final payment is (again, usually) a set figure based on the car, how long the finance is over, and the agreed mileage.  As I said, it's set at a level that, all things being equal, should mean that you have a certain amount of equity in the car at the end of the finance agreement to use as a deposit on the next one.

That's interesting as I don't usually do pcp due to the cost increasing vastly when I say my mileage is 20-25k per annum.

 

As I've said, the final payment is based on three things: the car, the length of the PCP agreement, and the agreed mileage.  This final figure is then set so that when you get to the end of the agreement, and provided you've done roughly the agreed mileage, you will have equity to use as a deposit on your next car.

 

If you agree the mileage at 6k/year, then that's fine - you'll pay less each month.  However, if in reality you do 25k/year, then you're likely to end up in the situation that the car is actually worth less than the final payment (or, at best, no more, so you don't have any equity for a deposit).  If it is worth less, then you can just hand back the keys, and pay the excess mileage charge.  Or you can p/x (or sell) the car and pay off the finance - this may cost less than the excess mileage charge.  If it's not quite that extreme (e.g. you only do 12k/year), then you're still likely to end up with some equity - just not as much as if the agreed mileage on the PCP was 12k/year.

 

The other thing to think about is that the higher the final payment, the more interest you're going to be paying on it over the course of the PCP agreement (unless you're on a 0% deal, obviously).

 

If you want to get the maximum benefit from a PCP deal, the best thing to do is not put in a massive deposit, and to be vaguely honest about your mileage.  Yes, you can bend the figures to suit circumstances each time and end up paying less per month as a result, but at the end of the agreement you may not have as much equity, and so you may not be better off in the long term.

I would point out that you're not just paying for the depreciation, you're also paying interest on the loan. Unless of course the finance deal is 0%.

Well yes obviously, i managed to get the 0%

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Like anything, there's always a benefit to the dealer, as has been eluded to:

 

At the end, if you hand back the car and walk away and it's worth more than the GFV, the dealer gets a cheap (on paper) car for the forecourt.  Even if you have excess mileage charges to pay, those are set at a price to not disadvantage the dealer

If you buy it at the end at the GFV, the dealer loses nothing as you've just simply completed the agreement.

If you p/ex it in at the end, the dealer gets a sale on a new one, and if (as it should) it's worth more than the GFV, no-one loses - see the first point.

 

As a buyer, you have a guarantee you won't end up with a car that didn't hold its value as well as you might have thought.  If it's worth more, you win either at buy it time or trade in time.  If it's worth less, then you don't lose out.

 

OK, you pay for that security...you can (usually) get a 5 year personal loan for the whole purchase price for about the same as 3 year PCP rates at which point the car is yours - depends on your circumstances though.

 

I'm sure most of you know all of the above though

This is really good stuff - it wasn't obvious to me

Putting in a deposit doesn't (usually) alter the final payment - it just brings the monthly payment down.  The final payment is (again, usually) a set figure based on the car, how long the finance is over, and the agreed mileage.  As I said, it's set at a level that, all things being equal, should mean that you have a certain amount of equity in the car at the end of the finance agreement to use as a deposit on the next one.

Not in my case.

I played about with deposit and monthly payments to alter the final amount. I said that i would likely keep the car long term, and that i would prefer to pay what i could afford beforehand, and every month, so i knew i wasnt going to be left with a large amount at the end. Thats definitely what we did.

This is really good stuff - it wasn't obvious to me

Glad it helped.

 

In short, what you pay for the car (deposit + monthly payments) is effectively the depreciation, plus (all being well) a small bit of equity.  Given the number of possible scenarios (above) it covers, you can see why they are popular.  You get a new car without forking out the whole lot up front.  It's not for everyone though - all depends on circumstances and what the individual wants.

PCP is a very flexible way of funding a car, so long as you know and understand the quirks/pitfalls of how they work if you like to change your car often and play the game it can work well.

I went to PCP from a company car; for me its about balancing the monthly cost with the mileage allowance.

I took a 10k/year deal over 42 months for an acceptable monthly payment; now im highly unlikely to keep the car to anywhere near the end of its term and typically I do more than 10k/year just in personal mileage.

There's a few ways I play this:-

Always put a small deposit, £500 is now about my limit.

Choose a reasonably low mileage allowance to benefit from the lower monthly costs.

Put a small chunk of money in the bank monthly in the event I find myself for one reason or another having to pay for excess mileage....given I wont likely keep the car all that long and will trade/sell it is highly unlikely I will so see it as a half decent way to save some money....but if I have to use it on the car so be it.

In 12-18 months I find myself having done considerably more mileage than I should have (eg 20-25k miles rather than the 15 or so I probably should have done) I'll trade it against another car....the condition of the car will count more than the mileage as 25k is nothing for an 18 month old car nowadays......sure I may come out with little or no equity (I only but 500 notes in anyway) but the money I have been saving for the past 18 months would almost certainly fund a small shortfall and deposit on a new one should it need to.

Ultimately Id rather pay as little as possible for the car, keep the money in my account and pay for mileage Im going to definitely do rather than pay up front for mileage I may not use up. Theres an inherrent risk but so long as you dont end up halfway through the agreement having done well over your full term allowance and have made other allowances for any "overuse" theres a way out.....

V worst case voluntary severance of the agreement at 50% completion is an option, walk away from the car and pay the excess mileage.....or take a loan and buy it and run it to death......quite a few choices.

Worth bearing in mind that an additional 10k miles will only cost in the region of £750 which isnt really that much money in the grand scheme of things.......

OK, you pay for that security...you can (usually) get a 5 year personal loan for the whole purchase price for about the same as 3 year PCP rates at which point the car is yours - depends on your circumstances though.

Not sure you have your sums correct there. Assuming no extra benefits of things like 0% deals, a 3 year PCP will be ~20% less monthly payment over a 5 year repayment loan. That's one of the reason why PCP's are so popular.

Steve

Not sure you have your sums correct there. Assuming no extra benefits of things like 0% deals, a 3 year PCP will be ~20% less monthly payment over a 5 year repayment loan. That's one of the reason why PCP's are so popular.

Steve

 

Sums most definitely wrong. A £24,000 loan over 5 years is £481.30 a month for 60 months (Sainsburys 7.8%) whereas a 3 year PCP is £300 (roughly) with nothing down as a deposit.

 

The £300 was based on the 0% APR offer though.

Edited 9 May, 201412 yr by JamesVRSmk3

Sums most definitely wrong. A £24,000 loan over 5 years is £481.30 a month for 60 months (Sainsburys 7.8%) whereas a 3 year PCP is £300 (roughly) with nothing down as a deposit.

The £300 was based on the 0% APR offer though.

not exactly an accurate comparison then if one is on 0%. Depends I suppose if you want to trade in regularly. Generally I keep my car for at least 5 years so prefer to go for a personal loan. Bought the wife a fabia recently and got the dealer to match the finance to the cheapest personal loan I could find. Saved about £20 a month compared to what the dealer originally quoted.

not exactly an accurate comparison then if one is on 0%. Depends I suppose if you want to trade in regularly. Generally I keep my car for at least 5 years so prefer to go for a personal loan. Bought the wife a fabia recently and got the dealer to match the finance to the cheapest personal loan I could find. Saved about £20 a month compared to what the dealer originally quoted.

A 3 year PCP 10k per year on similar APR would be about ~£400 a month with a GFV of ~£10.5K

What started out as a 'quick' question by me has turned into a really in depth thread that address many points so to all those that have contributed, thank you and on behalf of people like myself who have gained from reading this thread, well, we're all grateful.

So, now all I need to do is hope that Skoda do a tasty deal on the Octavias again in the not too distant future so I can get get my dream vRS !

Cheers one and all, top guys.

I'm due to pick my car up next month on a 42 month PCP, so I'm hoping the mark 3 facelift Octavia vRS is available late 2017 on 0% PCP and I'll simply switch over!

Very good thread.

 

I was going to keep my car long term, but got talked into using PCP by a friend and now after two to three years will be changing the car for a new one.

 

In reality unless you pay cash for a car or use a personal loan the car does not belong to you using HP until the final payment and is no different to PCP.

Sums most definitely wrong. A £24,000 loan over 5 years is £481.30 a month for 60 months (Sainsburys 7.8%) whereas a 3 year PCP is £300 (roughly) with nothing down as a deposit.

 

The £300 was based on the 0% APR offer though.

I was basing it on what I'd heard, from people doing 20k/year (and if the PCP APR rate wasn't zero either) - when "cash for car" schemes were being considered by previous employers.

 

If only doing low mileage (I call 10k/year low as I tend to do 30-35k/year), then you can get a lower PCP figure.

PCP's don't really work for me either, purely down to my mileage.

 

I cover between 25,000 and 30,000 miles a year which over a 36 or 42 month PCP results in a pretty low MFGV (minimum future guaranteed value) making it more difficult to get back into another deal.

 

I tend to buy 1-2 year old used cars on a straight forward 3 year personal loan and run the car for as long as I can.