PCH...... the 'new' PCP?

[LeeHarrison]

I'm intrigued to know if the above is true? As of late, not just on Brisky but also in the showroom, I have noticed an imcrease in customers/members asking about PCH quotes. The reason for posting in the Octy section is because this is where the biggest increase appears to be. I'd just like to hear peoples thoughts on the above 'statement' and any reasoning for choosing, lets say PCH over a PCP and any payment differences in quotes that you've received.

Is this the next step of the throw away society? 2 years, give back, pay anything owed, start again?!

Back when I first started out I don't even recall a PCP let alone anything else, it appears the shift has been:

* Cash buyers and some HP,

* Cash buyers, HP and some PCP,

* Some cash buyers, more HP and PCP,

* PCP, some HP, less cash buyers,

* Now? More PCH, some HP and PCP, alot less cash buyers?

From where I 'sit' on a daily basis, the above is what I have seen. You will always have cash buyers and a mix of varying finances but is there a new shift of customers who will buy via the PCH route coming?

I did quote a customer y

on a Yeti Elegance DSG TSI yesterday, ~£750 deposit, £240 p/m over 3 years, a PCO was about £60 p/m dearer on the same figures, seemed like a no brainer but what are peoples mind sets on the matter? Throw away society or a new way of driving a brand new car even cheaper?

[Chris]

I generally always go with whatever the 'cheapest' monthly payment is to get me into that car. Its unlikely I'm going to make it to year 4 or 5 on a PCP or HP but if it gives me reasonable monthly payments I'll go for it.

I can't imagine many people go full term (48/60) months..that's a long time for the same car..especially with the technology advances.

Lee, what's the difference between PCH and PCP/HP? Is it just you don't have the option to purchase at the end?

[john999boy]

What's the PCO that you mentioned Lee?

[Astec123]

What's the PCO that you mentioned Lee?

 

I'd expect a typo with 'O' and 'P' being beside each other.

 

On the topic at hand, I'd say it's less throwaway society and more that people getting a car the cheapest way they can. I personally prefer the freedom that PCP seems to offer, you can keep it or hand it back and you can end the term early. Personally I plan to do this around the 3 year mark, giving me 6 months to find the right new deal to replace the O3. Also means I wont need to worry about the figure on the Odo.

[LeeHarrison]

I generally always go with whatever the 'cheapest' monthly payment is to get me into that car. Its unlikely I'm going to make it to year 4 or 5 on a PCP or HP but if it gives me reasonable monthly payments I'll go for it.

I can't imagine many people go full term (48/60) months..that's a long time for the same car..especially with the technology advances.

Lee, what's the difference between PCH and PCP/HP? Is it just you don't have the option to purchase at the end?

This appears the 'issue'with the PCH you are tied to it for the term, so 2 years is not a major issue but a 3 + contract, you're in for the duration or, I would assume, some cancellation charges will apply. You just don't build up any equity in the car.

[LeeHarrison]

What's the PCO that you mentioned Lee?

Sorry John, fat fingers, should be PCP, they're next to eachother on the keypad

[themanwithnoaim]

PCH is a cheaper and thats the headline seen, offsetting charges to the end of term does follow the theory that money in the future is worth less than money now therefore, buyers are obviously becoming more confident in the state of the economy. 

 

In truth, a car will cost a certain amount whether you pay that evenly throughout the term or a bit up front, some throughout the term and a bit later or possible even all up front, whats the most important to the buyer is what fits their finances and how much RISK their willing to take.  Just like houses, what you really want is just outta reach, I'm sure if you look at the buyers for each type of finance you'll see certain sterotypes, understanding which buyers are which will help your sales figures Preston_Motors.

[LeeHarrison]

Its not a case of helping my sales figures or even working people out, it's more an observation and a massively open question to see IF peoples mind sets are changing. We generally only use VWFS for our financing due to their lower rates/incentives/ease of use and if someone can't get finance, in a nut shell they can't, yes some peoples bank accounts will be a bit more swollen than others but their credit ratings will all be within the set criteria, so there can be no discrimination on that part. Maybe the chap with the slighyly heavier wallet will 'hire' the car, who knows?

Just intrigued chaps and chapettes :-)

[ultramagnetic]

My reason for looking into it is the monthly payments, I do not have a large lump sum to put down on a car, I have always owned second hand cars a few years old which has always worked well for me, but I think the second hand market is a bit weird now - I'm struggling to find the car I want at the right price - I think PCP has had an affect on this (?).

 

Looking at taking out a loan the repayments are roughly the same - I have always swapped cars quite often as in a lucky position to be able to do this, my cars always really been a second car so always a more 'fun' car and my wife always had small or practical car.

 

My situations changed as just had a baby and the present car is just to small sadly, so the cheapest way into a good size family car for me is pch.

 

Pch I know may have its downfalls, i'm just going to try it see how it goes this time - was looking at a yeti, but the octavia scout deal at the moment has tempted me further!

 

Unsure how true this is, when i visited a dealer to talk about pch the manager told me they barely make any money on the deals and its quite new for them to supply pch cars, I have also spoken to three other dealers who in no way pushed pch or even seemed remotely interested to get my business tbh...maybe its true they don't make much as a dealer hence its not pushed?

 

Talking to a work mate who last year bought a brand new seat leon for cash, I asked if he had considered pch - when I showed him some of the deals around he was shocked as it was never given to him as an option he then realised he's probably lost around 5k in around 6 months.....

Edited 8 March, 2015 by ultramagnetic

[Geek42]

Too true regarding the comment about what you really want being out of reach. Definitely with houses anyway.

I think there's some timescale issues here, it's all good and well saying your mate lost 5k in 6 months, but the only values that matter are when you buy and when you sell. Whether PCP, PCH, or cash is cheaper partly depends on how long you keep it. Your mate hasn't actually lost anything until he crystallises the value by chopping it in.

If you want a new car every 2yrs though I'd be reluctant to stump up cash.

[gadgetman]

I assume PCH is technically leasing?

[skovirg]

This appears the 'issue'with the PCH you are tied to it for the term, so 2 years is not a major issue but a 3 + contract, you're in for the duration or, I would assume, some cancellation charges will apply. You just don't build up any equity in the car.

 

Yes but in reality there is very little equity in cars anyway. Customers generally want the maximum GMV to keep monthly PCP prices as low as possible and dealers oblige. I certainly don't expect any equity in my car. Actually, given the very poor residuals, I wouldn't be surprised if the car isn't worth the GMV on the open market. Still, that's not my problem I guess.

[neiln]

As I've never had PCP, can I just check is there any

Difference between the GMFV and the final balloon payment? I understand you aren't bound to paying that? You can instead hand back the car.

[LeeHarrison]

As I've never had PCP, can I just check is there any

Difference between the GMFV and the final balloon payment? I understand you aren't bound to paying that? You can instead hand back the car.

Correct Neil, the final 'balloon' is the GMFV - just depends which way you are explaining it. Yes, you can hand the car back at the end but again any bodywork issues etc will be deducted from the value.

[Dr Zoidberg]

Personal leasing is definitely becoming a lot more popuplar, and awareness has been helped by some of the bargain deals there have been on Golf Rs and BMW 135Ms.

As long as the monthly cost is lower than a PCP then that's going to increase, and for some people they may represent a fairly sensible way of running a new car. Your outgoings are known and fixed as long as you don't exceed the mileage or trash the car. If you've got a monthly car allowance instead of a company car from your employer this a convenient way of getting a car without the need for a large deposit or any long term commitment, and if you are happy to drive whatever is this month's bargain lease with no options it can save you money. I know a couple of people that changed jobs in the last year who had gone from having a company car to a lease as it was cheap and quick.

 

They aren't without problems though - In a couple of years time I can see that there will be a flood of people reaching the end who shouldn't have gone for a lease - some will have gone for totally unrealistic mileages and face huge charges (and some dealers are partly to blame by saying anything to get a signature), others won't have realised there's no option to keep the car, and everyone will find that they are having to pay for every single scratch and blemish on the car as lease companies see this as easy money.

 

What *really* annoys me though, and it's not just confined to leases, is artificially low monthly payments which are only achievable with huge deposits. I know it's there in the small print, but when you see a car advertised at £75 a month and the deposit is £3k it's bordering on dishonest. Spread that over the 36 month term and it more than doubles the true cost per month.

[LeeHarrison]

Personal leasing is definitely becoming a lot more popuplar, and awareness has been helped by some of the bargain deals there have been on Golf Rs and BMW 135Ms.

As long as the monthly cost is lower than a PCP then that's going to increase, and for some people they may represent a fairly sensible way of running a new car. Your outgoings are known and fixed as long as you don't exceed the mileage or trash the car. If you've got a monthly car allowance instead of a company car from your employer this a convenient way of getting a car without the need for a large deposit or any long term commitment, and if you are happy to drive whatever is this month's bargain lease with no options it can save you money. I know a couple of people that changed jobs in the last year who had gone from having a company car to a lease as it was cheap and quick.

They aren't without problems though - In a couple of years time I can see that there will be a flood of people reaching the end who shouldn't have gone for a lease - some will have gone for totally unrealistic mileages and face huge charges (and some dealers are partly to blame by saying anything to get a signature), others won't have realised there's no option to keep the car, and everyone will find that they are having to pay for every single scratch and blemish on the car as lease companies see this as easy money.

What *really* annoys me though, and it's not just confined to leases, is artificially low monthly payments which are only achievable with huge deposits. I know it's there in the small print, but when you see a car advertised at £75 a month and the deposit is £3k it's bordering on dishonest. Spread that over the 36 month term and it more than doubles the true cost per month.

Very well put Dr Z. Pretty much echoed my thoughts. Any Peugeot customers out there who have done a 'just add fuel' or marques with similar catchy wording? Both good and bad stories if anyone has got any? Any words of advice or warnings to people? Appreciate that the Skoda side of PCH will be very small at present and probably quite new in to their contracts but as above, ex/current PCH (whichever way it's dressed up) chaps/chapettes.

[mickycee]

From a personal point of view I choose to go with a pch this time after running my last 2 bmws for 5 and 8 years respectively. I spent about 6 months researching between pch pcp and hp but in the end the deciding factor for me was that in 3 years time I'd prefer to have a new vehicle. So knowing that I decided the more expensive pcp wouldn't be right for me. This is my 1st lease so can't comment on how harsh the finance company will be on wear and tear when hand back comes. But i tend to look after my cars so hopefully won't be too bad. I will admit I'd be more dubious of signing a pch with some of the independent companies out there but do have a little more confidence in vwfs to be reasonably fair when it comes to assessing fair wear in line with the guidelines. My only other worry is to be able to arrange my replacement to coincide with the ending of this contract 2 and a half years time. As for the new trend towards people taking pch over pcp I think cheaper deposits and monthly rates are a factor but as long as people are making an informed choice and have no desire to own the vehicle it can be a reasonable way to run a new car on a budget. I think people's attitude to cars is getting to be similar to mobile phone contracts where the newest and latest model with the latest tech is desired. I dare say if the demand for pch continues to grow we will see manufacturers reduce their replacement and face lift cycles in the future to appease the willing customers desire for new models more regularly. What effect in a couple of years this will have on the used market I really don't know.

I'd be interested to hear from any good folks on here who have previously had a pch and how they found the experience and what pitfalls they found or hidden/unexpected charges they were hit with come hand back time.

[lostp]

Well I think PCH is great if you know your needs and preferences aren't going to change over the contract period. Definitely the cheapest way to fund a new car, as the leasing company will be getting cars cheaper than you would be able to, so there is less depreciation over the term.

 

It's when you sign up for a 2 year lease then decide you hate the car, or you suddenly find out you're not having one baby, you're having twins, or that your new job requires a 50 mile commute instead of a 5 mile journey and you only signed up for a 5,000 mile lease that you run into issues because of the inflexibility.

[gadgetman]

Very well put Dr Z. Pretty much echoed my thoughts. Any Peugeot customers out there who have done a 'just add fuel' or marques with similar catchy wording? Both good and bad stories if anyone has got any? Any words of advice or warnings to people? Appreciate that the Skoda side of PCH will be very small at present and probably quite new in to their contracts but as above, ex/current PCH (whichever way it's dressed up) chaps/chapettes.

The Peugeot just add fuel deals started at 10k a year, then 8,and the recent disclaimers say based on 6k/year!

That's half the national average.

[LeeHarrison]

The Peugeot just add fuel deals started at 10k a year, then 8,and the recent disclaimers say based on 6k/year!

That's half the national average.

 

And that my friend is just one possible sting in the tale.

 

Did a quote earlier for a customer, Octavia Estate, 1  on PCP the other PCH and although the deposit was about £700 less on the PCH the payments were within about £30 of the same PCP. By the looks of it, and I think this was mentioned in an earlier post, for a bog standard spec it seems to be a good deal, just when you start cracking on with a few expensive options the monthly's start getting much closer.

[Dr Zoidberg]

Are the excess mileage charges the same on PCH and lease?

The 6k mileage on the Peugeot deal is fine for some people - it's about 3 times what my GF did last year - but they need to make it very clear what it is beforehand.

[LeeHarrison]

Just waiting on a Yeti to go out on a PCH - excess mileage is 3.6p per mile.

 

By no means extortionate as long as you don't go in to the thousands on the miles ££££ 

[TurismoM]

PCH was the only option for me, I only do 6K per year so the payments are miles away from the PCP.

[Dr Zoidberg]

Just waiting on a Yeti to go out on a PCH - excess mileage is 3.6p per mile.

 

By no means extortionate as long as you don't go in to the thousands on the miles ££££ 

 

That's not bad at all - even if you do 30k miles over that's only £1080 in penalties.

 

With rates that low it makes sense to have a modest mileage on the contract and just put a bit extra aside each month.

Better to do that than over esitmate your mileage and pay for it whether you've driven the car or not.

[TurismoM]

There is always the chance that the car might get stolen, written off or traded in early.