Can we talk about PCP?

[Rednaxela]

Our Rapid Sport is costing us £122 a month over 3 years with a final payment of £5392.

Deposit was £4146.

All the adverts say you can use the car against a new deposit if you decide to get a new one at the end of the three years.

What I don't understand is that at the buy off point, the car is surely still not mine, hence I cannot have any money in it to use against a new one.

Has anyone been through the cycle before who can explain the process based on my figures?

Many thanks, Alex

[999pooch]

They will value your car at the point of sale. If you have paid more (deposit + monthly payments) than the value of your car at that point, that difference is the equity you can you use for your next deposit

[Rednaxela]

Oh ok. Is it typically a few tens or hundreds?

[citigoblack]

If you keep it in excellent condition as most people on a car forum probably do and the mileage is at or below the agreed amount you should have a chunk of equity over the ballon payment amount to use as a deposit against a new car

The figure is the lowest the car will be worth in average condition within the agreed mileage which they calculate

[Rednaxela]

Ours will be in great condition, but alas the sport wheels are getting kerbed.

As it's the wife's main motor, I'm starting to wish we just went for the regular rapid with tyres that offer some protection to the wheels.

[mu7]

If the final payment is set too high, you'll have no equity but you'll have paid less over the term than you should have, If it's too low you'll have equity, but have paid too much each month. You pay either way for a new vehicle, it's just whether the cash is tied up in the old car or still in your pocket.

 

There are a few ways to lose out though... Damage the car or run at excess mileage. Or just not getting the right trade in price if you do have equity, remember you can sell it to someone else for cash and settle the finance if you prefer.

Edited 16 April, 2015 by mu7

[silver1011]

Our Rapid Sport is costing us £122 a month over 3 years with a final payment of £5392.

Deposit was £4146.

All the adverts say you can use the car against a new deposit if you decide to get a new one at the end of the three years.

 

£4,146 deposit, £4,392 of payments and a £5,392 final payment totals £13,930.

 

Seems quite a good total package.

[Stormchaser]

Wish mine was but I opted for Race Blue paint,Full size spare wheel and an Amundsen stereo so hiked it up.

0 deposit

42 months at £242 [emoji15]

£14770 total.

Umm ripped off springs to mind.

Sent from my iPhone using Tapatalk

[chrisgreen]

And this is why I will never, ever lease a car on PCP, I prefer to buy on HP and have something to show for my outlay.

Take my Spaceback. No, please - take it

£1,150 deposit, 60 months at £200 - car is mine, I own the asset at the end of it and have something with a residual value to trade in or sell on privately. Moreover, I own the asset, so can keep it as long as I want, and don't have any mileage limitations or surcharges etc to worry about.

[camelspyyder]

Agree, I buy not lease too.  Cant remember the terms, 0 deposit and 36 months I think, and then it starts again to get SWMBO a new car, and then me (Oh no last time it was my turn for a new car she had a conservatory instead )

Edited 17 April, 2015 by camelspyyder

[Rednaxela]

£4,146 deposit, £4,392 of payments and a £5,392 final payment totals £13,930.

 

Seems quite a good total package.

We added heated seats, hill hold and auto lights/wipers as well, so happy with the deal.

[silver1011]

And this is why I will never, ever lease a car on PCP, I prefer to buy on HP and have something to show for my outlay.

Take my Spaceback. No, please - take it

£1,150 deposit, 60 months at £200 - car is mine, I own the asset at the end of it and have something with a residual value to trade in or sell on privately. Moreover, I own the asset, so can keep it as long as I want, and don't have any mileage limitations or surcharges etc to worry about.

 

So £13,150?

 

Not that dissimilar to the PCP then?

 

That and the example PCP is over 3 years rather than 5 years, so the PCP car potentially becomes an owned asset before the HP?

[bluecar1]

you can contact skoda finance and request a settlement figure any time in your agreement which will be valid for one month from issue

 

early settlement does include an interest rebate (unless you managed to get 0% deal)

 

you can then use CAP etc on autotrader to get a fairly accurate figure based on milage and condition for about £4

 

with these figures you can estimate your equity in your car which should give you and idea of when to do a deal

 

you normally seem to come out of negative equity about 2/3 - 3/4 through your agreement

 

you will normally find a skoda dealer will give you a better price than average / near the upper end of the band, a non skoda dealer will normally be on the lower end as they will normally send the car to auction unless they have a skoda franchise in there group

 

also don't always accept their first offer if you are not happy with it, walk away and think on it for a week and see if it improves, also what they offer as extras etc can vary depending on what model you are looking at and what they need to sell to meet their targets so better deals to be had in the second half of the month / 3rd month in the quarter

Edited 17 April, 2015 by bluecar1

[chrisgreen]

So £13,150?

 

Not that dissimilar to the PCP then?

 

That and the example PCP is over 3 years rather than 5 years, so the PCP car potentially becomes an owned asset before the HP?

Potentially, but you still have mileage restrictions and surcharges hanging over you, especially if you don't make the massive balloon payment at the end to settle the finance.

Also. While I can't speak for the specifics of the Skoda/VW PCP terms, with many car makers you never formally own the car, even after clearing the PCP finance, and have to make a nominal annual ongoing payment to retain the vehicle. Car makers do this to deter you from "buying" the car at the end of the PCP period. They want you to trade the car in for another model or walk away, as PCP is designed to generate a steady flow of low mileage, not too old vehicles for the carmaker's approved used programme.

[bluecar1]

mileage payments only normally apply if you choose to hand the car back and walk away

 

the residual value figure is normally on the low side to ensure some equity at the end of the agreement and assumes good to poor condition it seem so unless you do interstellar mileage you should have some equity, I have been told the sweet spot for deposit is about 10-15% of the vehicle value, seeing what I have with my own cars this appears to be correct

 

once you fulfil your obligations under the agreement and settle your account your then own the vehicle as though you used a standard loan

 

the way PCP works is the payments are worked out on the difference of the purchase price to the residual value calculated by skoda, and the interest is based on the total value

 

it is not scary, and quite simple really, PCP payments on a new car are not far off what you would pay on a bank loan to own a 3 year old car

 

whether PCP is for you depends on how long you intend to keep the car, if you like to change on a regular basis and have a nice new car then PCP is for you, if you like to keep a car for 5 years plus then HP or a std loan is the better option

Edited 17 April, 2015 by bluecar1

[JonBRapid]

I can not advise anyone on financial service but in my experience I would opt for a 5 year hire purchase with as little deposit up front, then about 2 and a half years in ask for a settlement figure and see if the car is worth more than I owe. Sell the car for more and start again. Having said that this time round I payed cash with the intension of keeping the car till I get to 75,000 miles or more! I bought it less than a year old (1.2 elegance) for less then 9500 around this time last year.

[skoda1982]

The way i look at it is could you buy a 3 year old car for the balloon payment. If i was going to keep the car at the end i would get a pcp on a 5000 mile pa its cheaper payments

[j0hn]

Some people don't want three year old cars, some people want a brand new car and don't have the requisite capital to go and buy them outright.

I looked at a PCP and decided to treat it as paying the depreciation of the car over 3 years before getting another one.

[bluecar1]

Some people don't want three year old cars, some people want a brand new car and don't have the requisite capital to go and buy them outright.

I looked at a PCP and decided to treat it as paying the depreciation of the car over 3 years before getting another one.

that is pretty much how PCP works in a nutshell

[PJR77]

Yes, I too viewed it as a loan of the depreciation. When it is at 0% I think it works.

[wire]

And this is why I will never, ever lease a car on PCP, I prefer to buy on HP and have something to show for my outlay.

Take my Spaceback. No, please - take it

£1,150 deposit, 60 months at £200 - car is mine, I own the asset at the end of it and have something with a residual value to trade in or sell on privately. Moreover, I own the asset, so can keep it as long as I want, and don't have any mileage limitations or surcharges etc to worry about.

 

The difference here Chris (just using your quote as an example) and many others is that you have paid finance on all your car over 5 years, then you own it.

 

I have taken mine with PCP on 0% finance over 3 years.

 

Basically I will be making 3 yrs payments which equate to roughly half the balance) at 0% finance (no brainer) then either finance the balance which will only be 2 years interest on approximately half of the original finance of the the money you borrowed. Then at the end of that the car is mine. Finance settled car is mine. Same as your 5 year finance deal but cheaper in the long run.

Option two is to give the car back and walk away from the deal and pay nothing else provided you have stayed within the give mileage you signed for.

 

If you are going to keep the car and re finance the balance (ie a bank loan) then the mileage part of the deal doesn't matter. That only comes into play if you hand the car back and walk away.

Edited 22 April, 2015 by wire