Hi guys,

first time I've bought a car from new so plz excuse the nativity....

Just wondered - if I have this new fabia I'm waiting for then after 2 years they start contacting me for upgrading to a new finance plan and car - how does it work?

I.e it's worth about 15k now and in about 2 years it'll be around 9k - taking that into account in those 2yrs I will have paid around 5k into the finance so that should be a difference of 4k to put into the new car. Right?

What's the catch and how do they screw me? I'm being sceptical obviously.

Edited 5 July, 201510 yr by anst11

On the example you gave you'd be in negative equity by about a £1000. The car has dropped £6k in value but they've only had £5k off you, the negative equity may be a bit less as you'd get an interest rebate if it's not 0% finance finance you're getting.

PCP works the same as std HP with one difference

 

HP you buy the car and a large chunk of depreciation hits as soon as you sign the paperwork and drive it off the forecourt

 

your payments then decrease the amount owed faster than the ongoing depreciation so about 50%-60% through the HP agreement amount owed goes below the vehicles trade in vale

 

with PCP you only fund the depreciation (purchase price - guaranteed residual value) so the payments are lower but it takes longer (75%-80%) through the agreement to reach the breakeven point where the residual value is greater than remaining balance

 

the biggest choice when to purchase the car by loan / HP or on a PCP contract is the length of time you expect to keep the car

 

if only 2-3 years then PCP is the way to go especially with the current 0% apr deals

 

4+ years then loan / HP is the way to go

 

the grey area is 3-4 years then it comes down to deals and personal preference

how does it work if you want to change car manufacturer if you've got a PCP contract?

Exactly the same as if you stayed with Skoda, the other manufacturer/dealer settle your finance the same way Skoda would then you take out the finance with the new one.

which is exactly what I did in march when I traded my fabia GLII estate for a nice shiney new Hyundai i20 as I was not impressed with the new fabia III

 

the only difference is when trading in against a different manufacturer they will tend to offer less trade in as they are not a skoda dealer, so likely the car will go to auction, the dealer I chose had a skoda franchise in the group so I did not do to bad out of it

 

so you are not locked into skoda or any other manufacturer just because you buy on PCP, in 2 years time I would be able to trade my i20 for a fabia with no issues, you just need to get the relevant settlement figure and compare that to what is offered as the part ex value by the new dealer

Lease?