Depreciation

[AllanDJ]

It kind of proves the point that if something seems too good to be true, then it usually is! Namely, the supposedly zero % PCP deals that were originally only supposed to be for a month or two but Skoda kind of kept it going and going, not surprisingly lots of people bought into that deal (myself included), end result factory working flat out making many thousands of Octavia's. Classic Supply & Demand really, huge supply of most products inevitably will weaken residual values, that coupled with probably over optimistic original RRP is great news for those buying second hand but a bit of a kick in the teeth for those who bought new.

What Skoda gained initially was greater market share and the cost savings from running their factory at full output levels, but that short term gain has turned into longer term pain, which the recent VW scandal/s have only worsened. It rather looks like the estimations for GMFV on the Octavia 3 were simply a work of fiction, which is bad news for all concerned. For those of us who currently own Octavia's on a PCP deal the only options open are:

(1) Hand the car back at end of deal or as soon as your deal allows, in my case on a 42 month deal, I can terminate it at 36 months if I give I think a months notice.

(2) Buy it, which only makes sense if you intend to keep the car and run it for another two or three years at least.

(3) Hope that VW/ Skoda sweeten the deal for current PCP deals with either an extra trade in allowance to compensate for the excessive depreciation (some of which comes from recent emissions scandal) or a discount off of the GFMV for those who want to buy their car. Either way that would help redress the balance a bit.

Skoda doesn't want its customers to be unhappy because unhappy customers won't buy any more cars from them. November sales figures in Scotland showed both VW and Skoda sales to be down by around 1/3, whereas overall new car sales were about the same as in November 2014. Obviously people have made alternative choices. To restore confidence VW/ Skoda need to take some positive action to support current customers, if they want these existing customers to even consider buying any VW group car ever again. The VW group has made a very impressive job of turning a drama into a serious crisis by not communicating with its customers and then announcing that only US owners will receive any compensation. We are all damaged by the current VW scandal, whether our cars are amongst those with the dodgy software or not. And who would choose to buy a new car from a company that has chosen not to look after those who very recently did buy a new car from them?

[brad1.8T]

I understand depreciation and that it loses £2-3K as soon as you drive it off the showroom floor, it's simply the 50% drop after only 18 months seems to be rather steep and even after flattening out, will it only lose another 10-15% over the next 15-18 months to be worth around 35-40% after 3 years. Don't misunderstand me, I am not complaining, many people would like to be in my position and have a a MkIII TSI. Luckily I don't have to swap cars and can keep it as long as I want. If it's as good as my MkII I will keep it for 4-6 years. I just didn't expect the cost to change to be so high and wanted to have the diff for the real world gain in traction, not the tiny 0-62 improvement or barely ever used 1Mph increase in top end.

A remap (giving a lot more than 10bhp extra) & a proper slippery diff like a Quaife would be a fraction of the changeover price - why not just do aftermarket?

 

As an indicator, a mate has the AWD but similar engined Golf R with DSG.  It has an APR remap and does 0-60mph in 3.7 seconds - that's insane performance for the money.

[andyvee]

Correct me if I'm wrong (I've never done PCP) but cant they set the GFMV a fair bit higher than the trade in value of the car and still make money? Your balloon payment is the GFMV yes? so they could set it as high as the main dealer used car sale price and not lose...if you don't pay the balloon then they sell it to someone else that pays it. If that is so...it can depreciate a fair bit more yet before VWFS are 'losing'.

Not quite sure I understand you.

For arguments sake, let's say the GFV is 12k. Trade value is 10k.

You reach the end of the term, and you are looking at trading in. Best you can get is 12k as a p/ex, but you have to pay full list price for a new car as all of the dealer margin has been used as over allowance to clear the finance. Any deposit you put in last time has been lost.

You decide to see what discount you can get with no p/ex, and can get £2400 as if the dealer takes the same £2k margin off of the list price you also save the VAT on that.

So, if you hand back the p/ex you are about 80 pound a month better off on a 36 month PCP.

VWFS now have a car that owes them 12k, the best they can get for it at auction or selling as stock through the dealer network is 10k, they lose 2k.

A dealer will buy the car for 10k and put it ion the forecourt for 12k. They make a profit, but VWFS are the ones that lose out.

Sent from my HTC One_M8 using Tapatalk

[Smudger64]

just wondering though if the same dealer you handed the car back to would give you a good discount on a new car now you have no p/ex?

[andyvee]

That is where the online brokers come in to play. If one dealer doesn't play ball just go to another ........

If they dont sell you a car they don't make any money, so it is in their interests to. Even if they only give you 1k off of list you are better off.

It isn't rocket science, VWFS have got the GFV s very wrong and if people wise up then they are going to be stuck with a lot of overpriced cars ...

Sent from my HTC One_M8 using Tapatalk

[SurreyJohn]

just wondering though if the same dealer you handed the car back to would give you a good discount on a new car now you have no p/ex?

This seems to be why the zero deposit or dealer contribution PCP have come about

It means those with no part ex value can do it again

It was a mistaken long term plan, as you would usually get a better part ex price if you car was same brand, as the dealer could resell the part ex and make money there. Older cars and wrong brands would be sold on or sent to auction so worth less. But what happens now is you hand car back and can move to any other manufacturer with no disadvantage.

[glosrich]

We need an accountants input...but is it that VWFS are writing the loss down over the length of the PCP rather than taking a big hit when they sell the car new?

[gadgetman]

We need an accountants input...but is it that VWFS are writing the loss down over the length of the PCP rather than taking a big hit when they sell the car new?

But it's not costing VWFS the retail price.

What's their markup on their import price? 30-40%

[andyvee]

VWFS are a finance company, not the importer. The importer is SUK.

I spent 10 years in retail car sales, this is how it works.

For those old enough to remember, Ford Finance had a major problem on their hands when all the Sierra Cosworths got dumped back on them at the 50% VT point on HP. You couldn't sell a Sierra Cosworth as the insurance had shot through the roof due to the number being stolen.

Sent from my HTC One_M8 using Tapatalk

[Dempsek]

VWFS are a finance company, not the importer. The importer is SUK.

I spent 10 years in retail car sales, this is how it works.

For those old enough to remember, Ford Finance had a major problem on their hands when all the Sierra Cosworths got dumped back on them at the 50% VT point on HP. You couldn't sell a Sierra Cosworth as the insurance had shot through the roof due to the number being stolen.

Sent from my HTC One_M8 using Tapatalk

 

I agree and disagree, VW Finance, Skoda etc are all part of the VW group. The loses of VW Finance will be offset against the profits of Skoda,Seat,VW etc.

 

The 0% could have always been a loss leader for VW finance but a money maker for VW group in market share and overall profit.

 

At the end of the day I knew all the figures and signed the deal at no point was I told the car would be worth more than GFV. Recently local news said second hand car prices has fallen by 5%, that will impact on all  residual values.

[Dr Zoidberg]

Like a lot of sales people will have done, the one I used was quite clearly saying that the GFV was a bare minimum figure for what the car would be worth and it's very likely to be worth more.

I took that with a pinch of salt and didn't assume I'd have lots of equity, but I don't think it's unrealistic to expect that the car would be worth as much as the GUARANTEED final value. At the moment it's looking like it could be a couple of thousand below this.

Again, the paperwork may not use the words GFV but a lot of sales people do.

In some ways, those of us without EA189 engines are the worst off as we will have the second hand values of our cars trashed, but won't be eligible for any compensation.

[gadgetman]

I agree and disagree, VW Finance, Skoda etc are all part of the VW group. The loses of VW Finance will be offset against the profits of Skoda,Seat,VW etc.

The 0% could have always been a loss leader for VW finance but a money maker for VW group in market share and overall profit.

At the end of the day I knew all the figures and signed the deal at no point was I told the car would be worth more than GFV. Recently local news said second hand car prices has fallen by 5%, that will impact on all residual values.

This is what I meant Andy.

It'll only cost VWFS the rrp 'on paper'

[andyvee]

I agree and disagree, VW Finance, Skoda etc are all part of the VW group. The loses of VW Finance will be offset against the profits of Skoda,Seat,VW etc.

The 0% could have always been a loss leader for VW finance but a money maker for VW group in market share and overall profit.

At the end of the day I knew all the figures and signed the deal at no point was I told the car would be worth more than GFV. Recently local news said second hand car prices has fallen by 5%, that will impact on all residual values.

That may well be the case for you, but there will be some people that have put deposit in and were expecting or led to believe that at the end of the agreement they will have a small deposit for the next PCP deal. As values stand now, they won't.

When PCP first hit the market the GFV s were pretty accurate as the finance companies didn't want to catch a cold. I did many many PCP sales, customers returned and had a grand deposit towards the next one, it worked well.

Sent from my HTC One_M8 using Tapatalk

[andyvee]

This is what I meant Andy.

It'll only cost VWFS the rrp 'on paper'

But VWFS don't sell you the car, the dealer does who is a franchise and is not part of VAG.

Sent from my HTC One_M8 using Tapatalk

[SurreyJohn]

Like a lot of sales people will have done, the one I used was quite clearly saying that the GFV was a bare minimum figure for what the car would be worth and it's very likely to be worth more.

I took that with a pinch of salt and didn't assume I'd have lots of equity, but I don't think it's unrealistic to expect that the car would be worth as much as the GUARANTEED final value. At the moment it's looking like it could be a couple of thousand below this.

Again, the paperwork may not use the words GFV but a lot of sales people do.

In some ways, those of us without EA189 engines are the worst off as we will have the second hand values of our cars trashed, but won't be eligible for any compensation.

Actually it is only the minimum value providing certain conditions are met. If you have gone over the mileage or damaged it, you need to pay or fix it. Therefore there will be those who not only have no equity for a deposit, but a bill associated with the car they are handing back.

Of course others will have used the PCP as cheap finance and always intended to pay for the remainder and settle the balance to keep the car so will be glad of lowest possible value as it leaves a smaller balance.

If you always intended to hand it back and exchange it, then PCP probably wasn't a good deal, it becomes same as renting, whilst watching any equity from a part ex disappear.

[AllanDJ]

Actually it is only the minimum value providing certain conditions are met. If you have gone over the mileage or damaged it, you need to pay or fix it. Therefore there will be those who not only have no equity for a deposit, but a bill associated with the car they are handing back.

Of course others will have used the PCP as cheap finance and always intended to pay for the remainder and settle the balance to keep the car so will be glad of lowest possible value as it leaves a smaller balance.

If you always intended to hand it back and exchange it, then PCP probably wasn't a good deal, it becomes same as renting, whilst watching any equity from a part ex disappear.

 

I think that is the heart of the matter, with residuals falling through the floor, the PCP deals were in fact dare I say severely misrepresented by certain salesmen. In my case the salesman that I bought the car from assured me that the GFMV would never apply and that I should have around £2000 of equity at the end of the PCP deal to use against another new Skoda. This guy now has a very large nose and is doing Panto as Pinnochio! Recent deals offered on PCH on the new Superb 3 opened my eyes to how cheap it can be to never own the car and miss out on paying for heavy depreciation on a car that you never really want to own. One of the deals mentioned on this site for the Estate version of the SE Business Nav model of the Superb 3, with 2 TD engine and metallic paint only asked for £2400 deposit and £119 PCM over 2 years. Okay there might have been a small charge to reserve the car and you would need to add servicing etc on to it but you don't need to be a genius to work out that at these kind of prices that it actually doesn't matter if you ever own the car. That deal was for 8000 miles PA but I don't think a few more miles would have been that expensive at the end of the deal.

 

In my case I will probably have done less miles at the end of the deal than I have actually paid for in the PCP, which won't do me any good whatsoever if the market is swamped by that time in Octavia 3's being returned at the end of these deals

Edited 20 December, 2015 by AllanDJ

[Defenderben]

Quote Andyvee "Of course others will have used the PCP as cheap finance and always intended to pay for the remainder and settle the balance to keep the car so will be glad of lowest possible value as it leaves a smaller balance"

????

When I signed my PCP the GFV is the final payment to own the vehicle irrespective of its actually worth, my vehicle come 3 years could be £2k less than GFV but I will still have to pay the GFV to own it, is how I understood it.

Makes no odds in my case as I have requested a settlement figure after paying my PCP for 5 months and it will be settled in full in the next week or so. This will save in my case almost £3k in interest and also having a car that could be actually worth less then the GFV and having to buy it with the instant loss.

Allandj

Do not mean to sound rude but Sounds like you did not understand a PCP or know of other options, especially if you have no intention of ever wanting to own the car then maybe a a PCH was the way to go.

Edited 20 December, 2015 by Defenderben

[Niall]

The vein of depression running through this post has been lifted by checking out 4x4 prices on Autotrader. I may yet get back into a Scout at the end of next year without the deposit having disappeared in a puff of smoke!

Edited 20 December, 2015 by Niall

[2SHEA]

Don't think it will be as bad in Ireland either, cars like Vrs, scouts and yeti's are still rare enough...Petrol vrs are unheard of full stop.

[Eddie-NL]

Reading all the posts about the O3 depriciation makes me glad I resisted the temptation to trade in my O2 FL vRS for a new O3 vRS

 

Dealer sent me a nice reminder that my PCP was coming to the end and it would make financial sense to change.

 

I don't think I would buy a new O3 but would look for a demo or nearly new.

 

I think the market is saturated and demand has fallen

[andyvee]

Quote Andyvee "Of course others will have used the PCP as cheap finance and always intended to pay for the remainder and settle the balance to keep the car so will be glad of lowest possible value as it leaves a smaller balance"

I think you will find that is SurreyJohn, not me, that said that.

 

And I don't understand it either, you pay the GFV, not the market value of the car.

[Defenderben]

^^^Opps....Really sorry there Andy got crossed on the replies.

As you say it was surreyJohn that made that statement.

Sorry trust me to copy and paste and get it wrong, wish I knew how to quote from various replies into one post.

[andyvee]

^^^Opps....Really sorry there Andy got crossed on the replies.

As you say it was surreyJohn that made that statement.

Sorry trust me to copy and paste and get it wrong, wish I knew how to quote from various replies into one post.

Use the MultiQuote button

[andyvee]

^^^Opps....Really sorry there Andy got crossed on the replies.

As you say it was surreyJohn that made that statement.

Sorry trust me to copy and paste and get it wrong, wish I knew how to quote from various replies into one post.

 

 

Quote Andyvee "Of course others will have used the PCP as cheap finance and always intended to pay for the remainder and settle the balance to keep the car so will be glad of lowest possible value as it leaves a smaller balance"

????

When I signed my PCP the GFV is the final payment to own the vehicle irrespective of its actually worth, my vehicle come 3 years could be £2k less than GFV but I will still have to pay the GFV to own it, is how I understood it.

Makes no odds in my case as I have requested a settlement figure after paying my PCP for 5 months and it will be settled in full in the next week or so. This will save in my case almost £3k in interest and also having a car that could be actually worth less then the GFV and having to buy it with the instant loss.

Allandj

Do not mean to sound rude but Sounds like you did not understand a PCP or know of other options, especially if you have no intention of ever wanting to own the car then maybe a a PCH was the way to go.

 Like this

[Defenderben]

Yes...??