The biggest reason for the disparity, IMO is the market has been flooded with "Cheap" PCP/PCH deals which is then creating on over supply of second hand vehicles, flooding the market place which then creates an over supply and the inevitable lower residuals.

Car manufactures have come up with PCP/PCH's and have created the problem. It only used to be available to business users but by extending it to the masses it has created a false market.

In the old days people had cash, HP or loans which meant they were intending on buying the whole vehicle, even if it was over 60 months in some cases.

This new financial offering of very low deposits and low repayments to only pay off the envisaged deprecation is fairly new and is creating a glut.

I'm not very good at explaining things but hopefully it makes some kind of sense.

Edited 28 December, 201510 yr by Defenderben

I agree, but PCP has been available since the early 90's and I have had cars before on PCP that didn't have this disparity.

 

Whatever the reasons and the whys and wherefores all I can see is a big problem on the horizon, when all of these cars start getting to the end of the term the market will be even more flooded .....................

My 2012, tdi vRS had a list of around £23k in 2012, had someone bought it brand new.

I bought it as a 1 year old dealers demonstrator with 6k miles for £15.5k and also had a £1k Kenwood stereo upgrade, thrown in on top.

That was a mk2 which lots claim didn't depreciate very much. I had it for almost another 2 years and put 36k miles and traded for £11k May this year.

So over 3 years it was just over 50% depreciation, which seems on par with your MK3's. I just avoided the first years big drop.

The O3 seems to be heading for more like 60% over 3 years.

 

But - when I was in the trade in the 90s, most cars were expected to lose 60% over 3 years and the GFVs reflected this. It seems we are in a situation where GFVs are at about 50% and the market is closer to 60% depreciation.

Agreed

But these days people see a monthly headline payment for a car as the norm and affordable.

It is too easy to then get to the end of your current PCP or to a point where it seems sensible to get out of it into a new deal and to visit a dealer with lots of shiney new cars and get told headline figures and its only a few quid more and you can have this but the truth is most will never ever own anything other than a massive debt.

But that is the whole idea of PCP - to get people in to cars which otherwise they would have to take 5yr finance on to get the same monthly payment, and would be in negative equity until somewhere in year 4.

 

By doing it over a shorter period with the GFV, the manufacturer benefits from getting a new car sale every 3 years, and a constant supply of 3 year old 1 owner cars that should have been looked after for the used car forecourt, which is where the dealers really make their money. Dealers make next to nothing on new car sales once all the overheads are taken out of it - it is the warranty and service work and 2nd hand car sales that keeps dealers in business.

Edited 28 December, 201510 yr by andyvee

I don't get these finance plans etc in my own experience I don't see any point for me personally.

 

I've looked after my now almost 10 year old Fabia vRS mk1 and you know what, kept it as its still going on strong, why not keep running it into the ground.

That cost so far is about £1k a year for the car itself (going down of course).

If I do same with my octy petrol vrs and try and do the same, then that would be about the same after 10 years I guess ( as I got it 2nd hand at a similar price to what the mk1 Fabia cost me new)

Edited 28 December, 201510 yr by vRSAnt

Unfortunately my job dictates that I must own a car below a certain age and mileage.

I could always take a company car instead of car allowance, but then I would be driving round in a poverty spec Insignia whilst getting shafted by the tax man ........

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My original plan was to run mine for the duration of the PCP (42 months in my case) and then change for another, but as my car was one of the early ones before the interest free offers came out I looked at the likely residual value as against PCP GFV, realised I'd have no equity to put towards another so I paid off the finance early, saved over £1,000 in doing so on top of the £1,500 dealer contribution at the time of purchase and three years free servicing and will now keep the car until either I retire or it ceases to become reliable means of commuting. Judging by the number of Octavia taxis out there that do far more arduous service with well over 200k miles I am sure it will last!

Edited 29 December, 201510 yr by Timoctav

Unfortunately my job dictates that I must own a car below a certain age and mileage.

I could always take a company car instead of car allowance, but then I would be driving round in a poverty spec Insignia whilst getting shafted by the tax man ........

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Same....

I rather unfortunately went from doing about 11k/year to 25/30k and running my own vehicle on allowance became somewhat impractical.

Factoring the excess mileage my sub £300/month PCP easily became a +£400/month one and to keep running it as such just wasnt going to work.

Like most younger relatively successful but squeezed middle class people I dont have £16.5k lying around to pay off the PCP....given its depreciating maybe £500 every one to two months I wouldnt want to even if I could.

I was able to take a Golf GTD as a company car which I guess I am pretty fortunate to be able to do but Im now funding the PCP without a car allowance and paying £££ in car and fuel BIKs so im getting it in both ends. Arguably I could have taken a duller car but im stuck with it for potentially 4 years...do alot of miles and its pretty cheap as a CC anyway so figured I might just as well have it.

If I were faced with having to pay a few hundred £..maybe £1k or so to get rid of the Octavia then Id consider doing so...but Im not paying 3.5/4k just because VWFS have done a pretty terrible job of setting the GFVs.

Fortunately whilst I dont really want to have to afford to keep paying for it....I can but there are many other things id rather be putting £300/month into.....wife doesnt need a nearly new Golf based estate car either....though its been handy in some respects (as a family holdall/workhorse)...particularly as the Golf isnt the most practical car in the world....but the Golf does all the mileage now :-)

Edited 29 December, 201510 yr by pipsypreturns

Totally unrelated perhaps - but I like to buy a new car every 18 months or so.  Lots of research on discounts, running costs, depreciation etc.

My last car was a Yeti Greenline - 20K miles in 2 years actual depreciation £2,700.  With a tuning box (Racechip) it also went like a rocket!

This time my Octavia will probably cost nearly double - so back to the drawing board (well the spreadsheet).  Extras are a no win option.

Perhaps another Yeti?

Totally unrelated perhaps - but I like to buy a new car every 18 months or so. 

 

I'm clearly not into cars enough to understand this discussion. If you get something that turns out to be not quite what you wanted then I can believe you want to roll the dice, but once you find a great vehicle why would you want to swap it? My Octy is simply the best all round family car that I've ever owned, on the basis that it's a nice place to sit, is comfortable, spacious and relatively quiet. It could be a tad quieter at high speed and the ride could be a tad better, but I've never before owned a car that I could drive for 4 hours without stopping and get out feeling like I could jump straight back in and do it again. It's no sports car, but it's quick enough for a family car and it has enough toys for my needs - there's no way I'd want to risk trying out something different so soon!

 

I understand the difficulty with the allowance option to replace the company car, probably got to be less than 4yrs old with 4 doors and a hard top (or something like that I suppose), but I consider the headache of replacing my Octy to be something I'd like to postpone as long as possible, so mine will be kept 'til it goes to the knackers yard (or I win the lottery).

Guys seriously, just buy/hire/pcp the car and enjoy it....if you're worried that much about depreciation buy a €/£1000 banger.

Guys seriously, just buy/hire/pcp the car and enjoy it....if you're worried that much about depreciation buy a €/£1000 banger.

Bingo.

@Geek42 - agree totally. I am into cars, a total petrol head! I certainly didn't buy my Octavia for fun or exhilarating motoring - it doesn't do "fun" or "exciting", I bought mine to transport me comfortably, reliably and economically on my 80 mile round trip commuting run and it has done exactly that. Can't think of any other sensibly priced car that would have done better. First time in a long time that I've bought a car and not wanted to change it after a couple of years just to get something different. In a way it's done Skoda no good for just that reason, I'm so satisfied with it I see no point in burning a pile of cash just to change!

Edited 29 December, 201510 yr by Timoctav

Guys seriously, just buy/hire/pcp the car and enjoy it....if you're worried that much about depreciation buy a €/£1000 banger.

Another person who has missed the point ......

 

Depreciation isn't the issue, we all expect depreciation.

 

I have had quite a few cars on PCP, and this will be the first that currently looks like the market value is going to fall short of the GFV, meaning my only option really will be to hand it back at the end of the term. Even on crappy Vauxhalls I had value in them at the end of the term that did not come out of the margin of the next car.

Another person who has missed the point ......

Depreciation isn't the issue, we all expect depreciation.

I have had quite a few cars on PCP, and this will be the first that currently looks like the market value is going to fall short of the GFV, meaning my only option really will be to hand it back at the end of the term. Even on crappy Vauxhalls I had value in them at the end of the term that did not come out of the margin of the next car.

Iv missed nothing, you're handing the car back as it's deprecated more then you thought it would thus you are worring about deprecation.

Edited 29 December, 201510 yr by 2SHEA

But Andyvee - is that due to the car having severe worse than average depreciation (that I doubt) or over valuing the GFV to keep the monthly payments to a minimum?

But Andyvee - is that due to the car having severe worse than average depreciation (that I doubt) or over valuing the GFV to keep the monthly payments to a minimum?

I think both as they are the same thing - if the car has worse than average depreciation then the GFVs will have been set too high by VWFS.

 

From the example in the first post of this thread, the OP was looking at circa 50% after 18 months, which is pretty poor. Seeing as the GFVs are set somewhere around 40-50% on a 3 year 10k mileage PCP do we really expect the car to only lose another 10% in the next 18 months?

 

Skoda have been a victim of their own success - they have sold more cars than expected, and they seem to be dumping quite a few on to the market themselves from short term leases to hire car companies etc. which further erodes residual values.

 

Basically, oversupply of used cars is killing the residual values.

Iv missed nothing, you're handing the car back as it's deprecated more then you thought it would thus you are worring about deprecation.

I am not worrying about depreciation, or deprecation even

 

And it isn't more than I thought it would, it is more than VWFS thought it would - I don't give a monkeys as I don't carry any risk

 

One thing is for sure, I won't be buying it for more than it is worth at the end of the agreement, so the finance company can stand the loss, which is the whole idea of PCP - the risk is on the finance company.

 

Unfortunately, there will be many people that put a sizeable deposit (£2k plus) in at the start of the PCP, either from a p/ex or hard earned cash, and they can whistle goodbye to that at the end of the agreement, but they may have been led to believe that they would see a similar deposit when p/ex'ing the Octavia at the end of the agreement.

 

Looks like car ownership is becoming a thing of the past, and PCH is the way forward.

Edited 29 December, 201510 yr by andyvee

Hi All and Happy New Year. I've been following the topic and have seen a few people mention VT and wondered if anyone could tell me what it means? I did message a member who used the phrase but he couldn't be bothered to message me back. Thanks

I wondered the same but took it to possibly mean "voluntary termination" or something along the lines of terminating the PCP early and transferring to another make etc and getting a new PCP???

Keep an eye on this for the proper answer

Basically, it is Voluntary Termination.

 

Once you have paid 50% of the total amount payable under the agreement you can hand the car back and walk away, subject to condition and pro-rata excess mileage charges.

 

Total amount payable is on your agreement (Purchase Price + Interest) and you need to have paid 50% of this with your deposit/trade-in and monthly payments.

 

It does not affect your credit rating, it is your right to terminate early.

 

On a PCP it will only save a few months due the GFVs being around the 50% mark, but if you are handing back anyway because the car will be worth less than the GFV then you can be in your next car a few months earlier - which can still be a Skoda.

Iv missed nothing, you're handing the car back as it's deprecated more then you thought it would thus you are worring about deprecation.

I do not understand the logic of thinking the deal has gone wrong if you hand the car back and receive the guaranteed final final.

You may have taken a gamble and hoped there would be more value, and you may have been lucky in the past and done a PCP that did have more value. But that doesn't make this deal a failure, it just means the equity is nil which you accepted as a possibility when you signed up for it.

Market value is a bit vague anyway as there is usually about £1500 between the selling value and what you would need to pay to buy a similar car if you were buying. The goalposts have completely moved from 2 or 3 years ago, then you needed to have equity for a deposit, now you don't (nil deposit or a deposit contribution exists for this situation). Therefore you don't really lose, but the risk has changed to brand loyalty as you could get your next car from a number of manufacturers that are offering deposit contributions.

Longer term, if this persists then PCP will be pointless, may as well choose either HP if intend to keep, or some form of rental (personal lease) if you always want to pay monthly for next few years. Personally I would spec a car as I want then aim to keep it 5 to 7 years knowing that on average it will lose no more than about 14% each year, averaged over the term, less if I get a good discount at start.

On a PCP when can one voluntarily hand the car back without penalty?

On a PCP when can one voluntarily hand the car back without penalty?

I think this can only be done at the end of the contract. Say 3 years old. Hand it back pay balloon payment and walk away

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