I'm currently 28 months into a 42 month PCP deal & considering my next step, probably looking into exchanging mid summer onwards.

I definitely will want another Octy 3, SE L spec with DSG & 1.6 tdi engine, but whether to accept another PCP deal or go for the PCH alternative is my

dilemma.

I don't want to put a huge deposit down, I will not want to keep the car at the end of any agreement, and would like advice from some learned folk on here as to the pro's & cons of each method of leasing / hiring.

A simple list, ie, PCP = Pro's....... Cons.....   versus  PCH = Pro's......  Cons....... would be gratefully received !

JKW 

                        

Don't know the full in's and out's of PCP as I've never done it. But in a nutshell;-

With PCH there is no option to keep the vehicle at the end of the term, although you may be offered the opportunity to extend the term.

With PCH you do not receive a V5 document, as the car isn't yours. With VWFS you are neither the owner nor the keeper, just the hirer. This means VWFS will pay speeding fines on your behalf and invoice you.

With PCH adding lots of optional extras can increase the monthlies significantly, as you will end up paying for these in full spread over the term of the lease.

With PCH be aware that as you don't own the car then this will have insurance implications. In the event of a total loss the payout will go to the company that owns the vehicle, so something to bear in mind if you have put down a large deposit. Some insurance companies don't like insuring lease cars at all, and some others may charge a small premium for it.

With PCH you have no equity in the car at any point, if part way through the term you decide it's not working out for you it will likely cost you to get out of the agreement, and if you do you'll be starting from scratch so will get no contribution towards your next vehicle.

With PCH depreciation isn't your concern. Look after the vehicle and stick to the agreed mileage and there shouldn't be anything further to pay when you hand back. Also no haggling over part exchange values.It's probably the closest you'll get to affordable fixed-cost motoring if you like to change cars regularly. It doesn't make as much sense though to lease over longer periods, so PCP may work out better if you intend to keep a car indefinitely and run it into the ground.

With PCH, as long as your circumstances don't change then you should know exactly what it will cost. With PCP it's a bit more of a gamble. Lots of posts in the depreciation thread from people finding residual values being below the guaranteed future value, hence no equity towards the next one.

Edited 1 January, 201610 yr by Czechers

^^^ Good info on PCH.

I would add though that whilst a few insurers, and I mean a few may refrain from quoting, the vast majority do accommodate PCH with no adverse effect on premiums.

All the main comparison website have dropdown options for who owns / is the registered keeper of the vehicle, and what type of lease it is.

I've insured my leased Golf R for the last 2 years and had no problems. My latest renewal was for £235 inc business use, but more importantly there were reems of other quotes to choose from.

PCH / BCH is becoming very popular again, so insurers hands are forced to provide competitive premiums

Edited 1 January, 201610 yr by 999pooch

Forgot to mention also on a PCH, as VWFS are the registered keeper road tax is included in the monthlies for the full term. Don't think the same is true on a PCP, as the purchaser is also the registered keeper.

I plan to keep the Citigo so PCP was the only option, however as I plan to chop the Octy in I may check the available options again in 18 months and see what's what.

Don't know the full in's and out's of PCP as I've never done it. But in a nutshell;-

With PCH there is no option to keep the vehicle at the end of the term, although you may be offered the opportunity to extend the term. - BUT anyone else can purchase the car from the lease company, a spouse or partner for example. It is just the original hirer that can't.

With PCH you do not receive a V5 document, as the car isn't yours. With VWFS you are neither the owner nor the keeper, just the hirer. This means VWFS will pay speeding fines on your behalf and invoice you.

With PCH adding lots of optional extras can increase the monthlies significantly, as you will end up paying for these in full spread over the term of the lease. -  Exactly the same as PCP as the GFV doesn't change if you add extras

With PCH be aware that as you don't own the car then this will have insurance implications. In the event of a total loss the payout will go to the company that owns the vehicle, so something to bear in mind if you have put down a large deposit. Some insurance companies don't like insuring lease cars at all, and some others may charge a small premium for it. - With PCP you need to take GAP insurance to cover against total loss otherwise you could end up with no car and a bill for £££££k to clear the outstanding finance once the insurance have paid out.

With PCH you have no equity in the car at any point, if part way through the term you decide it's not working out for you it will likely cost you to get out of the agreement, and if you do you'll be starting from scratch so will get no contribution towards your next vehicle. - Given the current GFVs you are unlikely to have any equity in a PCP until it reaches full term. The advantage with PCP is you can make additional payments at any time to reduce the term or reduce your monthly payments. You also have the protection of the halves and thirds - once you have paid 50% of the total agreement value you can voluntarily terminate and hand the car back, once you have paid a third the finance company needs a court order in order to repossess the car. I would assume that if you miss a payment on a lease agreement the car will be on the back of a low loader fairly quickly .......

With PCH depreciation isn't your concern. Look after the vehicle and stick to the agreed mileage and there shouldn't be anything further to pay when you hand back. - Exactly the same with PCP, you can just hand back at the end. Also no haggling over part exchange values.It's probably the closest you'll get to affordable fixed-cost motoring if you like to change cars regularly. It doesn't make as much sense though to lease over longer periods, so PCP may work out better if you intend to keep a car indefinitely and run it into the ground.

With PCH, as long as your circumstances don't change then you should know exactly what it will cost. With PCP it's a bit more of a gamble. Lots of posts in the depreciation thread from people finding residual values being below the guaranteed future value, hence no equity towards the next one. - You shouldn't expect to have equity with PCP, if you do it is a bonus. This is what will catch out people who had a £2k+ deposit on a PCP, they can kiss goodbye to that come the end of the PCP. The only advantage you might gain with PCP is if Skoda do loyalty or p/ex offers when the agreement comes to an end. Plus, you have the option to purchase the car and it remains as a 1 owner vehicle.

I've added some comments

"With PCP you need to take GAP insurance..." - eh?

"With PCP you need to take GAP insurance..." - eh?

You are a taking a big risk if you don't. If the car gets written off or stolen after 13 months for example (most insurance companies will replace with a new car for the first 12 months) then any insurance payout goes to the finance company to clear the finance. Any shortfall you have to pay if you don't have GAP. This is likely to run into thousands if you have put a small deposit down. Pretty much the same as buying any car on finance, you are responsible for clearing the finance in the case of total loss.

 

Don't ever buy GAP from the dealer though, they tend to charge at least double what you can get GAP from ALA or the site sponsor for GAP for.

"You shouldn't expect to have equity with PCP"

 

My PCP will finish in six months time.

 

If I chop the car in now VW Finance Services want £9,582.  

 

My car is currently CAP valued at £11,500.  

 

I hope that means I have £2,000 equity?

^{If you hand the car back after the PCP period and walk away you lose any equity accrued.}

 

^{I think PCH, for me at least, seems more clear and the way forward as there are no surprises like you can get with the PCP - the example above - "Lots of posts in the depreciation thread from people finding residual values being below the guaranteed future value, hence no equity towards the next one."}

 

^{I believe PCH was originally more geared towards business users but the companies have obviously missed a trick and now offer personal users the chance to buy into it.  Lets face it, you talk to any dealer and all they seemed to be interested in is selling as many units as possible, hence the ever increasing "new cars sales up again" ever year.}

Edited 2 January, 201610 yr by Chubbs

"You shouldn't expect to have equity with PCP"

 

My PCP will finish in six months time.

 

If I chop the car in now VW Finance Services want £9,582.  

 

My car is currently CAP valued at £11,500.  

 

I hope that means I have £2,000 equity?

It does, but you don't have an O3 where the GFVs are a little higher so the above is fairly irrelevant in respect to O3's.

 

I seem to remember that vRS O3s have GFVs around £11k on 10k pa.

 

CAP value is not what you will get as a trade in either, it is only a guide. What do CAP say retail price is for your car? Knock £1.5-2k off of that and that is roughly what the dealer will stand the car at on their books. Anything they offer you more than that as a trade in is being taken from the margin they have in the new car, so you will be paying full list for the new car and they over allow on the p/ex.

 

You are better off by using discount on the list price as you also lose the 20% VAT, and having the dealer give you the SIV (stand in value) on the p/ex as long as it clears your finance.

 

For example (completely made up figures and not including RFL or dealer delivery/PDI cost to keep things simple)

 

New car is £20k and includes 16% margin for the dealer

Cost of the car excluding VAT is £16,666.67

Dealer margin is 16% of that - £2,666.67

Dealer cost price of the car is £14,0000 excluding VAT

 

So lets say the dealer is willing to give away 10% (£1,666.67) of their margin and retain 6% (£1,0000.00) as profit.

If you took this as discount off of the list price

Dealer Cost price - £14,0000

Plus 6% retained by dealer - £1,000.00

Total price ex VAT - £15,0000

Total Price to you - £18,0000

 

So the dealer has given you a £1,666.67 discount and you have paid £2,000 less due to the VAT saving.

 

Now, let's say your trade in has a SIV of £10,500 and your finance settlement is £9,500, leaving you £1k deposit if you accept the SIV as the p/ex value.

 

You have a price to change (which is the important thing) of £17,000.

 

If you do it the other way round and get caught up in the 'I want more for my p/ex' argument

 

List price of car - £20,000

Dealer now over allows the same 10% margin on your car, so offers you £10,500 + £1,666.67 = £12,166.67 as VAT doesn't come in to it

You now have a £2,666.67 deposit after the GFV is paid off.

Price to change is £17,333.33

 

That £333.33 is basically £10 a month more on a 36 month PCP. Just proves if you stack the deal the right way you can save money.

 

Of course, if it comes to trade in time and the SIV of the car is less than the GFV then you can go with option 2 and use over allowance to clear the finance and provide a small deposit towards the next one. This is the route most dealers will try and take you down as they want your car on their forecourt with £2k margin in it for them.

 

The better option in those circumstances is to use a broker site to get the best price possible for the new car. Get a dealer to match it, then produce the p/ex. They can only offer you the SIV as they have already blown all of their margin in discount off of the list price. At this point you know how much negative equity there is, and can make an informed decision. If it is only a couple of hundred then probably worth trading in. Anything more than that hand it back to the finance company and go for a cash only purchase with maximum discount up front. At this point VWFS own your old car and they will try to sell it back to the dealers for as much as possible to minimise their losses.

^{If you hand the car back after the PCP period and walk away you lose any equity accrued.}

 

^{I think PCH, for me at least, seems more clear and the way forward as there are no surprises like you can get with the PCP - the example above - "Lots of posts in the depreciation thread from people finding residual values being below the guaranteed future value, hence no equity towards the next one."}

 

^{I believe PCH was originally more geared towards business users but the companies have obviously missed a trick and now offer personal users the chance to buy into it.  Lets face it, you talk to any dealer and all they seemed to be interested in is selling as many units as possible, hence the ever increasing "new cars sales up again" ever year.}

If there was equity in the car why would you hand it back and not trade in????

 

The hand it back option on PCP is there to protect the consumer against the finance company having got the GFVs wrong or the market taking a nosedive due to an emissions scandal for example and it being in negative equity at the end of the agreement. On PCP there is no guarantee of having any equity, I don't know why people seem to think that there is, if you treat it the same as a PCH and assume zero equity at the end then the only surprise you will get is a good one!

 

PCH isn't for everyone, you can't perform some mods to the car, no option to keep it at the end of the term, restrictions on servicing etc, you may get a bill for cosmetic repairs at the end of the lease.

 

The thing to do is compare a PCH and PCP deal on the same car with the same mileage over the same period and make your own mind up.

Edited 2 January, 201610 yr by andyvee

I believe that the dealers are getting a significantly bigger discount than 16% on the price of a new car.

 

My own evidence and experience: when I worked for a small-ish family run business we would buy new Fords from the local dealer with 16% discount (standard), when I worked with the NHS we had a small fleet of private Ford vehicles which we sourced direct from Ford - 25% discount off list price.

 

I see a lot of members moaning about PCP (I'm certainly no cheerleader for the motor industry and their financial products) but too often members are putting in next to zero deposit, paying hundreds per month and look to change after six months.  Is it any wonder that there is no equity that they can use?

 

So should you either (a) put in next to nothing as a deposit or ( plough thousands into a deposit?  My view is that the truth is somewhere between - put a few thousand in as a deposit and keep the monthly payments realistic and let the PCP run its course.

 

This is my first PCP which is finishing soon.  I'll then make the judgement call whether it has worked out or not.

I believe that the dealers are getting a significantly bigger discount than 16% on the price of a new car.

 

My own evidence and experience: when I worked for a small-ish family run business we would buy new Fords from the local dealer with 16% discount (standard), when I worked with the NHS we had a small fleet of private Ford vehicles which we sourced direct from Ford - 25% discount off list price.

 

I see a lot of members moaning about PCP (I'm certainly no cheerleader for the motor industry and their financial products) but too often members are putting in next to zero deposit, paying hundreds per month and look to change after six months.  Is it any wonder that there is no equity that they can use?

 

So should you either (a) put in next to nothing as a deposit or ( plough thousands into a deposit?  My view is that the truth is somewhere between - put a few thousand in as a deposit and keep the monthly payments realistic and let the PCP run its course.

 

This is my first PCP which is finishing soon.  I'll then make the judgement call whether it has worked out or not.

Which bit of made up numbers did you not understand

 

NHS etc. do get larger discounts - they are subsidised by the Importer normally.

 

16% is typical on a car such as an Octavia - at one point in the 90s the dealers were working with sub 10% margins on cars such as Corsas etc.

 

In my opinion after having worked in car dealerships for a decade, anyone putting in more than £2k on a car such as an Octavia and expecting to see that again at the backend of the agreement as deposit towards the next car is in for a nasty surprise.

 

You are quite right though on people thinking that after 6 months they will be able to change cars - unless they put in a whopping deposit they are going to be in negative equity.

 

I think the issue with the O3 is that the residuals are pretty poor in relation to the list price - they seem to be valued pretty similar to an O2. The O2 was less to purchase though, especially with the 0 VAT deals, but the list prices were lower in the first place.

Which bit of made up numbers did you not understand

 

Apologies, but I lost interest after the first line!  :p

 

I'm not doubting your knowledge and experience re the subject matter but part of me thinks that you are making it all more complicated than it needs to be - keep it simple son!

I'm trying to give you some advice that could save you some money or put you in a better position for negotiating a deal. It isn't complicated, you just need to understand the true value of your car as a p/ex and what level of discount is achievable.

Or just pay full list price and get a Christmas card from the salesman every year

 

Also, 0% deals, free servicing etc. are normally paid for out of the dealer margin as well.

Some offers are paid for by the importer.

Can someone answer me why do people put in large deposits at all? I can't see any advantage. Pay the minimum deposit and the money stays with me for the term, the total cost after 3 years is exactly the same.

Can someone answer me why do people put in large deposits at all? I can't see any advantage. Pay the minimum deposit and the money stays with me for the term, the total cost after 3 years is exactly the same.

In my case I put a fair bit of deposit in to stop me spending it....lol

I intend to keep the car, so a smaller monthly payments are better for me.

Edited 2 January, 201610 yr by glosrich

In my case I put a fair bit of deposit in to stop me spending it....lol

I intend to keep the car, so a smaller GFV was better for me.

Your GFV has no relationship to the amount of deposit you put in?

The GFV is based on mileage, unless you reduced the GFV voluntarily by opting for a higher mileage than you are really doing?

It can be a dangerous game reducing GFV s voluntarily, they are your protection against market collapse and provide you with the safety net if you need it.

Of course, if you intend to just pay it off at the end then it doesn't really matter unless your circumstances take a change for the worse ..........

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I took my car on a PCP but fully intended owning it till the wheels fall off.

So paid Max 30% deposit including a dealer contribution got 3 years full servicing thrown in and paid the lot off the other week.

The big deposit meant less interest on the remaining finance (PCP).

By then paying off my remaining finance shortly after, I saved over £3.5k of interest.

Can someone answer me why do people put in large deposits at all? I can't see any advantage. Pay the minimum deposit and the money stays with me for the term, the total cost after 3 years is exactly the same.

Because salespeople lead them down the garden path........

Or

That is what the p/ex was worth

Or

Trying to hit a certain monthly payment.

As long as it was made clear to them that they are not going to have the same level of deposit next time round so the monthlies will be higher unless they save up a deposit over the term ......

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I took my car on a PCP but fully intended owning it till the wheels fall off.

So paid Max 30% deposit including a dealer contribution got 3 years full servicing thrown in and paid the lot off the other week.

The big deposit meant less interest on the remaining finance (PCP).

By then paying off my remaining finance shortly after, I saved over £3.5k of interest.

You are probably in the minority by having the funds to settle early, as well as paying interest. A large number will be on the zero per cent deals.

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Your GFV has no relationship to the amount of deposit you put in?

The GFV is based on mileage, unless you reduced the GFV voluntarily by opting for a higher mileage than you are really doing?

It can be a dangerous game reducing GFV s voluntarily, they are your protection against market collapse and provide you with the safety net if you need it.

Of course, if you intend to just pay it off at the end then it doesn't really matter unless your circumstances take a change for the worse ..........

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I realised that was wrong, so I edited my post shortly after, but you missed it.

I sold my trade in for more than Skoda offered, so I was keen to put in a fairly big deposit, £2000 + £500 from Skoda.

Simply to stop me spending it on other stuff other than the car.

I might change if I have some equity, sounds unlikely though...

Probably part savings and a small loan for the GFV.

I look at it this way. ..I'm getting a 1 owner car that has been looked after. Probably keep it until 10 years or so.

I've gone full circle on car ownership. Always, always bought outright, no loan / PCP or any kind of finance (unless it was incentivised and then I would pay off quickly afterwards).

Now, PCH all the way. The reason being I always change my car every couple of years, and my mileage has dropped to 10k or less each year.

No more hassle selling the thing, nice low fixed monthly payments, usually cheaper than PCP, and for me I get half the VAT back plus I can can claim the net monthlies against profit which is something I can't do with PCP

Winner, winner, chicken dinner

Edited 2 January, 201610 yr by 999pooch

Is that business lease?

I want to transfer my personal lease to business lease, got a novation form or something to complete.