PCP Question

[Octy0GG]

Right, new to this PCP and if I'm honest not keen on it but just missed out on some good Pre registered deals.

Salesman says no more coming at this price but....

 

Buy new car on 0% PCP with £2000 dealer contribution make a PCP payment then pay it off without penalty. 

 

Provided the money for the part exchange is OK this could make the price pretty reasonable.

 

But is their a catch or something I'm missing here?

 

Like I say this whole PCP thing is new to me

 

Thanks.

[kevberlin]

There is ALWAYS a good pre reg or similar car for sale.

Don't be sucked in!

Good luck

[silver1011]

Yes, you are missing the MFGV (minimum future guaranteed value) or the final balloon payment.

 

Without this it is impossible to determine if the deal is good or not. You need to look at the total cost from start to finish to be able to compare it to an outright purchase, so...

 

1) Deposit

2) Total monthly payments

3) Interest

4) Final payment or MFGV.

 

The dealers love to offer great upfront savings with attractive monthlies only to stiff you at the end.

 

Also look at PCH (lease) instead of PCP, PCH is now becoming much more popular for good reason; it is more difficult for dealers to hide margin.

 

A PCP can make sense if you have every intention of buying the car at the end of the finance term, if not and you plan on walking away or using any equity as a deposit on the next car then PCH is almost always cheaper.

Edited 19 December, 2016 by silver1011

[Octy0GG]

Thanks, and I get what you are saying but I don't plan to let the PCP run. Only plan to make one or two payments then pay it off. I should have enough money with trade in to buy outright, PCP plan is just to get the dealer's contribution.

 

Salesman says because 0% PCP deal there will be nothing extra to pay.

 

And provided you make one monthly payment before paying whole thing off you keep the £2000 dealer contribution.

 

So total paid will be cash price -£2000 contribution (which would not be available if buying cash)

 

I'm still wary but where is the catch?

[Eddie-NL]

No Catch

 

I know someone who bought a VW Golf R and VW Polo R-Line on PCP to get the best deal and free servicing only to pay it off after one month.

 

Just make sure you get a good deal

[silver1011]

No issue then, just make sure the total price to pay is a good deal, so be sure to compare to carwow etc.

[Lady Elanore]

That sounds about right to me if your figures are accurate. The only fly in the ointment in that case is the dealer will get his comission clawed back by your early settlement. Luckily the average salesman (especially young ones) doesn't car about his dealerships overall profit and just wants your business :D

 

Manufacturers like PCPs as they mean a chance of a new car being sold in say 2/3/4 years time as well as possibly getting a nice 3 year old (give or take a year) car for their stock. Obviously you are not tied into the manufacturer by taking a PCP and then returning it later on 

[YorkshireG]

If the finance is at 0% why not put your cash into an interest bearing account and draw off the monthly finance payment and then balloon payment at the end to pay it off. Even at today's low interest rates you will still receive a return on your cash. 1% interest over three years is better than 100% of nothing. Wouldn't this work?

[Lady Elanore]

Also don't forget that the £2,000 offer towards the PCP almost certainly wont all come from the Dealer (if it is a national offer and not one specific to the dealer in question, I'd be surprised if it was as much as £1,000 to be honest) which means there might still be room for a little bit of a haggle on the price of the car. Is it an Octy? 

 

Don't forget the mantra " if you don't ask..."

[Octy0GG]

If the finance is at 0% why not put your cash into an interest bearing account and draw off the monthly finance payment and then balloon payment at the end to pay it off. Even at today's low interest rates you will still receive a return on your cash. 1% interest over three years is better than 100% of nothing. Wouldn't this work?

Yes had thought about that and know it makes logical sense. Just hate being in debt (mortgage is unpleasant enough - I owe I owe it's off to work I go) ). Have bought cars with bank loans in the past and didn't enjoy car or feel it was mine until loan was paid off. - Yes I know backward mid 20th century thinking.

[Octy0GG]

Is it an Octy? 

 

 

Yes so I am aware facelift due very soon so shouldn't be paying anything even remotely close to list.

 

Assuming there will be a price hike and firmer prices when the facelift arrives. Facelifts may be nicer but on the other hand may be afflicted with an electronic handbrake and a petrol particulate filter.

[Lady Elanore]

If this is a nationwide Octy offer then the dealer may have incentives to shift the remaining national stock a last push for sales of the current model etc and if it is nationwide, then the manufacturer will almost certainly be stumping up some of the £2k incentive. So you should still try to haggle for a deal on the price of the car :)

[YorkshireG]

"Have bought cars with bank loans in the past and didn't enjoy car or feel it was mine until loan was paid off."

 

Yes, can understand that, if you are not comfortable with any part of it it will take the edge off enjoying the new car.

 

Merry Christmas

[Lady Elanore]

The funny thing is that is you use a bank loan the car is yours, but with a PCP it isn't until it's paid off.

 

I'd still say give it 3 months before settling any PCP, as the dealer will most likely suffer financially if you settle straight aweay and we need dealers to service our new cars and let us test drive stuff :)

[silver1011]

Whatever you do though don't be tempted to see the PCP through until the end. There are a huge glut of Octavia's out there on 3 year PCP's that are currently valued right on (or below) the final balloon payment resulting in zero equity and firm proof that Skoda UK had more faith in their used values than the used car buying public currently have the appetite for.

[XLBaconDoubleCheese]

I was reading a similar thread over on pistonheads. The best way of doing it is to 'withdraw' within 14 days, less fees etc. Winning!

[Aspman]

Whatever you do though don't be tempted to see the PCP through until the end. There are a huge glut of Octavia's out there on 3 year PCP's that are currently valued right on (or below) the final balloon payment resulting in zero equity and firm proof that Skoda UK had more faith in their used values than the used car buying public currently have the appetite for.

 

They always give you bottom book when you look to hand back a PCP. Doesn't matter if you intend to keep the car.

 

0% is good if you have the cash you can stick it somewhere for the period of the deal. You won't get much but you won't lose money.

[Lady Elanore]

I always take my PCP back to the dealers and possibly on to other 'same manufacturer' dealerships and see if I can get them to buy my car for stock. I've always been able to haggle some equity from the returning car :) If you have a nice car that isn't too old (perhaps it has a bit of warranty left?) the dealers will probably be interested, unless it is something that is very popular/common and they have loads of that type of car.

[silver1011]

They always give you bottom book when you look to hand back a PCP. Doesn't matter if you intend to keep the car.

 

If you are buying the car you want the bottom book.

 

There are plenty of PCP deals out there with equity in them at the end, just not with discount manufacturers such as Skoda. After all it is this potential for equity which is used to help tempt you into another PCP.

 

The high depreciation and stagnant used sales is what is driving the £2,000 deposit contributions and 0% finance on new cars.

 

Skoda UK over estimated used values on the MkIII Octavia when it was launched which is why so many PCP owners are already accepting there will be no equity in their cars come the end of their finance.

 

If it is known at the beginning of the deal that there is no chance the car will be bought at the end then PCH is almost always cheaper than PCP. It is even now possible to buy a PCH car at the end of the term too (at least via VAG Finance). 

[Lady Elanore]

Don't forget one of the great strengths of a PCP is that it is an HP agreement, so the rules of halves and thirds are in place to protect you and give you options. Voluntary Termination is always there (after the 50% point of course) if you want out early.