PCP - Going sour

[lol-lol]

https://www.parkers.co.uk/car-finance/advice/pcp-time-bomb-why-your-next-car-could-cost-you-dear/

 

PCP time bomb: why your next car could cost you dear

Yesterday 09:01 by Christofer Lloyd

 

 

An entry-level Audi A3 that would have set you back £190 per month just a year ago would cost you a whopping £298 now (on a 36-month contract with a £2,000 deposit and 10,000-mile-per-year allowance).  To keep the same monthly payments you’d have to put down a hefty £3,500-larger deposit. The question is, have you been putting enough money aside during the contract to be able to afford a £5,500 deposit now rather than the £2,000 needed previously?

Or can you afford to pay an extra £108 every single month simply to stick with a new version of the same car? If you can’t, you’d have to trade down to the smaller, older and less upmarket Audi A1, and even then that would cost you more at £198 per month.  And if that’s too steep for you, the sad fact is that you can no longer afford to finance a new car on Audi’s PCP scheme.

Edited 9 December, 2017 by lol-lol

[camelspyyder]

Oh well, back to cheap bank loans then, or even, perish the thought, pay cash for an outright purchase like I did this summer.

 

Does this mean that new car sales (I think I mean registrations) are going to drop dramatically?

 

 

Edited 9 December, 2017 by camelspyyder

[lol-lol]

32 minutes ago, camelspyyder said:

Oh well, back to cheap bank loans then, or even, perish the thought, pay cash for an outright purchase like I did this summer.

 

Does this mean that new car sales (I think I mean registrations) are going to drop dramatically?

 

 

Cheap bank loans are likely to get less cheap as country 's base rates rise but always best to look at the options of hp and outright but i, like many, are putting so much of our hard earned towards pension and property that pcp was a great option to get a new car or even newish second hand for relatively small money.

Edited 9 December, 2017 by lol-lol

[Eddie-NL]

Another point to consider other than price rises of new cars is the poor resale value of the cars.

Like the Octavia 3 with lots of people VT them as they were worth less than the GFV. 

[bigjohn]

Is Personal Contract Hire the way forward ? A friend of mine has a new Audi A4 as it's costing him about £200 month (First month £600) for a 24 month lease for up to 8000 miles a year. One advantage is that this is car "hire" so the value of the car is not shown on your credit file (there will be a search though)

 

Some stonking PCH deals around on the new Karoq

Edited 9 December, 2017 by bigjohn

[lol-lol]

4 hours ago, bigjohn said:

Is Personal Contract Hire the way forward ? A friend of mine has a new Audi A4 as it's costing him about £200 month (First month £600) for a 24 month lease for up to 8000 miles a year. One advantage is that this is car "hire" so the value of the car is not shown on your credit file (there will be a search though)      Some stonking PCH deals around on the new Karoq

 

So that is £5200 for 24 months for doing 16,000 miles I work that out as 33p a mile just for the car without fuel etc.  

 

I know the Dacia Logan is not in the same league, though it has also a/c, ESP, phone, satnav, 5 seats and 600 litre capacity, but that costs me about 12p a mile PCP cost on a 20k per year lease !  Is the A4 worth 3 times the difference and if you are getting 45p a mile, ie HM Treasury rate, maintained by the UK gov for the last 7 years or so.  Had both an I know which deal I am and would be happiest with.  

 

[camelspyyder]

I know its your thread and all, but it only took you 3 posts to chuck a Dacia ad in this time.

 

That makes 3 threads now on the first page of General Car Chat alone.

 

It's beyond boring now.

[bigjohn]

2 hours ago, lol-lol said:

 

So that is £5200 for 24 months for doing 16,000 miles I work that out as 33p a mile just for the car without fuel etc.  

 

 

 

Just trying to point out that PCH is a lot cheaper than PCP at the moment for an "equivalent" car

 

I know Dacia's are cheap but you can't really compare it to a new Audi A4

 

I did sit in a Dacia a while ago and hated the seat, interior and found it cramped. If you want a somewhat more upmarket new car and change every couple of years then depreciation is the biggest cost of all. I would put a bet on that this is more that £5200 for something like an Audi A4 - road fund licence is included in a lease as well. In 24 months your maintenance costs would be very low as well. Personally I think £200/month for a new Audi A4 or Karoq looks reasonable.

 

However as I do too many miles leasing would be too expensive for me though. Buy cheap nearly new end of a model and throw away after 10 years has been my strategy for a while.

 

When I retire - I'll look again at PCH.

 

PS my mileage is just for work and back so I pay it all - so the HM treasury rate is irrelevant for me

 

 

 

 

 

 

Edited 9 December, 2017 by bigjohn

[Lofty79]

Cheapest way to do it just now is, believe it or not, Credit Card.

I just got one for a car purchase. 2.5 years 0% interest.

If you have the will power to pay the monthly payment that finance would be over 4 years you'll probably be done in the 2.5.

 

Best way to buy just now if you can get the limit

[lol-lol]

2 hours ago, camelspyyder said:

I know its your thread and all, but it only took you 3 posts to chuck a Dacia ad in this time.  That makes 3 threads now on the first page of General Car Chat alone.  It's beyond boring now.

 

Simply using Dacia (Logan/Sandero) as the price benchmark ie the cheapest box to get from A to B one can buy.  It is not just me going on about it but the motoring press and it is the fastest growing car brand in Europe.  Go back 6 years and more it was Skoda/SEAT.  You did make a useful point on buying, if memory serves, when you said you got about 30% off your car ie £14K RRP car for about £10K, that was a very useful point and could encourage others to try and get a similar great deal.   It case you missed it in the press...................

 

https://www.dacia.co.uk/we-are-dacia/awards.html  

2017 What Car? Best small car less than £12,000

 

 

2016 What Car? Best small car less than £12,000

 

 

2015 What Car? Best small car less than £12,000

 

 

2014 What Car? Best small car less than £12,000

 

 

2014 Honest John Best Small Hatchback

 

 

2013 What Car? Best small car less than £12,000

 

 

[lol-lol]

18 minutes ago, bigjohn said:

 

Just trying to point out that PCH is a lot cheaper than PCP at the moment for an "equivalent" car.  I know Dacia's are cheap but you can't really compare it to a new Audi A4  I did sit in a Dacia a while ago and hated the seat, interior and found it cramped. If you want a somewhat more upmarket new car and change every couple of years then depreciation is the biggest cost of all. I would put a bet on that this is more that £5200 for something like an Audi A4 - road fund licence is included in a lease as well. In 24 months your maintenance costs would be very low as well. Personally I think £200/month for a new Audi A4 or Karoq looks reasonable.  However as I do too many miles leasing would be too expensive for me though. Buy cheap nearly new end of a model and throw away after 10 years has been my strategy for a while.  When I retire - I'll look again at PCH.    PS my mileage is just for work and back so I pay it all - so the HM treasury rate is irrelevant for me

 

Not sure I understand the difference between PCH and PCP (I still think of PCP as Angel Dust from my Customs days).  

 

I would not want to be taller than 6'1" in the Logan as a could do with the seat going back one more notch sometimes, keep meaning to have a look at the runner locks (Damn going on about Dacias again).  

 

 There is a good tool on car running costs on the fleet news website.  Helps me choose and I only have 100 days to pcik the next one so am looking now.

 

https://www.fleetnews.co.uk/car-running-costs-calculator

 

 

[Lofty79]

I've had 2 dacia's.

 

Gearing is all wrong on the 5 speed diesels.

Fuel economy mediocre on the patrols.

Interior plastics are the worst I've seen, the type that shatters in a crash and goes all in your eyes.

Steering wheel showed signs of wear at 25k miles.

Boot carpet just has insulation staples to the back.

Stereos are pish.

Metal is thin and euroncap safety is poor.

What car tests aren't "living with the car" tests.

 

After owning them cos of the costs for over 5 years, I can conclude

You get what you pay for.

 

That means it's not a better deal, yes you can still move around for less, but you get an inferior product. 

 

[lol-lol]

15 minutes ago, Lofty79 said:

I've had 2 dacia's.

Gearing is all wrong on the 5 speed diesels.

Fuel economy mediocre on the patrols.

Interior plastics are the worst I've seen, the type that shatters in a crash and goes all in your eyes.

Steering wheel showed signs of wear at 25k miles.

Boot carpet just has insulation staples to the back.

Stereos are pish.

Metal is thin and euroncap safety is poor.

What car tests aren't "living with the car" tests.

After owning them cos of the costs for over 5 years, I can conclude

You get what you pay for.

That means it's not a better deal, yes you can still move around for less, but you get an inferior product. 

 

Diesel is awful and hopefully they will all be banned soon.

You may need to do a sort on the PPM as I am not sure that comes up automatically......

https://www.fleetnews.co.uk/car-running-costs-calculator?Years=2&Miles=60000&CarType=small-car&Manufacturer=&Model=&CO2From=&CO2To=&BIKPriceFrom=&BIKPriceTo=&SortBy=PencePerMile&SortDesc=false&FuelType= 

[Lofty79]

Diesels are awesome

 

Dirty diesels FTW 

 

Twice now the government has said "diesel is worse, no sorry petrol is worse, whoops we meant diesel is worse" Its a whole lot more than n0x and particulates, it's clearly some jobsworth trying to justify his or hers exhorbitant wages.

 

ANYWAY PCP IS THE OPENING SUBJECT. LETS STAY ON TOPIC.

 

Pcp was always a plaster on a bullet wound, won't do good for very long.

 

 

Edited 9 December, 2017 by Lofty79

[bigjohn]

15 hours ago, lol-lol said:

 

Not sure I understand the difference between PCH and PCP

 

 

 

PCH - is where you effectively hire the car for a fixed period and mileage and hand it back at the end, although you need to insure and usually maintain it (some more expensive lease deals include maintenance)

 

PCP is a different form car purchase finance where you pay a deposit, pay a monthly amount and at the end pay a fixed balloon payment if you want to buy the car. Again you are limited re mileage and you need to insure and maintain it. This had been cheap where deals presumed a lower rate of depreciation  so the future balloon payment was high. As these deals are coming to an end, because of dieselgate etc, values have crashed so cars are worth less than the balloon payment so obviously people are handing them back and no value is carried forward as part of a future deposit. Going forward new PCP's now need a bigger deposit and higher monthly payments to compensate for much lower future balloon payments. 

It is a way of buying the car and you pay interest (if not 0%) on the WHOLE amount financed (inc balloon) - that amount also appears on your credit history not good these days if you need a mortgage any time soon (although PCH payments will be included in the affordability calcs)

 

 

Edited 10 December, 2017 by bigjohn

[lol-lol]

14 hours ago, bigjohn said:

 

PCH - is where you effectively hire the car for a fixed period and mileage and hand it back at the end, although you need to insure and usually maintain it (some more expensive lease deals include maintenance)

PCP is a different form car purchase finance where you pay a deposit, pay a monthly amount and at the end pay a fixed balloon payment if you want to buy the car. Again you are limited re mileage and you need to insure and maintain it. This had been cheap where deals presumed a lower rate of depreciation  so the future balloon payment was high. As these deals are coming to an end, because of dieselgate etc, values have crashed so cars are worth less than the balloon payment so obviously people are handing them back and no value is carried forward as part of a future deposit. Going forward new PCP's now need a bigger deposit and higher monthly payments to compensate for much lower future balloon payments. 

It is a way of buying the car and you pay interest (if not 0%) on the WHOLE amount financed (inc balloon) - that amount also appears on your credit history not good these if you need a mortgage any time soon (although PCH payments will be included in the affordability calcs)

 

Thanks for the above.  Very good points, so PCH is better in most ways than PCP?

One, potentially weakness is that if the car is worth more than market after the lease you do not get the option, with PCH, to keep whereas PCP you can choose?  The point about paying interest on all the amount on PCP is one many might not appreciate. 

Edited 10 December, 2017 by lol-lol

[bigjohn]

Just now, lol-lol said:

 

One, potentially weakness is that if the car is worth more than market after the lease you do not get the option to keep whereas PCP you can choose?

 

True, but as you pointed out on your original post PCP looking expensive at the moment

 

One additional thing that is relevant - with a PCH it's very like a normal car hire - it's the hire company's name that appears on the V5. You need a letter from them if you drive abroad.

[lol-lol]

4 minutes ago, bigjohn said:

 

True, but as you pointed out on your original post PCP looking expensive at the moment

 

One additional thing that is relevant - with a PCH it's very like a normal car hire - it's the hire company's name that appears on the V5. You need a letter from them if you drive abroad.

 

Another good point.  When detaining/seizing cars at the border, full of backy, booze, or drugs, the hire car company was not to happy about not being told it had gone abroad, having it impounded and paying a release fee, they tightened up procedures a lot when the numbers stacked up.

[bigjohn]

16 minutes ago, lol-lol said:

 

Another good point.  When detaining/seizing cars at the border, full of backy, booze, or drugs, the hire car company was not to happy about not being told it had gone abroad, having it impounded and paying a release fee, they tightened up procedures a lot when the numbers stacked up.

 

Whilst I'm stuck with my awful commute - I'll stick to my cheap as chips route (buy cheap and throw away) . Bought my 2014 Superb in 2015 and hope it lasts until 2023 (when I hopefully retire!). Faultless thus far (ignoring overfilling it with petrol shortly after I bought it!). Highish mileage makes everything expensive (PCP, PCH, outright purchase,tyres, servicing, fuel)

 

I'm also limited with car choice - being "big"john I'm not comfortable in many cars (eg on the latest Octavia the door pillar is too far forward), but my 6ft 5" son has bigger problems!

Edited 10 December, 2017 by bigjohn

[lol-lol]

1 hour ago, bigjohn said:

 

Whilst I'm stuck with my awful commute - I'll stick to my cheap as chips route (buy cheap and throw away) . Bought my 2014 Superb in 2015 and hope it lasts until 2023 (when I hopefully retire!). Faultless thus far (ignoring overfilling it with petrol shortly after I bought it!). Highish mileage makes everything expensive (PCP, PCH, outright purchase,tyres, servicing, fuel)   I'm also limited with car choice - being "big"john I'm not comfortable in many cars (eg on the latest Octavia the door pillar is too far forward), but my 6ft 5" son has bigger problems!

 

Horses for courses.  My company, successfully in areas which we have ventured, is looking to completely replace the buying/owning. having-on-your-drive model for many so that you just "pop" along to a collection/drop-off point and take the car to another one, close to where you want to go, and hire/use the car in 6 minute slots, has worked very well in Paris taking up to 100,000 car journeys a day and therefore owners cars and waiting taxis, as people drive themselves in an easy to drive lecky auto.

 

For me I almost must have at least two vehicles, I choose to have 3 ie 2 cars and one motorcycle, as I cannot have a situation where I come up in the morning and my "only" car has a flat tyre or a dead battery so I must have a backup means of transport which oft means have two, or three cheapy vehicles instead of one very nice one.

 

Point of my thread, and thanks for adding constructively to, is to hear what the next new paradigm of car ownership is best to have.  PCP may be waning. One of my relatively got the great bank loan, very long loan period, as like many of us in the last half a decade of our working career, maybe, (could always consult someway into my sixties I suppose) and that seems a very good model for some of us in this point in our financial cycle.  

 

Some banks are starting to factor in that interest rates for loans may need to be 5,6,7,8% APR in a two or three years times to keep apace with rising central bank lending rates, other are hedging and still loaning at around the 3-4% APR rate.  So much research needed to get the good deal it appears !

 

Edited 10 December, 2017 by lol-lol

[bigjohn]

5 hours ago, lol-lol said:

 

Horses for courses.  

 

", as like many of us in the last half a decade of our working career, maybe, (could always consult someway into my sixties I suppose) and that seems a very good model for some of us in this point in our financial cycle.  "

 

 

 

After a period of unemployment caught me financially on the hop a couple of decades ago I vowed never to be at risk again so I've always refused to have loans, PCP etc ever since. I had to build up again by running "good value" cars. We took my wife’s Polo through to nearly 20 years old and I invested a small amount into a 1990 Passat estate when we started a family  - which proved to be a great car lasting many a year. Since then I've saved in advance for future cars - only about £100/month. Having the cash really really helps your negotiating position (despite what people say about finance being the best negotiating position ) .

 

And as you say now I'm nearly in the "last half decade" of my career I'm now diverting funds to my future retirement and certainly don't want future car payment commitments dictating what I can and can't do.  Once I'm retired I'll know where I am financially (lots of planning going into this!) and my mileage is much less then PCH will make more sense

 

Edited 10 December, 2017 by bigjohn

[vrskeith]

On ‎09‎/‎12‎/‎2017 at 09:15, lol-lol said:

https://www.parkers.co.uk/car-finance/advice/pcp-time-bomb-why-your-next-car-could-cost-you-dear/

 

PCP time bomb: why your next car could cost you dear

Yesterday 09:01 by Christofer Lloyd

 

 

An entry-level Audi A3 that would have set you back £190 per month just a year ago would cost you a whopping £298 now (on a 36-month contract with a £2,000 deposit and 10,000-mile-per-year allowance).  To keep the same monthly payments you’d have to put down a hefty £3,500-larger deposit. The question is, have you been putting enough money aside during the contract to be able to afford a £5,500 deposit now rather than the £2,000 needed previously?

Or can you afford to pay an extra £108 every single month simply to stick with a new version of the same car? If you can’t, you’d have to trade down to the smaller, older and less upmarket Audi A1, and even then that would cost you more at £198 per month.  And if that’s too steep for you, the sad fact is that you can no longer afford to finance a new car on Audi’s PCP scheme.

With depreciation getting greater on used cars. UK Lower Volume new cars sales,  with reduced margins   , does this mean the contracted trade-in value will also take a hit at the end of the PCP term? 

[lol-lol]

1 hour ago, vrskeith said:

With depreciation getting greater on used cars. UK Lower Volume new cars sales,  with reduced margins, does this mean the contracted trade-in value will also take a hit at the end of the PCP term? 

 

Personally I think that dealers will be ever more keen to use the clauses in the PCP ie the fair wear and condition and push for a lower value than the stated one.  Both of my PCP cars have minor scratches and one has a small rip in one of the seat fabrics and the receiving dealership might well make a big deal in that I reckon.  I will probably buy both of these cars as they will be relatively cheap but that might not be an option for many.

 

I thought second hand residuals might be quite good on cars but, it appears, that the dumping of lots of cars exiting PCP and the general weakness in the economy is affecting the market.  Probably diesels worse than petrols but I will see in the next few weeks.

 

I also gather that there is a big shake up in dealership networks as the national car franchise companies are looking to rationalise their dealership network to match the 15-20% drop in car sales so one might find one is not returning the car to the same site that one took the PCP out with and they may not be so accommodating as the supplying dealership.   If one get a new car, maybe at the much higher PCP, and the returning car is mint then maybe no issues but I fear trouble ahead !

 

Edited 10 December, 2017 by lol-lol

[Aspman]

Well I look forward to the used prices on the forecourts dropping with this glut of PCP cars being handed back.

But I think I'll be waiting a long time.

[lol-lol]

19 minutes ago, Aspman said:

Well I look forward to the used prices on the forecourts dropping with this glut of PCP cars being handed back.   But I think I'll be waiting a long time.

 

One must learn to haggle.   Just because it says £22k on that nearly new whatever the dealership has probably marked it up by at least 10% so getting it fo £19k or so is where one should be aiming.  Mate of mine just got a 18 month old loaded Avant A6, £40k RRP, for that sort of money.

 

Some dealership do not add loads on. Relative bought a Qashqai from Evans Halshaw which was close to book but that the dealership works that way going for numbers turnover rather than margins, also did not realise what they had ie panoramic roof not valued in.  Dealers are now desperate to sell as the market has now peaked and is in decline so haggle, walk, try another dealership with a similar car and one will come back with a heavily discounted price.