Morning all,

 

I got this breakdown from a Skoda dealer for a Solutions PCP agreement on an ex-demonstrator 2.0 TDi 4x4 (7 seat) Kodiaq. It's based on 48 months and an annual mileage of 13k. I've been trying to get my head around it, 'cos I'm not sure where the value lies or if this is even a good deal. Here is the breakdown:

 

Ticket Price: £30,995

Deposit: £5000

Price minus deposit: £25,995

Charges: £5,861.46

Balance: £31,856.46

 

Balance consists of:

Monthly payments x48: £369.77 x 48 = £17,748.96

Balloon payment: £14,107.50

 

Total Amount Payable: £36,866.46 (£31,856.46+£5000)

APR: 7.3%

 

 

Can anyone tell me what those Charges are? I'm not sure I see the benefit where I've given a £5000 deposit, only to have that cancelled out (and more) by these Charges making the Balance more expensive than the Ticket Price. The Charges add on a whopping 22½% 

 

The dealer appears to have given me a breakdown based on buying the car outright after 48 months. However I don't actually intend keeping the car; when those 4 years are up, I want to either swap for another vehicle or hand back and walk away.

 

I've never had a PCP deal before, so would a breakdown based purely on handing back the car after 48 monthly payments mean I pay just the 48 monthly payments? Those payments would be even less if not for those Charges, which is why I'm keen to know what they are.

 

I also presume the Balloon Payment is what they expect the residual value of the car to be after 4 years with a mileage of £56k. Surely at £14k they've valued that a bit low?! I'd expect the value to be around the £18k mark.

 

Thanks in advance for any advice. Happy to be told if I'm being naive!

The current PCP apr is 4.9%. And my understanding is. I could be wrong, if they value it at £14k in 4 years time and it’s worth £18k that’s £4K you’ve got fit your deposit on your next car.

http://www.skoda.co.uk/finance-and-offers/new-car-offers/kodiaq

I would walk away. Does not add up!! Dealer would get profit on car sale and possible back-hander from finance company so cannot be too greedy

Edited 19 August, 20187 yr by edbostan

What model is it? SE L? EDITION? Either way - I would say that’s a pretty poor deal. The GMFV (balloon payment) looks about right and having been on the wrong end of an overly optimistic one recently, that’s not a scenario you want. That said, 7.3% is a rubbish APR, 4.9% is current for brand new vehicles. Even that’s not great! You can probably do the same pcp withdrawal trick as many on here have done and replace with a personal loan at .2.8%. Also you want them to be putting some deposit in - at least £2k. All the way around this looks like a bad deal. Go back and tell them to sharpen their pencil!

 

As a reference I have just bought a brand new scout with £3k deposit 11k miles per year - the monthly’s were £330 - balloon payment about £14500. 

4 hours ago, mrrollout said:

Can anyone tell me what those Charges are?

 

As no-one has directly answered this question - those charges are the interest on the loan. You pay interest on the amount owing (including the balloon figure) over the whole period of the agreement... so the jacked up figure of 7.3% is pretty crap.

 

1 hour ago, MattEds said:

You can probably do the same pcp withdrawal trick as many on here have done and replace with a personal loan at .2.8%

 

But, once again, take care when deciding if this is the correct route for you. If you do this, then you are liable for the full cost of the car, no matter what it is worth at any point in time. If you remain on the PCP agreement, and the car is worth less than the balloon (or GMFV) figure after 4 years, you get to hand the car back (subject to mileage and condition, of course) and walk away - with VWFS taking the loss on the chin.

 

One other point to mention, however - double-check that this quote is from VWFS... I've seen dealers use other PCP financing because they presumably get a greater kick-back (or in the case of large dealer chains they effectively have their own in-house finance brokerage) - but the deals are nowhere near as good as VWFS and you don't get whatever offers are currently available and linked to VWFS finance (test drive, fuel card, free servicing etc.). This could also explain why the APR is 7.3% and not the expected 4.9%.

Edited 19 August, 20187 yr by WiggosSideburns

8 hours ago, Kenny R said:

if they value it at £14k in 4 years time and it’s worth £18k that’s £4K you’ve got fit your deposit on your next car.

http://www.skoda.co.uk/finance-and-offers/new-car-offers/kodiaq

 

In my case though if the balloon payment was higher that would have squeezed down the monthly payment, as I don't intend on keeping the car. I worked out the car would be worth roughly £16½k in 4 years time, which would have cut down the monthly payments from £369 to £318.

5 hours ago, MattEds said:

What model is it? SE L? EDITION? Either way - I would say that’s a pretty poor deal. The GMFV (balloon payment) looks about right and having been on the wrong end of an overly optimistic one recently, that’s not a scenario you want. That said, 7.3% is a rubbish APR, 4.9% is current for brand new vehicles. Even that’s not great! You can probably do the same pcp withdrawal trick as many on here have done and replace with a personal loan at .2.8%. Also you want them to be putting some deposit in - at least £2k. All the way around this looks like a bad deal. Go back and tell them to sharpen their pencil!

 

Hi Matt. As it happens, I live in Bristol too!  It's the EDITION model. As said to Kenny, I worked out the GMFV should be around £16½k, which would have helped lower my monthly payments. Bear in mind I came to that figure comparing to a 4-year old Kia Sorrento! You mention an overly optimistic one could be disadvantageous. How so?

I agree, that 7.3% figure is poor. I guess because the vehicle is Used.

4 hours ago, WiggosSideburns said:

As no-one has directly answered this question - those charges are the interest on the loan. You pay interest on the amount owing (including the balloon figure) over the whole period of the agreement... so the jacked up figure of 7.3% is pretty crap.

 

But, once again, take care when deciding if this is the correct route for you. If you do this, then you are liable for the full cost of the car, no matter what it is worth at any point in time. If you remain on the PCP agreement, and the car is worth less than the balloon (or GMFV) figure after 4 years, you get to hand the car back (subject to mileage and condition, of course) and walk away - with VWFS taking the loss on the chin.

 

One other point to mention, however - double-check that this quote is from VWFS... I've seen dealers use other PCP financing because they presumably get a greater kick-back (or in the case of large dealer chains they effectively have their own in-house finance brokerage) - but the deals are nowhere near as good as VWFS and you don't get whatever offers are currently available and linked to VWFS finance (test drive, fuel card, free servicing etc.). This could also explain why the APR is 7.3% and not the expected 4.9%.

 

Thanks for clarifying Wiggo. They offer 4.9% on brand new models. They also offered to contribute £2k on top of my £5k deposit. Maybe new models gets the VWFS treatment and Used models have a different finance brokerage, hence the higher APR?

 

From all the answers, it's clear my concerns about the APR are justified. Do you think I have much wiggle room to ask the dealer if they can increase the GMFV (hence lowering the monthly payments), or even offer 4.9% on the Used model instead?

The edition makes it slightly better, but still doesn’t strike me as a great deal. Is it from Blade? 

 

Im pretty sure that the GMFV is fixed at the level of depreciation they expect over the time frame. I don’t think it’s negotiable.

 

The PCP on my Octavia that is now coming to the end had an optimistic gmfv which meant that at trade in time the value was lower that the gmfv and I was in negative equity, meaning that I only had the option to hand the car back. There was nothing left for any deposit on the next one. Apparently it’s a common issue on Ocatvias bought in 2015!

14 minutes ago, mrrollout said:

Thanks for clarifying Wiggo. They offer 4.9% on brand new models. They also offered to contribute £2k on top of my £5k deposit. Maybe new models gets the VWFS treatment and Used models have a different finance brokerage, hence the higher APR?

 

From all the answers, it's clear my concerns about the APR are justified. Do you think I have much wiggle room to ask the dealer if they can increase the GMFV (hence lowering the monthly payments), or even offer 4.9% on the Used model instead?

 

I'm guessing it is through Black Horse Finance then... most used car finance is through them (and Blade certainly use them - I'm guessing the dealer in question is Blade Bristol?).

 

They almost certainly won't be able to do anything with the GMFV, and may not be able to do anything with the APR either because these will be set by the finance company. The reason the good finance deals exist for new cars is so that they can sell more of them... no-one looks at used car sales figures as much as they do for new car ones.

 

Personally, I've never been able to get anything approaching a good deal out of Blade in Gloucester, so much so I went all the way up to Newcastle to get Yogi (sorted out through CarWow). But for what it's worth, the GMFV on Yogi is just over £13.5k, and his list was £33,250. So I don't think your GMFV is too far away from reality based on the fact that it would, in fact, be 4.5 years old (assuming it's probably around 6 months old already and hence why they're now getting rid of it).

 

And finally, don't forget that diesels are the most evil planet-killing things around at the moment (in no small part thanks to VAG themselves), and there is no telling what will happen to the diesel market in the next 4 years... you could end up sitting on an asset that is worth way less than anyone thinks right now, at which point handing it back to the dealer will be the only option.

 

Edit: Where did you get the £16.5k from anyway? A quick search and that seems to be what dealers are asking for 4-year old Sorrentos, so you can knock at least £2k off that for what a dealer would give you in part-ex.

Edited 19 August, 20187 yr by WiggosSideburns

5 minutes ago, MattEds said:

Apparently it’s a common issue on Ocatvias bought in 2015!

 

My '64 plate Octavia vRS went back to VWFS... it was just about at break-even on the GMFV, but I got a better deal on Yogi by not having a part-ex, and I couldn't be bothered with the hassle of trying to sell privately in the hope of making a few hundred quid at most.

If you’re in the market for a vehicle soon, speak to Rich Milner at Capitol ŠKODA in Newport. He’s a good guy and works really hard to get a result for you. When I bought mine he said they had a few more stock vehicles coming in shortly. Worth a call anyway! 

24 minutes ago, WiggosSideburns said:

 

I'm guessing it is through Black Horse Finance then... most used car finance is through them (and Blade certainly use them - I'm guessing the dealer in question is Blade Bristol?).

 

Where did you get the £16.5k from anyway? A quick search and that seems to be what dealers are asking for 4-year old Sorrentos, so you can knock at least £2k off that for what a dealer would give you in part-ex.

 

Actually the dealer is based in Wales, part of the Mon Motors Group covering South Wales and West of England. Do different dealership groups offer different deals?

 

So if they don't want to budge over the GMFV, I can try asking if they'll offer the Used car on a VWFS finance package instead with the 4.9% APR. They may well say no to that cos as you say, they reserve that incentive for shifting newer models. Depends how quickly they want to shift the car off their stock.

 

Failing that, I'll have a look and see what my bank (Lloyds Bank) are able to offer on their Flex Car Finance PCP.

 

You're exactly right by the way, I came to that figure by looking up a 4-year old Sorrento on Auto Trader!  Not the closest comparison I know.

18 minutes ago, MattEds said:

If you’re in the market for a vehicle soon, speak to Rich Milner at Capitol ŠKODA in Newport. He’s a good guy and works really hard to get a result for you. When I bought mine he said they had a few more stock vehicles coming in shortly. Worth a call anyway! 

 

Snap! The vehicle I'm after is at Capitol Newport!  I've heard some good things about Rich. I was there last Wednesday, though didn't meet him (I was seen to by a girl named Hollie). I might try contacting Rich tomorrow to see what he can do. As mentioned above to Wiggo, I'll see if he can offer me the 4.9% they usually apply for brand new vehicles to the Used one I'm considering. Or should I open my negotiation approach as simply saying I want something better than the 7.3% and see what he can do for me?

Skoda UK are well known to under inflate their balloon payments, this is deliberate to ensure there is equity in the car at the end of the term, which they can arm themselves with to roll you into another lucrative PCP.

 

Try not to get caught up in the detail at this stage. To know if it's a good deal or not then it's the 'total amount payable' you need to focus on.

 

It's a 2.0 TDI Edition, 7 Seat Ex-demo?

 

Manual or DSG?

150PS or 190PS?

Mileage?

Registration date?

Factory or dealer fit options?

Metallic paint?

 

I'm trying to determine the cars original list price.

 

Edited 19 August, 20187 yr by silver1011

37 minutes ago, mrrollout said:

Failing that, I'll have a look and see what my bank (Lloyds Bank) are able to offer on their Flex Car Finance PCP.

 

...and quickly discover that is simply Black Horse Finance as well...

 

What’s the list price new, by the way? I’d suggest your most likely angle for success would be to negotiate the starting price downwards. If they offered £2k towards your deposit without any/much haggling, then they’ve built that into the price to start with. Push for another £2k or so off the starting price and see where that gets you... 

 

And one last thing - if you have no intention of keeping the car, why put £5k into it up-front? You’re never going to get that back out at the other end... personally I put in the £500 deposit I had to stick down as it was a factory order, and I’m happy to suck up higher monthly payments. You won’t pay vastly more over the 4 years (although this is where the APR makes a difference), and you get to keep your £5k for holidays or other stuff - or using towards the higher payments if you like.

2 minutes ago, silver1011 said:

Skoda UK are well known to over inflate their balloon payments, this is deliberate to ensure there is equity in the car at the end of the term

 

That makes no sense. The higher the balloon payment, the less equity there will be (if any). They do it to make the monthly payments smaller and make the deal more attractive that way, on the basis that people don’t think about the GMFV until it comes to the end of the deal.

 

This is why you need to think very carefully before paying off your PCP with a straight bank loan...

Calm down, don't be so quick to criticise.

 

A simple mistake, it's pretty obvious I meant under inflate.

 

Original post corrected.

 

Your suggestion that the balloon is kept high to lower the monthly payments is the opposite to what I've experienced in the past. I've seen the balloon kept low to ensure there is plenty of equity in the car at the end of the term. Skoda UK do this to provide their dealer network with the worm and the hook needed to get the customer to use that equity as a deposit contribution for another new car.

 

This is why I mentioned earlier, the list price is the most important element. Don't get tied up with how the deal is sliced and diced. What is the total amount payable and how much off list is the dealer and Skoda Finance offering between them.

 

Edited 19 August, 20187 yr by silver1011

11 minutes ago, silver1011 said:

A simple mistake, it's pretty obvious I meant under inflate.

 

Its not, actually.

 

Your original statement of over-inflating them seems to be closer to reality - certainly in my experience, and that of many Octavia owners in the last few years.

 

I also think the GMFV of Yogi is potentially on the high side - it assumes he will hold 40% of his value after 4 years. It’s possible, but I think it is unlikely... 40% after 3 years I can agree with, but not so sure about 4.

This thread is a great example of why the dealers love finance. Deposits, monthlies, balloons, APR's, all part of the sell, deliberate tactics employed to confuse. They don't sell cars, they sell finance. The car is simply a tool to selling you the finance.

 

Cut through the crap, ignore it for now, how much is the car to buy - what is the screen price?

 

List (new) or current market value (used) minus any discounts.

 

In this case, £30,995. We need the questions I mentioned above answering to know if £31K is any good or not for the car in question.

 

Once you have the screen price then you can work out the best way to finance it.

 

It's this screen price plus the deposit and the term that is fed into the finance calculator on the dealers desk.

 

All the salesman and sales manager are doing as they skip between his desk and the back office is massaging the screen price and putting on a show. Classic sales tactics. Eventually you'll either get completely confused or just bored senseless and sign anyway, or at least that's their plan.

 

Edited 19 August, 20187 yr by silver1011

2 hours ago, silver1011 said:

To know if it's a good deal or not then it's the 'total amount payable' you need to focus on.

 

It's a 2.0 TDI Edition, 7 Seat Ex-demo?

 

Manual or DSG? DSG

150PS or 190PS? 150

Mileage? 1000 miles 

Registration date? 2018

Factory or dealer fit options? Park Assist (£670)

Metallic paint? Yes

 

I'm trying to determine the cars original list price.

 

Thanks silver. I've put the answers in bold as requested. Really grateful for your help. I think the original list price for the vehicle was £35,725 (without factory option). Saying that, the dealer also gave me a breakdown for ordering a brand new vehicle (same spec as the Used, except the new one would be 5 Seats and also in Velvet Red (£380) for £34,882.75. The brand new one was offered at 4.9% APR.

 

How come I need to be focusing on the Total Amount Payable though? That amount includes the balloon payment and I don't wish to keep the vehicle after the 48 months is up.

 

2 hours ago, WiggosSideburns said:

 

...and quickly discover that is simply Black Horse Finance as well...

 

What’s the list price new, by the way? I’d suggest your most likely angle for success would be to negotiate the starting price downwards. If they offered £2k towards your deposit without any/much haggling, then they’ve built that into the price to start with. Push for another £2k or so off the starting price and see where that gets you... 

 

And one last thing - if you have no intention of keeping the car, why put £5k into it up-front? You’re never going to get that back out at the other end... personally I put in the £500 deposit I had to stick down as it was a factory order, and I’m happy to suck up higher monthly payments. You won’t pay vastly more over the 4 years (although this is where the APR makes a difference), and you get to keep your £5k for holidays or other stuff - or using towards the higher payments if you like.

 

I looked on the Lloyds website (explained here) and you can select either an online PCP direct through the bank, or Black Horse PCP direct from the dealership. I assumed online car finance is different from Black Horse dealer finance...?

 

As mentioned to silver, I think the original list price for the vehicle was £35,725 (without factory option) and the dealer also gave me a breakdown for a brand new vehicle with factory option and also in Velvet Red for £34,882.75. But when you say negotiate the starting price downwards, I take it you mean from the current ticket price of £30,995...?

 

From my limited expectations of a PCP, I would hope that £5000 deposit is included in the sum of the 48 monthly payments... not on top of those payments. Or am I missing something?

When you take a PCP you are actually borrowing the FULL balance not the balance less the GMFV. Interest is charged on that full amount, but you only pay it for the duration of the PCP. That’s why you need to look at the total amount repayable. 

 

So in summary to get to that, you’ll have: 

 

list price - say £30000

Less your deposit - £5000

Less dealer deposit - £5000

total balance for finance £20000

GMFV - £10000

You pay the difference between balance and GMFV (£10000) plus the interest accrued on the WHOLE £20000 finance split over the 4 year PCP. 

 

I hope ive got that right!

 

Its a minefield and each dealer has a different way of illustrating it, which suits their way of selling! Just scrutinise your quote before you sign anything and make sure you shop around. It sounds to me that you’ll likely get a better deal on a new one once dealer discount has been taken into account. 

Just for quick comparison, have a look at he finance calculator on the Skoda website.

 

A New Kodiaq Edition (7 Seats) 2.0 TDI 150 PS 4x4 DSG, on a 48 month PCP with £5000 deposit, and 10,000 miles per year is £377.71 per month with a £15,346.80 final payment.

 

But if you manage to get an extra £1000 off the dealer (should be possible) it brings the payments down to £354.35 with the same final payment

 

 

So the OTR price for the car is £35,865 (Edition 2.0 TDI 150PS DSG 4x4).

 

Plus Park Assist @ £670.

 

Plus metallic paint @ £595.

 

Total = £37,130.

 

Current screen price =  £30,995.

 

So a 16.5% discount, which on a brand new car would be quite good, but on a used car which has already taken a hit of depreciation needs to be much more.

 

Once you've settled the negotiation with the dealer on the screen price i.e. secured your discount, then you can pump that amount into their finance calculator to generate the monthlies and balloon.

I've found carwow's PCP calculator works well...

 

https://www.carwow.co.uk/pcp-calculator

3 hours ago, MattEds said:

When you take a PCP you are actually borrowing the FULL balance not the balance less the GMFV. Interest is charged on that full amount, but you only pay it for the duration of the PCP. That’s why you need to look at the total amount repayable.

 

It sounds to me that you’ll likely get a better deal on a new one once dealer discount has been taken into account. 

 

I've gotcha! Thanks for explaining. Can't believe the interest accrued on that balance for a Used vehicle is 22.5%! How do they actually calculate that interest?

 

2 hours ago, silver1011 said:

 

So a 16.5% discount, which on a brand new car would be quite good, but on a used car which has already taken a hit of depreciation needs to be much more.

 

Once you've settled the negotiation with the dealer on the screen price i.e. secured your discount, then you can pump that amount into their finance calculator to generate the monthlies and balloon.

 

Thanks again. What kind of discount on the Used would you suggest I should target? And even if I do secure a good discount, would that be cancelled out if they ran it against the 7.3% APR?

I just ran a check through Lloyds Bank's online PCP. With a lower APR of 4.9%, I end up paying £308 more over the 4 years, but I also save £2221 in charges! So overall I'd be saving exactly £2529.50 than what the dealer is offering. Here's the bank's breakdown vs the dealer's:

 

	Dealer Quote	Lloyds Bank	Saving / Additional Cost
Used Car Price	£30,995	£30,995
Deposit	£5,000	£5,000
Finance Amount	£25,995	£25,995
APR	7.3%	4.9%
Charges	£5,861.46	£3,639.93	£2,221.53
Total Repayable	£31,856.46	£29,634.93
Monthly repayments	£369.77 x 48=   £17,748.96	£384.19 x 47=   £18,056.93	£307.97
Balloon Payment	£14,107.50	£11,578
TOTAL SAVING			£2529.50

 

So my opening gambit to them is to at least match the 4.9% APR they offer on new vehicles for the Used model. Or I'll opt for Lloyds Bank online's PCP.

 

Will hang on a while longer in case @silver1011 or anyone else has a suggestion as to what target Used Car price I should try and get it down to. 

Edited 20 August, 20187 yr by mrrollout
Providing more cost breakdown data