PCP Final Payment Bargains In Current Climate

[WaveyDavey]

Anyone else had, or got their, final PCP payment coming up and finding they look to have a bit of a bargain with the used prices being so high?

 

The Mrs' PCP deal comes to an end next month for her 2019 Fabia Colour Edition and having looked at what they are going for (Same age, spec and mileage look to be around the £11000-12000 mark) her final payment to keep the car is less than half of that. No wonder Skoda/VW Finance have been pestering her like crazy this last 6-12 months to trade it in. 😄 

[petrolcan]

This guy's wife has 🤣

 

 

[WaveyDavey]

6 minutes ago, petrolcan said:

This guy's wife has 🤣

 

 

 

He has an awesome username.  

[ColinD]

I know it's not PCP, SWMBO Lease co, previously offered very low prices at the ned of each 4year cycle.

Her 19 focus estate has been offered to us at a price 2k above WBAC/Motorway and still more than forecourt specials of a lower trim.

 

My conclusion, synical as it is... they give us a high price, we don't bite, they get to sell at better than expected... profit for them.

A friend who passed away had a volvo xc40, only a few months into the pcp.  When approached before his passing, they were only to happy to let him exit early.

I've never done pcp, I'd be half tempted in the current climate as I'm sure there's a huge correction on the way... or, this is just a taster for approaching 2030 as ICE supply becomes scarse.

[J.R.]

9 hours ago, WaveyDavey said:

Anyone else had, or got their, final PCP payment coming up and finding they look to have a bit of a bargain with the used prices being so high?

 

The Mrs' PCP deal comes to an end next month for her 2019 Fabia Colour Edition and having looked at what they are going for (Same age, spec and mileage look to be around the £11000-12000 mark) her final payment to keep the car is less than half of that. No wonder Skoda/VW Finance have been pestering her like crazy this last 6-12 months to trade it in. 😄 

But how much have you paid out over the last 4 years?

 

I have never leased or long term rented a vehicle so know nothing but from an investment standpoint 50% does not seem off beam.

[WaveyDavey]

17 hours ago, J.R. said:

But how much have you paid out over the last 4 years?

 

I have never leased or long term rented a vehicle so know nothing but from an investment standpoint 50% does not seem off beam.

 

It's not leased or rented though it's a PCP.....  So what we have paid isn't really relevant in that respect as you are just paying the new price over however long a term you signed up to. You have the price as new.... You pay a deposit then pay whatever per month for four years then if you want to keep it you pay the final balloon payment. From our past experience usually the car reaches neutral equity at around 3 years in and we've then handed them back and started a new PCP on a new vehicle but due to the current used car market the car is nowhere near that point.

 

 

To put it simply once you pay the final payment you have paid the brand new price but over 4 years.... The point here is that the car is still worth £11-12,000 so if you so desired you could sell it for that and instantly more than double the final payment you just payed.....As we're keeping it though it means in our instance that the car has only lost around £5,000 or so from brand new over four years. 

 

The other thing in this situation at present is that if you no longer needed the vehicle and would have normally just handed it back you could buy it and then put it straight on the market and in our case earn an instant £6,000 or so.

Edited 6 June, 2023 by WaveyDavey

[J.R.]

So are you saying if you take out PCP on a £24K vehicle paying £5K up front then 3 years of  £350 per month the final ballon payment would be £6400? And that is fixed at the start of the deal and will not change?

 

That you can pay the baloon payment and own the vehicle or you can walk away?

 

And that in normal times the vehicle would be worth £18000 at the end of the 4 year period but in the current market a lot more?

 

Sorry to have used 4 years instead of 3, it made the maths easier for me!

 

Where does mileage and condition come into the equation?

[WaveyDavey]

On 06/06/2023 at 09:46, J.R. said:

So are you saying if you take out PCP on a £24K vehicle paying £5K up front then 3 years of  £350 per month the final ballon payment would be £6400? And that is fixed at the start of the deal and will not change?

 

That you can pay the baloon payment and own the vehicle or you can walk away?

 

And that in normal times the vehicle would be worth £18000 at the end of the 4 year period but in the current market a lot more?

 

Sorry to have used 4 years instead of 3, it made the maths easier for me!

 

Where does mileage and condition come into the equation?

 

Sorry for the late reply.... Been on nights.

 

So yeah a PCP is kind of like the hire purchase of old. The difference is that you have three options at the end of the deal, Keep it, trade it for another or give it back and walk away. At the start when setting it all up all financial stuff is set out and you pay a deposit then however many years of monthly with a pre-agreed final balloon payment if you want to keep the car. Mileage is also agreed and can be tweaked as required (Ours by default was 24,000 miles total but we changed it to 32,000 miles). Vehicle condition & mileage is taken into account but only if you are giving it back and walking away or trading it and starting a new deal.

 

Our Colour Edition was something like £16,000 new, There was £3,000 deposit paid between us and VWFS (We paid £1,000 and VWFS paid £2,000) then what's remaining is paid at an agreed amount per month plus a final larger balloon payment if you want to keep the car. The monthly & final payment can be tweaked slightly as if you were definitely going to keep it you could pay a little more per month and have a smaller final payment or if you intended to give it back you could tweak it slightly to make your monthly payments slightly smaller leaving a larger final payment etc....

 

 

So in our case ours was £3,000 deposit, £198 per month for 47 months, and a final payment of £5300 for the 48th payment. 

 

The problem pre-COVOD was that the car usually reached the point of neutral equity at around the 3 year mark so pretty much everyone except those who were planning on giving it back and walking away at the end tended to end up finishing the deal up to a year early and switching to a new vehicle or they would end up paying a final payment that was more than the market value of the car. For example with the Citigo that this Fabia replaced in 2019 it was approaching the point of negative equity at a month short of 3 years even though it was either a three and a half year or four year deal and hence the wife traded it in for the Fabia.

 

Post COVOD though with used car prices being a lot higher it means the car has depreciated a lot less and so the final payment is actually a lot less than the market value. This is great if you intended to walk away as you could pay the final payment then just put the car straight on the market and maybe double the money you just paid as the final payment. 

 

In our case we will have paid around £15,600 over the last four years (£15,600 rather than the new price of £16,000 as VWFS paid £2,000 of the deposit but there has been around £1,600 paid in interest over the four years) and we have a car that is currently selling for around £11,000-£12,000 on a forecourt looking at others available that are 19 plates with the same spec and mileage.

 

 

From what myself and friends have found the differences between PCP and leasing are the final options where PCP gives the added benefit of the option of keeping the vehicle and the lease deal sometimes getting the benefit of things like running costs like tyres and servicing included in the deal.

 

 

Also PCP is usually also now available as an option for used cars at dealers rather than just on new cars as it used to be so the same process can be used when buying an approved used car as well.

 

 

Edited 7 June, 2023 by WaveyDavey

[J.R.]

Thanks for the clear and concise explanation.

 

Lets say it did not have the equity like the Fabia, how do you "trade in" a vehicle that you dont own?

 

Do you mean just choose a new vehicle and start all over again with a new deposit and new payments?

 

Financially that would be the same hit as handing it back and walking away.

 

I guess were there not the equity you would have done that with the Fabia and it would have cost you £12504 for having a vehicle for 4 years, whether you look at it as depreciation or hire costs. £260 per month.