MB

Audi actively encouraged my parents to do that as they could offer a better deal. They didn't see to care about it being paid off straight away.

Nick Graves

Actually, I've seen quite a few prices frigged to get an underwater situation to float to cover the deposit on the next one! Probably a law against it somewhere...

But it does have the advantage that the underwater punter HAS to trade up!

ianl

Same with my parents at Ford....Dad went as a cash buyer, but sales chap persuaded him not to buy outright, but take finance and pay off as soon as he wished, no penalties and a much, much better deal than he could get anywhere as a cash buyer.

Strange times.

s2konroids

Guys, PCP is something I just can't get my head around? I know in essence your renting a car so you can get a nice car for a monthly fee that you don't own but locked into and the manufacturers/dealers love it - I'm not saying there is anything wrong with it.

I'm self employed and I actually own my BMW 435d I paid 28k for 29k miles 1 prev owner start of last year and its pretty much fully loaded. Maybe I'm old school but I don't like lots of outgoings and believe you shouldn't live out of your means, I also never use my credit card. I've never been given cash I've just worked my way up took risks and worked several places.

I'm in 2 minds next time to try Pcp but I don't know the pros and cons and if it's really better than owning a car? Aside from 3 years it hopefully be trouble free. I generally only keep my cars till 100k.

What are peoples thoughts of owing a car and PCP?

Nick Graves

Whilst I tend to follow your line of reasoning, there are many people who are not in a position to buy a car outright like we do.

The advantage is that if we suddenly drive down Shit Street, we can sell it easily.

It ought to be that easy with PCP, but you are always taking a risk with PCP that a new car may very quickly go underwater. Of course, the car really going underwater might be a way out, if you took out gap insurance...

Since most modern cars seem to be FPOS, a new car with the mfr.s warranty on it might seem a safer way of buying, for many. And arguably, you ought to be able to afford the repayment anyway, unless you are really over-reaching.

It's why I recommend to many of my tradesmen (who rely on a reliable van to earn their keep, as well as its) to go out & rent a new one.

MB

It's generally very simple, if you can afford not to rely on finance then don't. I deffo don't have anything against it, if you go down that route you are knowingly chucking money away but means you have a car you may not be able to have otherwise, and allows you to use your capital elsewhere instead of tied up in a car. But it's not the most sensible option.

I actually quite like the idea of leasing, on more run of the mill cars although never tried it.

pip

I think that's pretty much it; have a look at the balloon at the end and decide what that means to you. Yes, you can offset the value of the current car against a new deal, but that just means an extension of borrowing. It works well on run of the mill cars if you want to keep a car in warranty and set cost servicing at a relatively low monthly cost, but if you want a performance car it's a very expensive rental and you have no asset, it simply isn't your car. Unless your financial circumstances change of course and you can then pay the balloon.

gaddafi

The business case and maths ought to be fairly simple to work out. Unfortunately, it's not that simple because few people seem to go beyond looking at how much disposable income they have at the end of the month and max the repayments to that figure. That's fine if the calculation of disposable income is sophisticated but it rarely is. Take someone who is not saving and not making pension provision. Is the £300 left over after mortgage, food, bills, clothes and entertainment really disposable income and what they can afford and is £300 a month on a car the best use of that money?

Regardless of the above, it's the psychology that screws things up for many. The lure for shiny new is strong. People can rent things they could not afford to buy. The delusion is strong in this in a society where image is so important to people. I have been told by many people that financing is their best option when the reality is they have no other way of getting into a new car. A bit sad really. Why not just celebrate the opportunity of driving something you couldn't afford to buy.

Every now and again I look at leasing a car or cars. I have two businesses they could run under, one VAT registered, but a couple of things stop me. The first is how I hate the idea of worrying about the car getting damaged and the hassle factor when giving it back. I know for a fact that if my partner drove it, it would be damaged. It's what she does. After two years every panel would be dented, both bumpers would be scraped, all wheels would be kerbed and there'd be interior trim damage. It would drive me crazy. So better to do what we do, which is to buy her a decent enough second hand car that she can drive into the ground. She has had a couple of decent spec Astras which have been totally reliable, she likes them because they are familiar, maintenance is cheap and easy and parts are peanuts. By way of example I expect to have to replace both door mirrors due to her smashing them in her ownership. Cost, for the electric, heated variety - about £25 and 15 mins to fit. In Arsie's M3, we would be starting at £700...the thought of the state the car would be in makes me shudder!

After three or four years her car will be a shed. I'm about to put her in an 08 118D M sport (this is not patronising - our deal is that I pay for and maintain the cars in the household, she pays for other things). Cracking little thing, leathered up, electric sunroof, heated seats, one owner and tidy all round. Cost me £6K to purchase and fettle and I expect to see it destroyed over the next three years. See what I mean though, she gets to drive a nice car for three years, I don't have to worry about anything apart from servicing it and there isn't £300 a month going out of the account on the 1st of every month. In three years it will still be desirable to a certain type of buyer and we'll start again. Imagine the stress with a new car over that period! The new car would also cost around £10K over three years (before penalties!) with nothing back at the end. The beemer will sell all day long for £2.5K even in shed state and won't need more than a grand spent on it over the same period. So cost, circa £4.5K. The leasing just doesn't work for me/her.

But when talking about me alone, the second reason is that I don't want to be tied to one car for two years. I 've had cars for longer, but they aren't white goods cars or cars that I associate with a particular demographic or type of owner I dislike. People can make their own choices but I don't want the attention that goes with certain cars. To avoid upsetting anyone with a modern, take the Impreza 'Classic'. I could have had one as a company car in the 90s. Not a chance because they were (and are) the ultimate chav wagon. There are equivalents today. I also like being able to change cars on a whim. The modern cars that I would be interested in are not £300 per month, e.g.

https://www.contracthireandleasing.c...easing/bmw/m5/

So I'd be paying around £800 a month for something I'd be fretting about every time I parked it and I couldn't let the missus drive it. Great.

Most of you know I like running older unusual stuff like my STR and Daimler. People have said that's ok because I can do stuff but it's not expensive to maintain these cars with a specialist once you have them running right. There's certainly no way the annual maintenance on my STR will cost more than one month's payments on that M5. Yes, the M5 might be twice the car, but I'm not willing to pay 12 times the price (rent or buy) for the privilege. I'd rather buy one when they're £20K thanks, run it for a year or two and pay about £4K for the privilege.

In summary, I don't think most people think the decision through. The extent of their thinking is how much money do I have at the end of the month and what's the best car I can rent for that. OTOH, where I see people who want a reliable shopping car for £100 a month I can see the appeal. Maybe that's what I should do with mum...

buaan

Interesting topic, I know little about PCP. I nearly went for the M135i lease deal a few years ago when it was reasonable but couldn't stomach losing the 10k in 3 years or whatever it worked out as when including gap insurance.

In the end I bought outright a Kia Ceed diesel, 1 year old with the 'approved' 7 year warranty. 3 Years in I am still happy, had a few things replaced under warranty and only had to pay for servicing. No road tax etc but I believe I have lost about £5/6000 in depreciation.

If I keep it another 4 years until the warranty expires it may sell for £2/3000 with 100k miles on it due to it hopefully still being free to tax but maybe as a diesel it will be not usable in cities etc. Round up to around £10,000 for 7 years of motoring, ~£1450 a year for the car before servicing. I may still keep it at the end as a runaround if it remains reliable then purchase another car, maybe electric or whichever the govt doesn't screw us for using.

No idea if my method is better but I am sure some people wouldn't want to be seen dead driving a Kia, but I'd rather have my money saved/invested and have the option to buy myself a litre bike outright to commute on.

fluffyninja

The basics are pretty simple.
You buy a car for 36,000 over 36 months on HP (numbers just picked to make the maths easier). Ignoring interest it costs you £1000 a month at the end of which you own an asset which for the sake of this example is worth £18,000.
At the end of 36 months you buy another car worth £36,000 but you trade in your £18,000 asset so you only finance on the HP to the tune of £18,000. That means your repayments are now £500 a month.
You could then keep repeating the above

With a PCP the concept of the final value of the car means you can start paying that £500 a month straight off.
Since the final assumed value is £18,000 you're only financing the difference between £36,000 and £18,000
The down side is you never own the asset at the end.
That means it is furiously expensive if you want to get out of it or a bit more of a hassle if you want to change marques

It is popular with dealers since it is cheap to get people on, they're more likely to stay with the marque due to the (perceived) hassle of changing, they're unlikely to keep older cars (increasing sales frequency) and it gets people on an easy upgrade ladder.

The last bit for example:
You buy a Toyota Aygo with zero deposit. The dealer makes no profit on the car but they get someone who will have their car serviced and Toyota love you due to the finance package
At the end of the term you now have some equity (assuming you stuck to the mileage limits for example) meaning you can afford a Yaris on the same type of deal
For a little more next time you get an Auris...........next an Avensis..........etc