[Vish8895]

Hi all,

I am just asking this as I wondered if I am missing something.

What makes you choose PCP over owning?

The reason I ask is it seems such a huge outgoing for no asset at the end of it.

For example, I saw a lovely M4 on the approved used, and it was something like £37,000.

To PCP the car it was £8K deposit, then £450/month for 36 months. So in total it would have cost £24.2K to have the car for 3 years, then you hand it back.

But if you bought it, you could sell it after the three years for far more than £12.8K (£37K-£24.2K).

So what is the appeal?

Not having a dig in anyway what so ever, I just want to understand if I am missing a trick!

[The0pportunist]

This is an interesting question which confuses me too.

I think a 'good' lease deal will only cost you the depreciation over set period. Just like buying car outright and selling it on. So total lease cost = depreciation.

For example if you buy a car outright for 10K and you sell for 6K in 3 years. That's a 4K hit. So a 'good' lease deal will be 4K divided by 36 months which is £111.11 / per month.

Is my logic correct?

[Vish8895]

Yes I think your logic is correct.

I always thought that was how PCP and leasing worked. I think from my basic understanding though that they set a GFV (guaranteed future value) of the car.

So lets say the above example with the M4 costs you £24.2K and then when the lease is up the car is worth more than the GFV, you can transfer the difference into the deposit of a new lease deal or pay the GFV to keep the car.

So you pay more in the first instance but then can use the over-payment to your advantage if you stay in their PCP loop/buy the car outright.

Can someone correct me if I am wrong?

[Rudz]

If only they made the GFV calculations a bit more transparent, I feel it is biased in favour of the trader.

As a comparison, if u bought a car worth say £40k and took out a pcp for 20k miles a year for 48 months at 2.9% APR vs same deal on HP where miles are not considered, u would be better off about £3k on HP, they factor in a percentage for the miles as well

[AWSAWS]

Always mystified by this as well. Does that pcp cost include things like servicing or is that extra? I wonder what is the cost if it breaks down etc. Is that covered by an additional warranty?

Surely it makes more sense to buy, but buy used. Not brand new ☺

[Vish8895]

Yes the PCP deal will always favor the dealer, as they are there to profit from us.

Also unless specified, servicing, repairs and warranty are not included from my understanding (of course brand new will come with manufacturers warranty).

[TomD335xicoupe]

Best reasons to lease instead of buy. By example if you buy your car or lease your car, in three years and 36 K miles should depreciate about the same amount, more or less. Resale /trade in/ lease return value about the same unless you have an accident. Lease car set at value as long as you have it repaired , you insurance rate may differ because a lease must be repaired with OEM parts, but the return value is set from the lease inception. If you own it and you have a reported accident you will take a major hit on value.
I have a leased 16 X5 no reason to think I would have an accident during my lease period. Oh but Ahole runs a stop sign, broad sides me $27,000 in damage. Had it repaired I don't care will be turning in X5 at end of lease with no loss to return value. If I owned it I would more than likley be out about 5,000 in value, nobody want a car after 27K in damage.

[nicktyler]

The GFV should be what they think the value of of the car is after 3 years in the M4's case £12.8k and so you pay the depreciation + any interest on the finance amount.

If at the end the car is worth more than that, say £15k then you can give the car back and put the £2.3k left over into another deal, or pay the remaining £12.8k to own the £15k car. If the car is worth less the dealer takes the hit. You are only ever paying the total value agreed at the start + interest.

I think the biggest draw for people to go PCP is that £37,000 is a lot of money. Maybe you don't have that sort of money, but maybe you can afford £450 per month and have £8k (which is still a lot but a lot more achievable). Now you can own a £37k car without ever having to own £37k. And most likely without ever having to pay the full £37k as you can just give the car back taking any £££ left over from the GFV (which is your money as you have already paid) with you.

Make sense?

[Vish8895]

Originally Posted by nicktyler

The GFV should be what they think the value of of the car is after 3 years in the M4's case £12.8k and so you pay the depreciation + any interest on the finance amount.

If at the end the car is worth more than that, say £15k then you can give the car back and put the £2.3k left over into another deal, or pay the remaining £12.8k to own the £15k car. If the car is worth less the dealer takes the hit. You are only ever paying the total value agreed at the start + interest.

I think the biggest draw for people to go PCP is that £37,000 is a lot of money. Maybe you don't have that sort of money, but maybe you can afford £450 per month and have £8k (which is still a lot but a lot more achievable). Now you can own a £37k car without ever having to own £37k. And most likely without ever having to pay the full £37k as you can just give the car back taking any £££ left over from the GFV (which is your money as you have already paid) with you.

Make sense?

This is the most logical explanation I have heard so far so thanks!

I guess the idea is that they either sell you the car at the end or pressure/persuade you into another PCP deal.

This has given a new light to PCP

[225_AB]

PCP and lease are of course different. With a lease you pay a set amount for the period of the lease then hand the car back at the end of the lease. With PCP you pay deposit, then monthly payments and at the end of the PCP period end the contract or buy the car for the GFV which is not an option on a lease. (Although many companies will sell the car to a "family member". Apart from this the previous post sums it up.

[Kerr]

Personally I think there needs to be a clampdown on the usage of PCP deals.

If you're a young guy living at home with your parents you shouldn't be able to get £30-40k credit. I got ripped to bits a few weeks ago for saying that. Apparently young ones can't afford to move out so they may as well buy expensive cars!!!

Half of the subjects on other forums now revolve around finance. How to be able to afford a car and then a couple of years down the line how to either VT the car or how to deal with the negative equity.

Should you really be trusted with a £30-40k asset when you can barely afford to pay a small deposit?

I see loads of people are leading and PCPing and not sticking to the terms. Loads are running out and tuning them and only hoping they don't get caught out. I just don't understand why so many put themselves at so much risk.

Where do all these PCP cars end up in the end? Brand new car sales were rocketing for years (down Septemeber) and more and more people are getting in brand new cars rather than used. The used market doesn't appear to be that oversupplied and too many used cars are also too expensive.

Look how many Golf Rs have been leased or sold. For the first few years I was seeing loads of them every day. Now I don't see as many with the leases and PCPs finishing and there isn't that many for sale.

Where have they all gone?

[Vish8895]

Originally Posted by Kerr

Personally I think there needs to be a clampdown on the usage of PCP deals.

If you're a young guy living at home with your parents you shouldn't be able to get £30-40k credit. I got ripped to bits a few weeks ago for saying that. Apparently young ones can't afford to move out so they may as well buy expensive cars!!!

Half of the subjects on other forums now revolve around finance. How to be able to afford a car and then a couple of years down the line how to either VT the car or how to deal with the negative equity.

Should you really be trusted with a £30-40k asset when you can barely afford to pay a small deposit?

I see loads of people are leading and PCPing and not sticking to the terms. Loads are running out and tuning them and only hoping they don't get caught out. I just don't understand why so many put themselves at so much risk.

Where do all these PCP cars end up in the end? Brand new car sales were rocketing for years (down Septemeber) and more and more people are getting in brand new cars rather than used. The used market doesn't appear to be that oversupplied and too many used cars are also too expensive.

Look how many Golf Rs have been leased or sold. For the first few years I was seeing loads of them every day. Now I don't see as many with the leases and PCPs finishing and there isn't that many for sale.

Where have they all gone?

I agree on the most part. I have always owned my cars rather than leased or PCP'd.

This thread was about trying to understand why people choose to PCP as it just didn't make sense to me.

Also I do quite understand your point about where do all the cars go? They are still on the road, its not like once the PCP deal is over or the people cancel the PCP that the car gets crushed. The cars don't "go" anywhere, they just end up as used cars on the used car market, same as any other?

[Kerr]

Originally Posted by Vish8895

I agree on the most part. I have always owned my cars rather than leased or PCP'd.

This thread was about trying to understand why people choose to PCP as it just didn't make sense to me.

Also I do quite understand your point about where do all the cars go? They are still on the road, its not like once the PCP deal is over or the people cancel the PCP that the car gets crushed. The cars don't "go" anywhere, they just end up as used cars on the used car market, same as any other?

Some choose to buy on PCP as the smaller monthly payment allows access to cars they couldn't otherwise afford.

My point is that PCP and leasing deals have pushed the demand away from used cars to new cars. More new cars than ever are being bought, or leased, and that should feed even more used cars to a declining market. Values are too high on the used market and often interest rates are too high too. It often works out as cheap to buy new than it does a used version of the same car.

Try selling a car on the private market and demand isn't there. I've shortlisted a few cars on Autotrader and some have sat there for 6 months+.

[Vish8895]

Originally Posted by Kerr

Some choose to buy on PCP as the smaller monthly payment allows access to cars they couldn't otherwise afford.

My point is that PCP and leasing deals have pushed the demand away from used cars to new cars. More new cars than ever are being bought, or leased, and that should feed even more used cars to a declining market. Values are too high on the used market and often interest rates are too high too. It often works out as cheap to buy new than it does a used version of the same car.

Try selling a car on the private market and demand isn't there. I've shortlisted a few cars on Autotrader and some have sat there for 6 months+.

Yes I agree the used car market is a struggle to sell on if you're selling anything of high value.

There are two reasons in my opinion. 1, People cannot afford to stump up say £18k to buy a car in lump sum, and 2, people dont want to stump up £18k to a stranger and buy a potential money pit, when they can cough up maybe £4k and some small monthlies for an approved used or a brand new version of that car, knowing its not been ragged to death and has full warranty.

In my opionion the increase in cars to the used car market is a great thing. Basic economics shows us that when there is a big increase in supply and a large drop in demand, competition increases and prices decrease.

It's a buyers market currently, meaning if you want to sell you are somewhat at the mercy of the buyer. Great for people like me and my friends who don't mind buying used, and like to change our cars more often than our shoes!

[djgandy]

Originally Posted by Kerr

Personally I think there needs to be a clampdown on the usage of PCP deals.

If you're a young guy living at home with your parents you shouldn't be able to get £30-40k credit. I got ripped to bits a few weeks ago for saying that. Apparently young ones can't afford to move out so they may as well buy expensive cars!!!

Half of the subjects on other forums now revolve around finance. How to be able to afford a car and then a couple of years down the line how to either VT the car or how to deal with the negative equity.

Should you really be trusted with a £30-40k asset when you can barely afford to pay a small deposit?

I see loads of people are leading and PCPing and not sticking to the terms. Loads are running out and tuning them and only hoping they don't get caught out. I just don't understand why so many put themselves at so much risk.

Where do all these PCP cars end up in the end? Brand new car sales were rocketing for years (down Septemeber) and more and more people are getting in brand new cars rather than used. The used market doesn't appear to be that oversupplied and too many used cars are also too expensive.

Look how many Golf Rs have been leased or sold. For the first few years I was seeing loads of them every day. Now I don't see as many with the leases and PCPs finishing and there isn't that many for sale.

Where have they all gone?

I think some manufacturers / finance cos are being sneaky and holding supplies back to prevent used prices cratering. With interest rates so low this becomes preferable to selling stock at a lower price and forcing the entire value of all used assets down.

My dad handed an Audi lease back in January having just had 4x discs, pads and new tyres along with new shocks and the car still hasn't even turned up on the road. We're still wondering where it went. Not been taxed since then

[Vish8895]

Originally Posted by djgandy

I think some manufacturers / finance cos are being sneaky and holding supplies back to prevent used prices cratering. With interest rates so low this becomes preferable to selling stock at a lower price and forcing the entire value of all used assets down.

My dad handed an Audi lease back in January having just had 4x discs, pads and new tyres along with new shocks and the car still hasn't even turned up on the road. We're still wondering where it went. Not been taxed since then

Interesting idea.

Could have been auctioned off and a trader bought it, who is struggling to sell it. Not been taxed as it will be on a traders with a trade plate maybe?

Just a theory.

[djgandy]

Originally Posted by Vish8895

Interesting idea.

Could have been auctioned off and a trader bought it, who is struggling to sell it. Not been taxed as it will be on a traders with a trade plate maybe?

Just a theory.

We thought that too, but it's just not turned up anywhere.

Also doesn't have an MOT so a trader should not be driving it around.

I guess someone could have grabbed it an auction and shipped it abroad given how cheap our prices are vs. the continent.

[Vish8895]

Originally Posted by djgandy

We thought that too, but it's just not turned up anywhere.

Also doesn't have an MOT so a trader should not be driving it around.

I guess someone could have grabbed it an auction and shipped it abroad given how cheap our prices are vs. the continent.

Ah interesting!

And yes possibly. Should check if it's been written off or stolen.

[AndyVR]

Originally Posted by djgandy

I think some manufacturers / finance cos are being sneaky and holding supplies back to prevent used prices cratering. With interest rates so low this becomes preferable to selling stock at a lower price and forcing the entire value of all used assets down.

My dad handed an Audi lease back in January having just had 4x discs, pads and new tyres along with new shocks and the car still hasn't even turned up on the road. We're still wondering where it went. Not been taxed since then

I follow a similar PCP thread on a non motoring forum. Your suspicions are right, a few inside the trade know of some ex-PCP vehicles sold abroad to countries that have short supply of vehicles or very expensive to buy or get spare parts for. Some of these cars that are required for spare parts only, get cut up for the front end & rear end components, i.e. the middle 'cabin' of the car is scrapped and the high value ends get put into a container to save space/weight, then shipped abroad. The guys that mention this didn't believe it either until they saw these 3 year old cars being cut up and containerised themselves. This all keeps the supply of used cars low, and the values high, and keeps the PCP/lease Ponzi going.


The main incentive of PCP and leasing has got to be the 'Ease' of it, people are prepared to spend a lot more 'renting' and not having the hassle of selling it on in the future. A lot will ignore the fact that it is very expensive, claim the monthly payments are small (they are really not! more like a mortgage payment, or half a mortgage) and will never work out the difference of getting a bank loan for the whole car, which you can have flexibility in the length of time you use it for, then sell on if need be.

Yes it might be slightly more difficult to sell a car privately, but seen as used values are artificially propped high by PCP, depreciation will be slow. I definitely had to move fast buying an E91 privately, plenty of cash/private loan buyers after them.

Also people just think they are paying a 'monthly rent' on the depreciation, no, you are paying off a loan for the whole price of the car, plus interest, only difference is that you can stop after 3/4 years. But if you hand back, you have to get the thing serviced and MOT'd at the very end by the main dealer, paying out for something you'll never benefit from. Or if you carry on and 'upgrade' to a new car, you usually pay more a month than last time. The Guaranteed final values etc. are heavily weighted to suit the manufacturer/finance co, if you do end up with some equity it is because you've been paying over the odds every month to achieve that. Equity is the 'hook' that keeps buyers changing for a new car each time.

I've had a small car on PCP, recently handed back, first & last time for me.

It was about £150 a month) over 4 years. Even at that sort of monthly outlay, the total cost racks up. I had some vandalism to the car that I had to pay out for, and also some faults with the car that I couldn't get the dealership to repair under warranty (5k miles a year, driven carefully) they blamed driving style and refused to repair. After 2 years my circumstances had changed, needed something different, but with PCP no flexibility to do this unless prepared to stump up £1000's in penalties.

At the end of it all, when I worked it out, it had cost a lot more than I could of bought one for outright for with low mileage.

So, I go back to buying used, small bank loan, equity from old car, low depreciation, proper ownership and maintaining it myself.

Each to their own, but PCP/leasing is very expensive way of running a car.