I know these PCP's make sense for many people but I just look at the interest charges.

I paid for my car outright, which some will say is mad but it's the way I have always done it. Freelander 2 HSE Lux 2013MY - Barolo Black with Ivory Leather. Alpine DVD - Privacy -Evoque 20" Dynamic Wheels and more to come.........

When we bought my wife's Mini last year they were charging 2% for their PCPs. Made more sense to leave the cash in the ISAs and get the car on the PCP. The money didn't stay in the bank for much longer though as I then realised I had the cash sitting there to trade my Defender in for a Freelander

PCP interest is usually lower than regular finance. The good thing about PCP is that if the value fell out of the market for any car on PCP & it was worth far less (book value) than the PCP agreement states they have to honour that value. (Past) Freelander 2 HSE 2010 MY In Rimini Red.
(Past) RR Evoque Dynamic Lux Si4 In Firenze Red.
(Past) RR Evouque Pure Tech in Barollo Black with bespoke Firenze Red colour coding.
(Present) Freelander Metropolis 2015 MY In Santorini Black with Ivory Premium Leather.

But is pcp interest really cheaper as a large lump of the amount remains attracting interest all through the term. whereas with hp the loan amount drops more rapidly. At work
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"I can't always believe facts I read on the web" - Charles Dickens

winner by default of the tractor vs caravan race

This gives a reasonable idea on PCP costs

http://www.icalculator.info/finance/PCP_car_loan_calculator.html

It would appear that interest is charged on the decreasing capital which falls from the initial nett cost down to the GFV. in addition capital payments are made which brings the outstanding capital down from initial nett cost down to the GFV

That's my understanding, but like various CG statements it could be flawed. MY 09 GS manual in Lago Grey, Wood Co arm rest and side bumper strips - now sold.

MY 15 SD4 SE Auto Orkney Grey with colour coded Bumper Door Mouldings

I re-iterate what I said earlier - PCP (the finance kind!) has its place.

However, the chance of the bottom falling out of the car market to such an extent that you would be protected by a GFV is pretty unlikely. Not impossible, I grant you, but unlikely.

Equally, contrary to a previous post, the costs of the rental charges MUST be considered. They are payments for the use of a vehicle - they have no capital return, and you are not servicing a dwindling capital debt. To compare them with the charges from a hire company is not correct - those prices include an offset against the capital outlay of the vehicle, maintenance and insurance. You are also fully insulated against the need for deposit and/or capital loss in the vehicle.

All I would say is that if you ever find yourself in a position where you think you've got "one over" on the finance company, and/or the dealer has "done you a favour", you've clearly misunderstood.....

If PCP has lower APR then you need to work out the saving on monthly figures, and the balloon payment to future value when you trade in

Against the cost of HP apr and higher monthlies, no balloon payment and as such a larger deposit

I'll bet you will get different trade in figures too

I've always HPed when buying a car on finance, nothing worst than thinking you need to find £??K when your cars 3 years old and your going to have to keep it longer than planned Former Mod/Member, with the most post & Chicken George Arch nemesis

You only pay interest on the amount financed IIRC and not the balloon, the balloon is the balloon. Obviously if you re finance that then interest is added. (Past) Freelander 2 HSE 2010 MY In Rimini Red.
(Past) RR Evoque Dynamic Lux Si4 In Firenze Red.
(Past) RR Evouque Pure Tech in Barollo Black with bespoke Firenze Red colour coding.
(Present) Freelander Metropolis 2015 MY In Santorini Black with Ivory Premium Leather.

The balloon is the final payment interest will be charged on the full loan balloon and all At work
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"I can't always believe facts I read on the web" - Charles Dickens

winner by default of the tractor vs caravan race

This calculator suggests that interest is not payable on the balloon element... PCP Calculator