so you hand your car over as deposit pay a low monthly for 3 yrs and then balloon payment and/or trade in.

all well and good but whats left for the deposit on the next car??


so do people swap out early to retain some worth? or pay out a new deposit every few years after having had lower monthly payments?

I'm bemused by it , I normally use higher purchase over 3 years or so , buying the right car to suit what I can afford per month.


pcp's seems to suit the typical modern way of 'buy now worry about paying later'

Am I missing something?? At work
At home

"I can't always believe facts I read on the web" - Charles Dickens

winner by default of the tractor vs caravan race

Not sure I'm telling you anything you don't already know, but here goes...

You pay a deposit at the start (either cash or p/x), agree a future value of the new car in (say) 3 years, and pay a RENTAL charge based on the difference (i.e the difference between the future value and the purchase price of the car less your deposit).

At the end of the 3 years you hand back the car and walk away, buy the car outright for the agreed future value, or use any equity in the car above the agreed future value as a deposit on another agreement.

The important points are you never own the car (unless you buy it at the end), and these agreements are difficult to get out of. Once you're into this type of arrangement (having a lovely shiny new car for a fairly minimal rental charge) it is difficult to service the PCP monthly charge whilst at the same time saving money to buy a car outright at the end of it - simplest solution is to start another agreement, and the dealers know it.

Typically, the dealers will be on the blower a couple of years into the agreement offering to "upgrade" you to a brand new car for "only" £50 a month more; at which point the 3/5 year agreement starts again. They then take your old car back and make a killing through the approved used scheme.

Don't get me wrong - PCP has its place and is a valid way of financing a lovely shiny new vehicle every few years. You just gotta make sure you know what you're getting into before you sign on the line.

but surely your initial deposit on the first car can never be repeated without a major cash injection, so the monthlys will go up and up until you may as well be on a normal hp? At work
At home

"I can't always believe facts I read on the web" - Charles Dickens

winner by default of the tractor vs caravan race

I swapped mine and saved £10 a month

Is this a fishing trip or is the writing on the wall for the RRS?

Apr

Last edited by Legoman on 3rd Jan 2015 4:10 am. Edited 1 time in total

So if you have equity at the end of the term you can use it as the deposit on a new one, but if you decide not to get a new car what happens to the equity ? Does the dealer write you a cheque or do you lose out ?

Think

Last edited by Legoman on 3rd Jan 2015 4:11 am. Edited 1 time in total

More likely that the dealer will price the car at precisely the MGFV for a hand-back and walk away. A new car on another PCP will likely yield a better than MGFV offer.

My wife had a Corsa on a PCP. Just the once though. I seem to remember that being traded in elsewhere for MGFV plus a reasonable deposit on her next car which she then funded with a bank loan. Out of the trap and nowadays our cars are paid for as we buy them.

The PCP wasn't a good deal for her by any means but for the dealer... earns on the original PX, Paid commission etc by the finance house and then earns all over again at the end of the lease.

Exactly right.

There'll be two different prices depending on whether you're handing back or taking out a new agreement.

Like I said before - PCP has its place, and as long as you know what you're getting into before you sign on the line and do your sums, it can be a nice way to have a nice shiny new car every few years.

I guess it all boils down to your priorities in life vs. your finances vs. what is acceptable/unacceptable commitment. Just remember, the dealer ain't doin' it for love. Every time you chop your car in for another one on a new agreement, they'll be making a handsome chunk of change......

Cheers chaps.
They always win in the end.

Typically I've swaped and saved with enough equity to cover the next deposit.

I change my car on a regular basis so PCP suits me, but this DS might be an exception it's the highest spec I've ever went for so will have to last the full term this time. I put money away in shares, ISAs etc so cover the GMFV should I decied to retain it shouldn't be a problem. 21MY Defender 90 S 3.0 D200

When I bought my first Evoque a Dynamic Lux Si4 it was £45K though I paid £43.5K as I had a £1500 voucher from Landrover (there were no discounts on Evoque then), this was on 5 year PCP. IIRC I put £4500 down as a deposit then 10 months after I collected it I was offered a good deal from a private trader, I sold it, got enough money to clear off all the finance, all my deposit back plus nearly £2K on top so I ordered a 2nd Evoque on 4 year PCP. This was the Pure Tech but then added several options to get it to my spec. I had this one for 15 months & just simply tested the water. I wasn't fussed on selling as we loved it but another private trader from Scotland contacted me & this time wasn't quite as good as the 1st but in reality very good indeed in as much all finance repaid & approx. 88% of my initial deposit returned & as the cars are on my accounts as works vehicles that helped too!!
My Metropolis is on PCP though I don't expect that to do so well but I only put down £1500 deposit anyway so when I do decide to sell hopefully I will clear all finance & get at least some of that back. The salesman said I was spot on by putting just this figure down as typically you can lose your deposit especially if you just hand the car back at agreement end but I won't do that - sell it!!
One can say what about the monthly payments you have lost/spent? Anything you pay monthly for the so called rentals is way way lower than if you were to hire the same vehicle from a car hire place plus you have had the use & pleasure from it so it really can't be considered. (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.

Aero_383 wrote:

So if you have equity at the end of the term you can use it as the deposit on a new one, but if you decide not to get a new car what happens to the equity ? Does the dealer write you a cheque or do you lose out ?