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OOV

PCP question

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Designed to rope you in forever? I never did this. So you pay monthly really cheap, then lose the car after x years, and get a new one ? And this goes on forever. Then you exit with no car. This is how it works?

 

Or instead of exiting, you buy the final car you like and then you’ve also exited? At a premium cost I imagine?

 

I’ve always just bought cars outright but it’s started crossing my mind 

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If you keep the car I don't see why this is at a premium cost. Finance the balloon payment however you chose, whether it be cash or finance. And bear in mind if it is financed theres no obligation to use VW finance, there are cheaper alternatives out there.

 

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7 hours ago, OOV said:

Designed to rope you in forever? I never did this. So you pay monthly really cheap, then lose the car after x years, and get a new one ? And this goes on forever. Then you exit with no car. This is how it works?

 

Or instead of exiting, you buy the final car you like and then you’ve also exited? At a premium cost I imagine?

 

I’ve always just bought cars outright but it’s started crossing my mind 

If you're going to buy the car after the lease period im not sure why you would get pcp, surely HP makes more sense with a decent sized deposit.

 

I'm like you and always buy a car to own it but my sister has been PCP for about 8 years. Currently has an abarth fiat 500.. 

 

I guess if you can find a really good PCP deal with a guaranteed final payment fee or something then its worth considering?

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1 hour ago, Djs2394 said:

If you're going to buy the car after the lease period im not sure why you would get pcp, surely HP makes more sense with a decent sized deposit.

 

It all comes down to the size of the monthly payments. With conventional HP, the monthly payments will be much higher because you are financing the whole value of the car (minus your deposit), whereas with PCP you are only financing the difference between the initial value and the guaranteed future value (GFV) - i.e. the depreciation. Also, with HP you are committed to owning the car in 3 or 4 years time, whereas with PCP your options are more open. I don't think that many PCPers actually opt to pay the balloon payment at the end (I would love to know the actual %), but that is obviously one of the options.

 

1 hour ago, BobbyT said:

It also depends on what the car is worth at the end. I've known people who hand the car back at the end but still owe a few K. 

 

This isn't possible with PCP (if you mean owe money to the finance company), as long as you have kept up the monthly payments and stuck to the other contract conditions. The finance company have to accept the car back instead of the final 'balloon' payment irrespective of the current market value of the car. That's why the final 'balloon' payment is officially called the car's 'guaranteed future value'. If the car is worth less than the GFV at the end of the agreement, then that's the finance company's problem. After all, they set the GFV. For you, it simply means that there wouldn't be any equity left in the car to be carried over to your next PCP, but that shouldn't be relied upon anyway.

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This isn't possible with PCP (if you mean owe money to the finance company), as long as you have kept up the monthly payments and stuck to the other contract conditions. The finance company have to accept the car back instead of the final 'balloon' payment irrespective of the current market value of the car. That's why the final 'balloon' payment is officially called the car's 'guaranteed future value'. If the car is worth less than the GFV at the end of the agreement, then that's the finance company's problem. After all, they set the GFV. For you, it simply means that there wouldn't be any equity left in the car to be carried over to your next PCP, but that shouldn't be relied upon anyway.

I think they had to pay as they didn't finish the full term and wanted to change the car early. I've never used pcp or leasing so I'm a little naive to it all.

 

Sent from my S20 5G using Tapatalk

 

 

 

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1 hour ago, BobbyT said:

I think they had to pay as they didn't finish the full term and wanted to change the car early. I've never used pcp or leasing so I'm a little naive to it all.

 

Sent from my S20 5G using Tapatalk

 

 

 

Yep, that would have been it. You generally remain in negative equity with a PCP until the last few months of the agreement, simply due to how depreciation works with a new car. You can also voluntary terminate (VT) the PCP contract - if you want/need to bail out early - but that's a separate issue.

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About 82% of new car buyers use PCP. Yes the bigger deposit (max 30%) reduces the monthly payment however this is dead money as you need to find the deposit again when taking out a new PCP. 

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On 23/02/2021 at 00:08, OOV said:

Designed to rope you in forever? I never did this. So you pay monthly really cheap, then lose the car after x years, and get a new one ? And this goes on forever. Then you exit with no car. This is how it works?

 

Or instead of exiting, you buy the final car you like and then you’ve also exited? At a premium cost I imagine?

 

I’ve always just bought cars outright but it’s started crossing my mind 

I’m in agreement with you on this one. Would never go down PCP route but I can understand why people do.

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48 minutes ago, bertie1249 said:

I’m in agreement with you on this one. Would never go down PCP route but I can understand why people do.


It started crossing my mind, the opportunity cost that comes with buying a car outright.

 

I could buy a car with £30k

or I could get PCP with the cheap monthlies, turn the £30k into £100k over the duration of the PCP contract, then buy the car at the end with the £100k you now have, but wouldn’t have, had you bought it for £30k in the beginning.

 

So I was thinking along those terms for future buys. Anyway...

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