Car PCP - Personal Contract Purchase

Any advice or comments re. above- seems to be promoted by a lot of car sales
Thanks

Previous thread here.

It's easy to get drawn into these types of finance arrangements, as you get a new car for a relatively small deposit, and low monthly payments.

A lot of people like the fact that after 3 years you can just hand the car back. So basically you have only financed the deposit, plus the 36 payments, plus interest.

If you want to hand the car back in as a deposit on a new car, then you are locked into the brand (which they want).

If you want to change to a different brand, then you just hand the car back, but you should also have remembered to have saved up the next ~30% deposit for the next car.

is there a good way to model these PCPs to get the best value for money vs a standard loan? ......from my calculations, i cant see significant difference between a PCP on a new car vs a standard loan on a 3 year old model.

At the end of the PCP, you should still have some equity to upgrade to another car which is probably about the same amount as the value of your now 6 year old car on stanard car loan is worth anyhow for the same monthly cost except your driving a car that has a warranty and is likely to need less major maintenance vs your new car........other than the fact that you now own your 6 year old car, am i missing anything?

I have been taking a lot of interest in these PCPs lately as was in the process of changing my wifes car. All the Dealers are really pushing them and apparently they are gaining in popularity. It wasnt really for us as we had the money to pay for the car outright but were looking to part finance so as not to use up too much of our savings.
The key factor appears to be the GMV (Guarranteed Minimum Value) that is outlined on the contract. This is the value they allow for the car after 3 years and the 'balloon' payment required if opting to purchase outright. However the idea behind these PCPs is at this stage the 'renter' (effectively this is what this is promoting...long time rental) upgrades to a new car. In reality the car should be worth considerably more than the GMV. However the one note of caution is that there are a few caveats to this GMV....a restriction on mileage (the car we looked at had max 15k (km) per annum) and the car being kept in good nick. A charge per km over this amount is calculated if excess mileage done. The carrot part of this is the APR being charged, less than the dealer finance on a loan and considerably less than bank rates. For us we went with part finance though dealer....interest rate pretty good and for me best part is no restrictions re mileage and/or condition (so no panicking if one of the kids knocks bike against it ......though will suffer my wrath!!!).
I wouldnt knock these PCPs and certainly an affordable way to drive a new car regularly. A common concept abroad but just getting into Irish Psyche. Not for everyone and if looking at pure resale value i would tend to go with regular term loan and take my chances on open market after x number of years. Hope this all makes sense. I was very suspicious of them at first but less so now. For anyone intersted i would say do the sums but also assess your own situation. If your mileage is low and you not going to be worried about nicks and scratches (for this read kids!!) and you can afford to pay X amount per month for your car (think rent, med ins etc all budgeted monthly expenses) then certainly a good option. If you want 'own' your car then not for you..........Hope this helps ....trying to be objective.

With PCP's you are merely "renting" the car for a set period of time. This is a financial instrument to get you back into the dealer's sales office at the end of the agreement whether you like it or not. And you have to have the pre-determined lump sum if you decide to keep the car.
The old fashioned HP or loans are at least straightforward to understand and calculate.
As I stated in a different post, have a look at your local Credit union rates.

The cost of the lower repayments under PCP is the fact you never actually repay the balloon payment - so you're always paying interest on this element of the car cost.

Keep an eye on "total cost of credit" versus a normal term loan.