Is PCP a good way to finance a car?

Firefly said:
True, but if you need to source via alternative financing, it's surely going to be higher than 0%
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Absolutely, I can't see any of them offering 0% where the consumer chooses to hold on to the car. But at least having this option at least means the dealer can't apply a punitive rate to someone who chooses to do so.
 
Does anyone know when PCPs came into force in any case and who was the first main brand to offer them?
 
Mega thread over on boards:

http://www.boards.ie/vbulletin/showthread.php?t=2057120240

Good advice here:

In relation to the pcp deals, the way I see it, you must look down the road to your next car if considering a pcp. If you can work out roughly how much equity you will have at 3 year stage (value over gfv) and see if you can then afford another new car with that equity amount as a deposit, well then you can afford the car. If on the other hand, you are relying on a large upfront deposit now in order to have a small monthly payment, you cannot really afford the car unless you will have access to similar deposit in 3 years time.
 
Firefly, I wasn't trying to compare purchasing a car to a house but rather the financal product that is used to buy the more expensive things in life
Most people when buying a new car don't have the 30,40 or €100,000 sitting in their bank account so a product like PCP makes perfect sense,
and even if they did have the cash sometimes financing part if not all might make better sense to that person.
 
Cervelo said:
Most people when buying a new car don't have the 30,40 or €100,000 sitting in their bank account so a product like PCP makes perfect sense, and even if they did have the cash sometimes financing part if not all might make better sense to that person.
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My point is that PCP is luring people (with low monthly repayments) into buying a more expensive car (i.e. a new car) when they probably shouldn't. The full price of the car will have to be repaid eventually..
 
Firefly said:
My point is that PCP is luring people (with low monthly repayments) into buying a more expensive car (i.e. a new car) when they probably shouldn't. The full price of the car will have to be repaid eventually..
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well then that person shouldn't be allowed access to credit if they cant afford it or understand what they are getting themselves into!!
 
Cervelo said:
well then that person shouldn't be allowed access to credit if they cant afford it or understand what they are getting themselves into!!
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Ain't that the truth! What's that they say about history repeating itself!
 
So when its all said and done, is PCP a good way to finance a car then? Is there a simple summation to all of this?
 
From Joe Duffy website.

PCP on Volvo XC 60 D3ES

On the road price €40245
Deposit €12073
Finance amount €28171
36 payments of €390
PAR 4.9%
GMFV €18186

To own the above car through PCP requires 36 x 390 = €14040

Then to buy the GMFV of the car ie (€18186) through finance over 36 months @594 per month = 21384 ( using loan calculator on PTSB website. APR = 11.5%

Total amount repayed for the financing of the car with PCP is € 35424

A straight loan from PTSB for the full finance amount of €28171 over 36 months @APR 10.5% would cost €909 per month so total repayed would be €32724.

How is PCP more attractive?
 
demoivre said:
If someone wanted to own the car under a PCP that's what you're looking at, its expensive. The cheap PCP rate gives a false sense of a cheap deal IMO.
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comparing a 3 year loan v 6 year loan is an unfair comparison and makes no sense
 
Blackrock1 said:
comparing a 3 year loan v 6 year loan is an unfair comparison and makes no sense
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I would say the majority of people buying on PCP would not have the balloon payment in funds to buy out the car at the end. Many will and are "going again" on another PCP plan but sooner or later the balloon payment will need to be made. Either they sell the car and walk away with nothing (how bad would that feel?) or they will need finance to keep the car they have, in which case it does make sense to look at both the PCP element and the final finance required.
 
you are making an assumption there, fair enough, but that doesn't mean looking at 3yr financing v 6 year financing is a valid comparison.
 
Blackrock1 said:
comparing a 3 year loan v 6 year loan is an unfair comparison and makes no sense
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You're comparing the cost of buying a car using two methods of financing. If you want to own the car outright through PCP you will probably pay more, fact , but its not what you want to hear.
 
Blackrock1 said:
you are comparing 6 years financing versus 3, what did you expect?
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no they're not. the first example is 3 years PCP (@4.9%), followed by a 3 year loan (=6 years); second example is a straight loan over 6 years.

if you can get 0% on the PCP bit, the result might be different.
 
Blackrock1 said:
you are making an assumption there, fair enough, but that doesn't mean looking at 3yr financing v 6 year financing is a valid comparison.
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I think it's a valid assumption. The majority of people would not have the funds to buy out the car at the end. They will therefore need finance and 3 years would seem valid. Hence, the 3 + 3 costs provided by Demoivre.
 
It looks to me that Blackrock1 has a point. Taking demoivre's example financing the €28k over 6 years (3 years PCP and 3 years personal loan) costs over €35k . . but you can't compare that to finance over 3 years (which you'd expect cost less) . . a 6 year personal loan for the €28k @ the 11.5% quoted would cost closer to €39k, so dearer than the combined PCP/loan option over the same period.
 
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