Is PCP a good way to finance a car?

Discussion in 'Cars, cycling and transport' started by Brendan Burgess, Aug 12, 2016.

  1. Leo

    Leo Moderator

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    That's an interesting development, 11% was what I was seeing at the time from some of the more popular brands. Nissan are still at 11%, Toyota are 8.9%, but most of the others seem to be lower alright. When I get some time I'll update the table, or perhaps it might be better add a new one to reflect the higher deposit levels required for these HP deals, Peugeot for example require a 30% deposit. Do you have a link to Hyundai's HP terms? I can only see the PCP rates on the site.
     
  2. RedOnion

    RedOnion Frequent Poster

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    I can have a look tomorrow evening at a few examples. Even for Toyota if memory serves me right their PCP is a bit higher than others so will try comparing like for like. Stuck with mobile at moment so I'll see what I can do when I'm back on laptop.
     
  3. Leo

    Leo Moderator

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    Sounds good, thanks.

    Toyota's rates are 2.9% for the Aygo and 4.9% or 5.9% on other models.
     
  4. Firefly

    Firefly Frequent Poster

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    Given everything that happened in 2008 with the financial regulator and Central Bank falling asleep at the wheel and the relatively large purchase price of a car, they should really be stepping in here. Think I might write to them actually..
     
  5. RedOnion

    RedOnion Frequent Poster

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    I've started some work on this, but not finished yet. Will be the weekend before I get it finished.

    Can anyone tell me how do I upload a table to the forum?

    I have some HP vs PCP rates below, but I want to format correctly when I do all the calculations of repayments & cost of credit. I've also got the minimum deposits for all of these (Skoda is 10% on HP, but Peugeot is 30%), and will include in my calculations.

    In getting the rates below, I've picked the 'main' rates available for each manufacturer, and ignored where 0% is available on only 1 selected model.

    Make Model HP APR PCP APR
    Hyundai i40 3.90% 3.90%
    Nissan Juke ? 2.90%
    Toyota Aura 8.90% 4.90%
    Skoda Rapid 5.90% 3.90%
    Skoda Yeti 5.90% 5.90%
    Peugeot 3008 3.90% 4.90%
    Peugeot 508 3.90% 3.90%
     
  6. Leo

    Leo Moderator

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    See here.

    HP on the Juke is 11%.
     
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  7. RedOnion

    RedOnion Frequent Poster

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    Last edited: Jul 7, 2017
    Ok, hope this works.
    I've taken example of Hyundai i40. APR rates are the same for HP & PCP. I've compared with Cash and Personal loan (gone with KBC 6.9% rate as it's the lowest I could find).
    Assumed GMFV finance at personal loan rate after end of PCP term.

    OptionCashPCP 3 years, plus 2 YearsPCP 3 years, plus 2 Years. With HP Min depositHP 5 YearsPersonal Loan 5 Years
    OTR Price€26,495€26,495€26,495€26,495€26,495
    GMFVN/A€10,333€10,333€0.00€0.00
    Initial Term (years)N/A3355
    Initial Rate APRN/A4%4%4%6.90%
    GMFV TermN/A22N/AN/A
    DepositN/A€1,854.65€5,299.00€5,299€0
    GMFV Rate APRN/A6.90%6.90%N/AN/A
    Initial Monthly0€455.36€353.82€389.40€523.38
    GMFV RepymentsN/A€462.17€462.17n/an/a
    Total Cost€26,495€29,339.47€29,128.46€28,663.05€31,403.02
    Total Cost of credit€0€2,844€2,633€2,168€4,908
    Here's also a table of sample rates available for typical models for the brands I selected. Interesting that a number seem to have dropped the deposit required for HP to be similar to PCP - which makese sense as PCP is literally just a HP deal with a balloon payment.

    MakeModelOTR PriceGMFVHP APRHP Min DepositPCP APRPCP Min DepositGMFV / OTRFinance ProviderNotes
    Hyundaii4026,495.0010,333.003.90%20%3.90%7%39%Bank of IrelandSpecial offer - selected models only
    NissanJuke19,995.007,997.0011%10%2.90%10%40%AIB
    ToyotaAura24,750.009,652.508.90%7%4.90%7%39%Bank of IrelandMinimum deposit appears to be the same in T&Cs
    SkodaRapid19,975.007,660.005.90%10%3.90%10%38%Volkswagen Bank0% available on selected Skoda models on PCP
    SkodaYeti26,295.009,598.005.90%10%5.90%10%37%Volkswagen Bank
    Peugeot300826,712.809,227.003.90%30%4.90%10%35%Bank of IrelandPeugeot, 0% available on HP on 308.
    Peugeot50829,425.0010,150.003.90%30%3.90%10%34%Bank of IrelandDifferent models have different rates, but 3.9% / 4.9% are typical

    I'll update shortly with a simple Excel model for calculating each option.
    Edit: Simple Excel model. https://drive.google.com/file/d/0B-x1gxWgkZiQeWRrakV2NEhiMGc/view?usp=sharing
    Input cells are highlighted in yellow

    Edit. Realised I've no cash being put in for personal loan option. I'll update when I get a chance to be comparable. Will also add version with AIB rates.
     
    Last edited: Jul 7, 2017
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  8. Leo

    Leo Moderator

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    Last edited: Jul 10, 2017
    Nice work RedOnion.

    Read this over the weekend, Regulator in UK is concerned with rate of growth of these deals, but this article suggests even a significant drop-off in second hand values won't threaten the banks stability. PCPs are far more popular there and new registrations haven't dropped like they have here this year. So we'll get the benefit of observing issues evolve in the UK before they hit home here.
     
    Last edited: Jul 10, 2017
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  9. RedOnion

    RedOnion Frequent Poster

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    Amended version using the Hyundai, but with AIB loan rates (8.45%), assuming 10% cash deposit.

    OptionCashPCP 3 years, plus 2 YearsPCP 3 years, plus 2 Years. With HP Min depositHP 5 YearsPersonal Loan 5 Years
    OTR Price€26,495€26,495€26,495€26,495€26,495
    GMFVN/A€10,333€10,333€0.00€0.00
    Initial Term (years)N/A3355
    Initial Rate APRN/A4%4%4%8.45%
    GMFV TermN/A22N/AN/A
    DepositN/A€1,854.65€5,299.00€5,299€2,649.50
    GMFV Rate APRN/A8.45%8.45%N/AN/A
    Initial Monthly0€455.36€353.82€389.40€488.65
    GMFV RepymentsN/A€469.46€469.46n/an/a
    Total Cost€26,495€29,514.44€29,303.43€28,663.05€31,968.65
    Total Cost of credit€0€3,019€2,808€2,168€5,474
    Also, did a comparison using Skoda Rapid where PCP rate is lower than HP rate (so I'm not accused of bias!)

    OptionCashPCP 3 years, plus 2 YearsPCP 3 years, plus 2 Years. With HP Min depositHP 5 YearsPersonal Loan 5 Years
    OTR Price€19,975€19,975€19,975€19,975€19,975
    GMFVN/A€7,660€7,660€0.00€0.00
    Initial Term (years)N/A3355
    Initial Rate APRN/A3.90%3.90%5.90%8.45%
    GMFV TermN/A22N/AN/A
    DepositN/A€1,997.50€1,997.50€1,998€1,997.50
    GMFV Rate APRN/A8.45%8.45%N/AN/A
    Initial Monthly0€329.05€329.05€346.72€368.40
    GMFV RepymentsN/A€348.02€348.02n/an/a
    Total Cost€19,975€22,195.67€22,195.67€22,800.71€24,101.67
    Total Cost of credit€0€2,221€2,221€2,826€4,127
     
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  10. tallpaul

    tallpaul Frequent Poster

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  11. Firefly

    Firefly Frequent Poster

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    It's like turning back the clock to 2007 but instead of houses we now have cars. This has sub-prime written all over it. As many of these plans IMO will fail, it will add even more stock to the 2nd hand market before the 3 years are up

    As the sector is unregulated, there may be scope for loose standards. One concern with PCPs is that it can be so easy to access such a deal. Some finance companies promise that “bad credit history” is not a problem; others allow you to “apply for finance online in under two minutes”.
     
  12. Leo

    Leo Moderator

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    Do you think there will be a significantly higher rate of failure of these PCP deals than there has been with the HP deals? Given current new car registration numbers, it would need to be very significant to have much of an effect.

    Remember, new car finance has always been very easy to get, PCPs just made it sound more attractive to some who really shouldn't be buying new. But sales numbers don't suggest there's a significant bubble. I'd see a further devaluation of Sterling as a much greater risk to the second hand market here.
     
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  13. Firefly

    Firefly Frequent Poster

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    I don't think HP was ever popular with the masses here though. PCPs have opened the possibilities of Joe Bloggs buying a new car when he would have previously gone to the Credit Union and bought something 3 or 4 years old. Who knows where it will end and I am speculating for sure as it's a new product. I can just feel it in my bones it's going to cause problems. Yes, imports from the UK are the biggest threat - external factors as it were. In the 2nd hand market there is a chasm in the price difference between importing from the UK and buying here and it's bound to affect values here.
     
  14. demoivre

    demoivre Frequent Poster

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    Agree and the numbers support that view ! Number of imported cars increased by 46% in the first half of 2017. If Sterling depreciates further and EUR/GBP heads for parity, as many predict, you would expect the number of imported cars to continue increasing.
     
  15. Leo

    Leo Moderator

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    Yeah, and H1 2017 imports are up more than 80% over 2015 numbers. What I was a little surprised by though is levels of imports as a percentage of all new car registrations has remained reasonably steady. Imports account for 34% of new registrations for H1 2017, this is in line with the previous 5 years where the import percentage has varied from 28% (2015) and 41% (2013). I really would have expected the import ratio to rise after the Brexit-linked drop in Sterling.
     
  16. Pugmister

    Pugmister Registered User

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    When important numbers are quoted are these solely based on private individuals making a trip over to the UK or are dealers importing cars for resale also included ? I know when i bought my car from Frank Keane it was just brought in from the UK and the dealer said a lot of the second hand stock comes from the UK dealerships
     
  17. Leo

    Leo Moderator

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    The CSO numbers will include cars brought in by dealers also, they include all new registrations of second hand private cars.
     
  18. PaddyBloggit

    PaddyBloggit Frequent Poster

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  19. Leo

    Leo Moderator

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    The CCPC are conducting a study and are particularly keen to hear from anyone who has had problems with PCP deals.
     
  20. RedOnion

    RedOnion Frequent Poster

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    This is the kind of article that I think causes confusion around PCP.
    http://www.independent.ie/business/...s-not-the-only-show-on-the-road-35933049.html

    I'm not even sure where to start with the factual errors, so I think I'm better to ignore it, but it's exactly the kind of thing that I was referring to earlier about people over complicating what a PCP is. (I won't get into the fact that it even contradicts other articles published previously by the same paper).
     
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