# PCP Equity (or lack of it!)



## Blackhole128 (Dec 24, 2015)

I'm coming to the end of my PCP deal in December this year and as I was in for a service at the dealership where I bought the car, I thought I'd see how much equity I had in my car.

Foolishly I expected to be a bit in equity as my 15k miles per year estimate should have been more like 12k, but found to my horror that despite the lower mileage, the car is about 2-3k below the current settlement figure! (I verified that at the nearby BMW garage, so it wasn't just sales spiel).

Now I definitely want to stay in a TT at the end of the year - I can't think of anything else that ticks all of the "practicality tick boxes" that the TT does. The question is am I daft to consider paying the residual at the end of the year when it's going to be more than the car's value?

Has anyone experienced dealers recognising that you could just return the car and so agree a smaller residual in those circumstances?

Of course, it would be nice to get a new replacement, but price rises have pushed the spec of TT I have at the moment out of reach by about 25% of my current outlay (not to mention the car tax hike on top) so I'd have to go for a low-mileage 1 year old or something similar to get some manufacturer's warranty.


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## phazer (Apr 2, 2018)

This is the reality of PCP. I very much doubt you're alone. It's been said before but the fact that people are led to believe they will have equity and they most definitely do not 99% of time is why eventually it'll end up being another PPI job in the future.

GFV is set by Audi Finance so your dealer has no control over this. The higher value also means you've paid less on the monthlies so even in the very very unlikely event they offered to reduce it, are you prepared to make up the monthly cost if the GFV had been £3k lower at inception?

Short and sweet is the dealer doesn't care if you return it, take a hit to part chop or whatever as long as you come back for another and even then they'll only care if they think you can afford it


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## Blackhole128 (Dec 24, 2015)

I had a very positive experience with PCP with my previous car (BMW Z4) where I ended-up with £1.5k of equity when I over-specified my yearly mileage.

This time though it appears that the depreciation on the TT is far larger than they estimated for the PCP deal. Whether that's because of market uncertainty (Brexit?) or whether it's because Audi charge way too much for their new TT models - causing greater depreciation - I don't know. Perhaps a combination of both, but whatever it is, I've boobed this time by over-specifying my yearly miles. If I hadn't done that I'd have had an extra £1200 in my savings pot due to the higher monthly payments I made. I'll not make the same mistake again!

What you say makes a lot of sense regarding the GFV, the dealer's view of it and the fact that I would have had to pay more per month if they'd got the prediction accurate. I suppose it's unfair to look at it just from my angle - if I buy the car out, then effectively I'm only paying the total price of the vehicle as agreed at the beginning of the deal.


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## Toshiba (Jul 8, 2004)

I can't say I'm surprised.
PCPs are a way to get people in cars they can't normally afford via traditional finance. They exist for manufacturers to generate second hand cars and boost sales. They are a treadmill of debt..

Manufacturers have their costs covered, they really don't care what the end value is and the more PCPs they sell the more values on second hand cars reduce.


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## Sybra (Jul 7, 2019)

I was always under the impression that a car on a PCP cannot go below its guaranteed minimum future value. Also, having helped out at a dealership on weekends not too long ago, it has come to my attention that 3 years in on a 4 year agreement you break even on the equity.

I hope I understood you right as this appears very strange to me :?


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## denTTony (Jan 6, 2013)

looks like the APR keeps creeping up too. Think mine was 6.2 less than 18 months ago, now 6.9 %


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## Alan Sl (Nov 11, 2009)

Toshiba said:


> I can't say I'm surprised.
> PCPs are a way to get people in cars they can't normally afford via traditional finance. They exist for manufacturers to generate second hand cars and boost sales. They are a treadmill of debt..
> 
> Manufacturers have their costs covered, they really don't care what the end value is and the more PCPs they sell the more values on second hand cars reduce.


Sadly you are spot on with your take on PCP's. I am fortunate to be in a position not to need PCP, however every time I come to buy a new motor it has become harder to get a really good p/e price for my car. This is largely due to low mileage PCP vehicles being in plentiful supply for dealers.

The dealers don't need to work so hard either to sell cars as there are now plenty of punters around happy to commit to PCP'S. Years ago if a dealer knew you were serious about buying a car they would do almost anything to get a sale. Now if the dealer doesn't think there is enough profit in the sale they are quite happy for you to walk away.


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## Mark Pred (Feb 1, 2017)

Buying a new car for cash is the biggest waste of money I can think of. I could easily afford to buy my cars that way, but it makes no sense to me to throw a pile of cash on a depreciating asset. You just need to make sure the terms of the PCP agreement are negotiated more in your favour... as I do


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## ross_t_boss (Feb 28, 2017)

In terms of valuing your vehicle to pay off the balloon... look at some decent private options that look well cared for, like your will be, and then decide if it's worth it.

Example: My BMW 335d was "valued" at 13,500 when it came to hand it back. The final payment was 17,300. Now I was 40k over-miles so not as bad a deal as it seemed, but a quick look at the private market suggested it was still worth high teens to the right buyer, and sure enough i got 16700 out of it to a trader within 3 days of listing.

If you still find the GFV is a few grand over priced, then great, you won the PCP game. Hand it back. Or if you really want to keep it, they'll almost certainly agree an extension to just keep on paying the monthlies.

PCPs have never been designed to keep you in a car long-term, the BMW dealer was frequently calling me with the latest deals once the VT term was up - "just hand it back early and we can get you into a new xxx" - you have consider it like a lease, with an option to buy at the end.

They have their place, like when they offer 0%, or offer a finance contribution. Just be sure you make arrangements to get out of it once the perk has been cashed (e.g. buy a TTRS with 30k on PCP, 1200 finance contribution, then pay a bunch of 5k over-payments, also gaining 7500 air miles each time  )


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## winrya (Feb 22, 2014)

Buying outright in the current market is quite a brave decision with the state of the uk during Brexit. What's useful about these finance options is these gfv and our right to end agreements after 50% is paid of off. The problem with the tt is that you need a hell off a lot of options to make them match the spec of a Ford Fiesta. These options carry no residual value when you go down the part ex route. £20k plus cars are a difficult private sale in this climate, buyers generally want finance options, warranties and then when you read about all the stories of people coming to test drive and steal cars it's not an easy way to get rid. Audi got the residuals wrong on the tt, the sportcar market is shrinking and people that wanted sports cars 10 years ago are more excited by suvs and sitting up high in traffic

My wife's tt, with all the options you'd want in showroom condition is worth 4K less than it's settlement figure. Luckily this monster depreciation is Audi's problem as were currently vt'ing it so high losses are swallowed up by audi. I know a couple of people at audi and they very rarely part ex cars at the moment. If within the vt window that's the route most of the cars go down


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## Toshiba (Jul 8, 2004)

Audi don't lose at all, you/we do.. You've paid the interest and the depreciation, the car wont be sold on the forecourt at a loss. Depreciation on MK3s is no higher % wise than the MK2 was at the same stage - hell my RSTT was the biggest loss i ever had on a TT, ironically i could have kept it and it would have flattened out, but that's another story.

So, nothing has changed and the sales numbers didn't increase for the TT. it just means PCP keep the resale market low and in the dealers favour and they keep people on the PCP tread mill which has ALWAYS been the goal for DEALERs. Audi have simply over priced the TT for what you get. 60k for an RS TT is beyond a joke. its a 45k product, tops!


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## no name (Feb 16, 2014)

Unless its a particularly sought after model or in exceptional condition just assume it will only be worth the balloon payment or less.


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## Toshiba (Jul 8, 2004)

Well, buying cash you can get the same if not a "better deal" on the cars original price. You don't have the interest payments on the principal to fund, which btw is alway more than interest paid on any saving product currently on offer anywhere and the car loss can be managed by time - Simply extend the length you keep it, the curve will always catch up, something which is not possible for a PCP.

PCPs are a mugs game, that benefit dealers and keep people on a tread mill of debt.


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## winrya (Feb 22, 2014)

Wife's previous tt (which we should have kept) did far better on pcp. 18 months into a 48 month pcp it was £1500 in positive equity. Mk2 amplified tdi Quattro. Definately the best car she's had, never should have traded it in for the mk3. That virtual cockpit drew us in.. Just going with whatever is good on lease deals in the future. 24 month term works much better for us.

On a separate note I've just picked up a cash sale on a brand new Peugeot partner for work to save miles on my s3. Worked out at 43% discount. The van market is even more nuts than the car market.


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## Alan Sl (Nov 11, 2009)

Toshiba said:


> Well, buying cash you can get the same if not a "better deal" on the cars original price. You don't have the interest payments on the principal to fund, which btw is alway more than interest paid on any saving product currently on offer anywhere and the car loss can be managed by time - Simply extend the length you keep it, the curve will always catch up, something which is not possible for a PCP.
> 
> PCPs are a mugs game, that benefit dealers and keep people on a tread mill of debt.


Once again Tosh I find that I agree with you. The last three Audi's I have purchased the dealers have said I would be better off with PCP. I disputed this and got them to work out a PCP and a cash sale comparison. Over a three yr term the cash purchase was significantly cheaper than the PCP option pushed by the dealer - much to their embarrassment. Incidentally I always choose the PCP option just to get the Audi contribution and then pay it off within 14 days. Surprisingly this was originally suggested by an Audi dealer.


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## phazer (Apr 2, 2018)

winrya said:


> On a separate note I've just picked up a cash sale on a brand new Peugeot partner for work to save miles on my s3. Worked out at 43% discount. The van market is even more nuts than the car market.


Unless it has a VW badge in which case the "scene" tax applies 25% increase :lol:


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## Toshiba (Jul 8, 2004)

it would need a 100% discount for me to consider anything with VW on the back.


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## phazer (Apr 2, 2018)

Toshiba said:


> it would need a 100% discount for me to consider anything with VW on the back.


But you're ok with owning more than one thing that is thoroughly VW inside? :mrgreen:


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## Toshiba (Jul 8, 2004)

Not much is VW inside, have you seen how cheap the VWs are inside!!! the odd switch...?

I'd like to see VW broke up, this is just leading to too many boring and dull cars on the road now with this modular approach manufactures have.


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## phazer (Apr 2, 2018)

Toshiba said:


> Not much is VW inside, have you seen how cheap the VWs are inside!!! the odd switch...?
> 
> I'd like to see VW broke up, this is just leading to too many boring and dull cars on the road now with this modular approach manufactures have.


I have indeed, Audi interiors may be light years ahead of others but most of it has a VW badge printed on it somewhere.

I don't disagree, a bit of innovation rather than banging a new dress on everything would probably shake the market up a fair bit and move things along quicker than currently.


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## Blade Runner (Feb 16, 2018)

phazer said:


> Toshiba said:
> 
> 
> > Not much is VW inside, have you seen how cheap the VWs are inside!!! the odd switch...?
> ...


Reminds me of Hammond's famous (and pretty accurate) comment that a "TT is a Golf in a posh frock".
That doesn't irritate me (I like the frock!), but I accept that the drivetrain in my TTS is basically the same as in the Golf R.
And no bad thing, either.


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## cliveju (Jun 27, 2018)

I was caught out on my pcp deal. I was given a quote which included a £4k Audi Finance contribution - on top of the dealer's discount, making the car seem very cheap. Much later I discovered that the £4k had been added to the finance calculation to increase the debt.


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## aeroflott (Feb 18, 2019)

Toshiba said:


> I'd like to see VW broke up, this is just leading to too many boring and dull cars on the road now with this modular approach manufactures have.


I'm constantly impressed with Citroen's car designs these days. I can't picture myself ever walking into a Citroen dealer and handing over my hard-earned, but would love to see them have a go at a coupe using the DS design aesthetics.


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## Blade Runner (Feb 16, 2018)

cliveju said:


> I was caught out on my pcp deal. I was given a quote which included a £4k Audi Finance contribution - on top of the dealer's discount, making the car seem very cheap. Much later I discovered that the £4k had been added to the finance calculation to increase the debt.


That just sounds wrong. So actually no finance contribution?? Did you take it up with the dealer/Audi finance?
Did the original paperwork (order form) make it clear that the £4k had been deducted from the purchase price, so you should only have been paying interest on the discounted figure? You have to enter PCP deals with your 'eyes wide open', but that sounds ridiculous.


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## phazer (Apr 2, 2018)

Blade Runner said:


> Reminds me of Hammond's famous (and pretty accurate) comment that a "TT is a Golf in a posh frock".
> That doesn't irritate me (I like the frock!), but I accept that the drivetrain in my TTS is basically the same as in the Golf R.
> And no bad thing, either.


Ah yes, well it is true, and it is a nice frock! At least we have a brake setup not used on any other VAG model...oh wait. Ker ching!

Everything is modular but the MQB platform with the R/S3 running gear must be used in about 10+ models across the VAG range now


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## ross_t_boss (Feb 28, 2017)

cliveju said:


> I was caught out on my pcp deal. I was given a quote which included a £4k Audi Finance contribution - on top of the dealer's discount, making the car seem very cheap. Much later I discovered that the £4k had been added to the finance calculation to increase the debt.


Just be aware they do include that amount in the total invoice, but what you should see is that there's an extra 4k added to the deposit you put in to balance the books, with the total amount financed not including it (sounds like on yours it was added to the finance?) The total owing on the agreement will include interest as well, which is likely to be the tune of 3-4k extra.

If that's legitimate you have good place for recourse on that, providing you have paperwork to back it up. The total payments, GFV, deposit, 4k contribution, dealer discount should match the full RRP plus interest.


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## 90TJM (Sep 30, 2013)

I have used PCPs since the 90s albeit on cheaper cars back then and ended up in pocket at the end of the term.Not the case these days and have had to put in money towards the deposits on my TT and the wifes Mini.My car is due up at the end of the year and thinking of not even buying another car as we dont need 2 cars. If there is no money in the car I will hand it back which is an option with PCPs.I could have bought both cars for cash but that would have gone from the bank and not gone back in.


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## 90TJM (Sep 30, 2013)

Done a few on-line valuations and car is worth around £16K.Checked Audi Finance and I owe £16,200 so would expect to break even if trading in now.


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## Toshiba (Jul 8, 2004)

That's not even, the finance is calculated up front with a down payment to get you to the next car... so it's a loss and a bigger one than cash, be it with a limited basement downside. With PCPs they want you on a treadmill with the concept of small monthly payments and no large outlays.


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## Blade Runner (Feb 16, 2018)

Toshiba said:


> That's not even, the finance is calculated up front with a down payment to get you to the next car... so it's a loss and a bigger one than cash, be it with a limited basement downside. With PCPs they want you on a treadmill with the concept of small monthly payments and no large outlays.


Very true, and that is what is keeping the car industry going (approx. 80% of new cars are "purchased" using some form of loan finance, usually PCP). Whether it can continue in this fashion is very doubtful (the whole thing is "built on sand", as they say) and many finance experts predict a looming crash. For now, like the property crash in 2008, governments are quietly ignoring it.

In any event, people should forget about having any equity (other than negative!) in their car when the loan deal has finished. It aint going to happen, not these days. In fact, the monthly interest payments are kept low by having a relatively large balloon payment, which they know most people are not going to pay anyway. As you say, much easier (any actually essential if you are continue to have a car) to roll it all forward into another PCP.

As you and others have said, the net result of all these PCP deals is just to flood the second hand market, which makes new car depreciation worse. And I think even those of us without an economics degree can see where this is heading&#8230;


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## ZephyR2 (Feb 20, 2013)

It would be in the early 1990s when Ford introduced their Options scheme - probably the first PCP scheme in the UK. Even then the drawbacks of the scheme could be seen, although they were not obvious at first, it's a trap.

There's 2 ways you can play a PCP -
1.	Buy the car you originally intended to buy and with the reduced payments put a bit away each month towards your next deposit 3 years down the line. The sensible way.
2.	Make the monthly payments you originally intended to make but have a more expensive car. The emotional way and the way salesmen will push you.

Now which way do most people go I wonder?

The trap is having bought a more expensive car no one's going to want to go back down to cheaper model, but without that initial deposit of a part-ex, just a small amount of equity, if you're lucky, you're going to have to up your monthly payments next time round. Once you're sucked in you stay sucked in, unless you've got the cash to get out.

Basically they drag people into a market they can't afford but by the time they're on their second PCP the higher monthly payments eating into their monthly budget have become normalised and accepted.


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## Blade Runner (Feb 16, 2018)

ZephyR2 said:


> It would be in the early 1990s when Ford introduced their Options scheme - probably the first PCP scheme in the UK. Even then the drawbacks of the scheme could be seen, although they were not obvious at first, it's a trap.
> 
> There's 2 ways you can play a PCP -
> 1.	Buy the car you originally intended to buy and with the reduced payments put a bit away each month towards your next deposit 3 years down the line. The sensible way.
> ...


Nice analysis and pretty much spot on. That second PCP, when the monthly payments increase significantly, is when alarm bells should start ringing, but with most people they don't. Many have become so accustomed to living life on credit (i.e. 'pushing the problem down the line') that they see it as normal behaviour. Everyone does it, right? Perhaps PCPs should be regarded like divorce? Most men can afford one (just about!) but very few can afford two..


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## Ruudfood (Apr 9, 2018)

PCP is a mug's game. Everyone wants things they can't (really) afford. PCP makes it seem affordable. In reality, you're spending more than you need to. Save up for a car and when you have enough, buy the one you want even if you have to take out a small loan to top up. Sure, you might have to wait a while to get the car you want but you'll love it more when you eventually do get it. Deferred gratification it's called!


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## 90TJM (Sep 30, 2013)

Buying cars unless they are classics that will increase in value is a mugs game along with renting property which I dont do so happy to lose on a new car.


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## digital_dreamer (Aug 28, 2011)

Ruudfood said:


> PCP is a mug's game. Everyone wants things they can't (really) afford. PCP makes it seem affordable. In reality, you're spending more than you need to. Save up for a car and when you have enough, buy the one you want even if you have to take out a small loan to top up. Sure, you might have to wait a while to get the car you want but you'll love it more when you eventually do get it. Deferred gratification it's called!


This way works for me. Tired to get me to buy on a PCP and he looked shocked when i said no its ok :lol:


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## Blade Runner (Feb 16, 2018)

Ruudfood said:


> PCP is a mug's game. Everyone wants things they can't (really) afford. PCP makes it seem affordable. In reality, you're spending more than you need to. Save up for a car and when you have enough, buy the one you want even if you have to take out a small loan to top up. Sure, you might have to wait a while to get the car you want but you'll love it more when you eventually do get it. Deferred gratification it's called!


Wow, I though that type of thinking had died out in the 80's. Glad to hear that its alive and well on this forum. 
Now all we have to do is convince the other 90% of the population. The trouble is that pretty much the whole economy is now based on credit (personal debt in the UK is estimated at 1.5 trillion .. and rising), so people suddenly changing their borrowing habits would bring several industries to their knees. Like drugs maybe, people have somehow to be weened off credit slowly, giving manufacturing time to adjust to the lower volumes. Oh wait, job losses, 'end of the world' etc etc. The problem of course is that 'industrial growth = good, slow down = bad' is so ingrained that governments tend to go into a flat spin when the economy stops growing. And when politicians/bankers go into panic mode we are all in serious trouble. Catch-22 indeed.


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## phazer (Apr 2, 2018)

Why would anyone in business/Government want to wean people off the PCP mechanism when in only a few years we're going to be renting our cars and paying a monthly subscription for the battery/batteries?

Nobody will be able to afford the next or future generations of electric car and/or batteries (and why would you want to own a giant liability - more so than cars are now). The way to proceed is to commoditise them and have people pay a monthly fee.

Everything is going subscription, it's the way to smooth out business earnings, no peaks and troughs just a steady consistent stream of cash. You can't blame business when they are obliged to benefit their shareholders.

Oh and the way it's being talked about here is like people are stupid (some might be). When whole industries make it nigh on impossible to purchase outright or make it so much more expensive then what real choice is there?

It's the Capitalist way. Three choices, embrace it, get yourself to a position to effect change, or communism :lol:


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## aeroflott (Feb 18, 2019)

I often drive past the dealer lots in my town and think to myself "who is buying all these cars?". There are rows upon rows upon rows of new and used cars out there in the rain. The reality is very few people can walk into a dealer and pay 15k in cash upwards for a new car, so I guess everyone is doing PCP. But then who buys all the used cars?

Personally, I decided to buy my TT used, with some savings and a small 3 year loan. The car was 2 years old, and had lost almost 50% of its new list price. I'm happy to own the same car for more than 3 years and by then just be paying out for maintenance, insurance and no monthly capital costs.

There's benefits to both though I guess - I do get the appeal of a new car every few years, but PCP strikes me as a hamster wheel you can't get off once you're on it.


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## Ruudfood (Apr 9, 2018)

Blade Runner said:


> Ruudfood said:
> 
> 
> > PCP is a mug's game. Everyone wants things they can't (really) afford. PCP makes it seem affordable. In reality, you're spending more than you need to. Save up for a car and when you have enough, buy the one you want even if you have to take out a small loan to top up. Sure, you might have to wait a while to get the car you want but you'll love it more when you eventually do get it. Deferred gratification it's called!
> ...


There's a political discussion in here but I'll stay away from that. The banks want you to borrow money starting from the time you decide to go into further education. They get you on the cycle of debt and keep you there...for the rest of your life. And who benefits?

We're brainwashed into thinking we need the most expensive this and the best that. And who benefits?

Collectively as a society, we seriously need to break out of this cycle.


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## Toshiba (Jul 8, 2004)

Who cares if the German economy tanks because of a sudden cliff edge around manufacturing sales.

And the comment above around subscriptions is true, but we are in the main talking about PCPs being a mugs game and it is. So are subscriptions of which a PCP is a type. Companies want this because it's repeatable revenues and many people are too dumb to shop around... this way is more expensive in the same way cloud computing is, its also subscriptions, but it's instant on and instant off or pay per drink. Don't confuse cheaper with small monthly payments. Somewhere someone is financing the loan you carry along with insurance to cover in the event you don't pay along with a huge fat profit. You are NOT winning. Cash is still cheaper.


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## leopard (May 1, 2015)

'tis true. I've stated all along PCP is a mugs game and it's nice to see people are starting to cotton on. If people want to play the monthlies game and hand the car back, just lease. Miles cheaper...


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## ZephyR2 (Feb 20, 2013)

phazer said:


> Everything is going subscription, it's the way to smooth out business earnings, no peaks and troughs just a steady consistent stream of cash. You can't blame business when they are obliged to benefit their shareholders.
> 
> Oh and the way it's being talked about here is like people are stupid (some might be). When whole industries make it nigh on impossible to purchase outright or make it so much more expensive then what real choice is there?
> 
> It's the Capitalist way. Three choices, embrace it, get yourself to a position to effect change, or communism :lol:


And as if to emphasise the point .....
https://www.autoexpress.co.uk/bmw/107492/bmw-makes-apple-carplay-a-subscription-service


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## FJ1000 (Nov 21, 2015)

PCP a mugs game?

I'd say taking on a brand new car is a mugs game - regardless of the method of financing it.

PCP just makes new cars more attractive as the monthly payments are lower.

Regardless of how you finance it though - you have to pay the new car depreciation!

Most new cars will lose 40-60% of their value in the first 3 years. That's the main reason I don't think I'd ever buy new. The cost of depreciation over my typical 3 or 4 years of ownership would be intolerable. For the same depreciation cost as a new car - you can have a far better car in the used market.

Sent from my iPhone using Tapatalk


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## Toshiba (Jul 8, 2004)

And you think with PCPs you are not funding the depreciation? :lol: 
You are funding the SAME depreciation, plus all the interest on both the higher value loan and the risk in terms of an insurance for the finance company. look at the math, it's not cheaper and you have NO asset at the end. it's a treadmill of debt design to fool people into thinking it's not expensive. Aimed at people who couldn't normally afford a new car. you still have fines for wear and tear, you have a mileage cap, you could get early redemption charges.

PCP fools you into thinking by paying monthly it is better. Leasing is better if you don't want to own an asset.
Pure mugs game and im sure its going to be the next PCI scandal as other have said. UK really needs to wake up to this debt culture.


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## leopard (May 1, 2015)

^^^^
Bang on [smiley=thumbsup.gif]


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## Alan Sl (Nov 11, 2009)

Tosh - 100% spot on


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## ZephyR2 (Feb 20, 2013)

Leasing is usually cheaper than PCP unless you want to get out early in which case you can get hammered.
Best bet is take out a PCP, pay it off straight away and keep the "deposit contribution".


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## Alan Sl (Nov 11, 2009)

ZephyR2 said:


> Leasing is usually cheaper than PCP unless you want to get out early in which case you can get hammered.
> Best bet is take out a PCP, pay it off straight away and keep the "deposit contribution".


That is exactly what I did last week, no hassle from Audi/VW finance.


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## phazer (Apr 2, 2018)

I've had quotes for leasing in the past and it's always been considerably more expensive than even a PCP factoring in the interest over the same period.

If you're happy to take whatever deals are out there on make/model/spec great but when you want a specific car it's much harder, especially as options disproportionally increase the cost per month. That's why there are sooooo many poverty spec Golf R's out there - cracking lease deal but only if you took bone stock.

As above and what I've said before best bet is take the PCP, get the incentive and pay it off as soon as.


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## Toshiba (Jul 8, 2004)

ZephyR2 said:


> Leasing is usually cheaper than PCP unless you want to get out early in which case you can get hammered.
> Best bet is take out a PCP, pay it off straight away and keep the "deposit contribution".


Thats fine, but its not really a PCP, its just a means to get a discount, which you can normally get anyway.
but if it works, I say take the free money and pay the rest in cash. if you pay the PCP monthly, its not cheaper, its just a subscription to debt.


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## FJ1000 (Nov 21, 2015)

Toshiba said:


> And you think with PCPs you are not funding the depreciation? :lol:
> You are funding the SAME depreciation, plus all the interest on both the higher value loan and the risk in terms of an insurance for the finance company. look at the math, it's not cheaper and you have NO asset at the end. it's a treadmill of debt design to fool people into thinking it's not expensive. Aimed at people who couldn't normally afford a new car. you still have fines for wear and tear, you have a mileage cap, you could get early redemption charges.
> 
> PCP fools you into thinking by paying monthly it is better. Leasing is better if you don't want to own an asset.
> Pure mugs game and im sure its going to be the next PCI scandal as other have said. UK really needs to wake up to this debt culture.


Was that addressed at me? If so - please re-read my comment

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## Toshiba (Jul 8, 2004)

You simply changed the topic to used cars, that's not the subject at hand, it's not relevant.

It's very warm in German today. I'm going for beers at Salitos tonight.


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## FJ1000 (Nov 21, 2015)

Toshiba said:


> You simply changed the topic to used cars, that's not the subject at hand, it's not relevant.
> 
> It's very warm in German today. I'm going for beers at Salitos tonight.


Of course it's relevant.

You seem to think I'm taking an opposing view to you - I'm not, I agree!

PCP is a way to fund the massive depreciation of a new car - in such a way that a great lump of the capital repayment is pushed to the end of the term, keeping monthly payments low, and thus attractive.

Hence, most new cars are sold on PCP, and consumer debt levels in the UK have never been higher. If people added up their monthly payments over the life of ownership of the car - they might have a nasty surprise!

That mountain of PCP debt is largely new car depreciation + interest.

The best way to avoid that, is to expose yourself to less depreciation, by buying used.

Another way of framing this same effect is; if you're comfortable with X depreciation over Y years - that'll buy you a better car in the used market.

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## Toshiba (Jul 8, 2004)

I genuinely don't. But if you (not you personally) want to save money you would never buy new or used. Cars are money pits. But, what's it worth to pick and choice your perfect spec? To some it is. Be it PCP or cash.

My only point is people are not considering like for like..


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## ZephyR2 (Feb 20, 2013)

The depreciation for cars isn't any worse than that for any other goods, in fact its probably better. Its just that you don't normally trade in your fridge or your TV or garden shed etc. for a new one once every 3 years. :lol: 
The only other items that come close are mobiles and laptops.


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## FJ1000 (Nov 21, 2015)

ZephyR2 said:


> The depreciation for cars isn't any worse than that for any other goods, in fact its probably better. Its just that you don't normally trade in your fridge or your TV or garden shed etc. for a new one once every 3 years. :lol:
> The only other items that come close are mobiles and laptops.


To point out the obvious - cars tend to cost considerably more than fridges...

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## Blade Runner (Feb 16, 2018)

Toshiba said:


> I genuinely don't. But if you (not you personally) want to save money you would never buy new or used. Cars are money pits. But, what's it worth to pick and choice your perfect spec? To some it is. Be it PCP or cash.
> 
> My only point is people are not considering like for like..


Quite so. Its the price you pay (quite literally) for "buying" a new car. And, yes, at its most blunt PCP is for people who want a new car but - in the old fashioned sense at least - can't afford one. Its a glorified rental scheme, I think we all understand that. But most new cars are "purchased" using some form of loan finance, so the car industry has come to depend on it. Cars on TV are not even advertised with their list price any more, just the monthly repayment figure. If we are talking performance cars who, for example, can afford to pay £70k cash for a TT RS or a 718 Cayman S? Very few. Thirty years ago someone driving around in a new Porsche 911 was a rich bloke. Not any more. It just means he can afford the circa £1k per month repayments, which would equate to a below-average mortgage in the south east.

As I said in a previous post, it would be nice to think that people could change their borrowing habits (and their general attitude to debt), but it aint going to happen. As we have seen before, the market has to crash first, and even then (as is the case with 95% mortgages) banks and their customers soon return to their bad old ways when the dust has settled. We have unwittingly developed a "must have it now" culture, so boom and bust is a natural consequence.


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## phazer (Apr 2, 2018)

You know it's not all that long ago that people rented their home phone and the television because they couldn't afford to buy the items outright (and I don't mean the likes of Brighthouse either, it was normal and not just for debt ridden monkeys).

It's by no means a new phenomenon, the monthly rental has just transferred to some new stuff that's outside of purchase range. It's easy to scoff without context.


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## Toshiba (Jul 8, 2004)

Its basic marketing and finance, hide the cost. Your new iPhone is only 40 whatever a month, for 8000 months.. but, that's marketing and that's finance. You don't get anything cheaper with finance, you are paying for the interest and the risk on the debt plus the interest on the cost of the insurance and the nice shinny showroom..

All said, who's to say you can't do it? personally I think schemes like these should be removed, but... Shareholders and banks want a return. This is money making money. Why do dealers like it, they keep you on the treadmill, (let me guess, you get a call 9months before your term ends with a once in a lifetime deal) and it creates a stock of used cars they can sell and make more money on. its a win win for dealers.. not consumers. Take the PCP contribution and pay that shit off quick.


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## phazer (Apr 2, 2018)

Toshiba said:


> Its basic marketing and finance, hide the cost. Your new iPhone is only 40 whatever a month, for 8000 months.. but, that's marketing and that's finance. You don't get anything cheaper with finance, you are paying for the interest and the risk on the debt plus the interest on the cost of the insurance and the nice shinny showroom..
> 
> All said, who's to say you can't do it? personally I think schemes like these should be removed, but... Shareholders and banks want a return. This is money making money. Why do dealers like it, they keep you on the treadmill, (let me guess, you get a call 9months before your term ends with a once in a lifetime deal) and it creates a stock of used cars they can sell and make more money on. its a win win for dealers.. not consumers. Take the PCP contribution and pay that shit off quick.


Absolutely. The marked shift from the era I mentioned is back then there was no business without finding ways for people to be able to have things, almost (I mean almost!) a try and do something good mentality. Now it's definitely a totally cynical process, consumers never win, whatever you buy, however you buy it you don't win.

I remember a time when you bought hardware (electronics etc) it was yours to do with as you please, now you're buying the licence to use it, that hardware is technically not yours. why? control.


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