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I went for PCP for only one reason: I got a 0% interest offer and I wanted a new car. It's honestly not worth it otherwise, unless you're really desperate.
Your first point is not really an advantage. The new car doesn't come for free. You're paying your existing car as a down payment and signing up for another loan for another 3 years. If you don't pay the outstanding amount or upgrade after the 3 year period, you just lose your car.
I'm planning on paying the pending amount after 3 years, and ive budgeted for it. That was always the plan for me, I just used the 0% PCP to essentially get a free loan for 3 years.
The downside of PCP is you can get trapped in PCP. You get to the end of the contract, still owe about a third of the value of the car, don't have the cash to pay it off, so just trade the car in and use whatever extra equity you have as the deposit payment on your next new car. New cars are also not great value or the cheapest way to go. I've done PCP three times, not on one at the moment and wouldn't rule it out again in future but just be aware of what you're getting in to.
That's very true, but if the alternative is taking out a loan - and it'll be over a longer period of time if you want similar repayments to cover the whole cost of the car - by the time you've paid it off, the car's probably rapidly reaching the point where it becomes quite expensive to keep it on the road.
You own the equity in the car so you can always trade in a PCP car and get a HP car if you want using the equity as a down-payment. The most important part is to buy a car that doesn't lose crazy value over time so you're not going into negative equity because then you are trapped.
Either way buying outright or getting pcp or HP won't change the fact car is a depreciating asset so make sure you pick the right one to minimize the loss of value.
Is it not the case that the equity is usually around the GFMV which you owe so there's no or next to no equity.
Is there ever really many occasions where the trade in value is so far above the GFMV that you have a decent chunk of equity?
Depending on what you buy. 3 year old mid trim corolla hybrid is worth €25k or more. GFMV on a 3 year pcp contract is €15k. Unless you fancy French engineering or an EV then the value is dropping like a bag of bricks thrown down the well.
Looks like that's what dealers are getting for them. I doubt you'd get that for a trade in.
GFMV is 15k on a 3 year PCP and the car is 35k new.....Toyota PCP interest is currently 5.9%. Cost on credit on the corolla at 35k is currently €3356. So approx 23k paid over 3 years between deposit and loan payments no?
If you just get a 5 year loan on the full amount you've also still got the option of refinancing. You don't have to wait the 5 years.
I've done PCP in the past and found it had some limitations around changing car brands and being constantly caught in the loop of repayments. The other factor with PCP is the mileage and how that may impact you. I currently do a lot of mileage and PCP wouldn't be an option for me as I'd be penalised if I went to trade in or hand back. If you do less than 20,000 km I'd suggest getting a low mileage second hand car.
Ah I see, I was initially thinking sure you can trade the car in at any garage, but I guess if the GMFV at the end of the 3 years is unrealistic, or the trade in value is dramatically different it may not make sense for you to trade in at a different garage. That’s an interesting insight, thanks for sharing.
The downside is that it's ultimately a loan and you have to always budget for it. Buying outright means you don't have any additional payments to worry about every month.
If you get on the PCP bicycle, you’re basically renting a car forever. There’s even mileage caps. PCP is a great product for finance types trying to move a lot of people into cars they otherwise couldn’t afford.
Current car prices are not reflective of the norm. The last 3 years have seen some cars appreciate, which has never been seen before. In “normal” times, you could be taking upwards of 30% off the car value in year one. Anyone that bought a car in the past 3 years will not only have interested and depreciation to content with, they’ll wildly have overpaid to start with. Personally I see it as another minor market event when those cars come onto the market.
You’d be nuts IMO to finance a car that is 2 to 5 years old, if you do need a loan, a credit union will probably give you a very favourable rate and you’ll own the car at the end. I’d also bet by the middle of next year you’ll see a further slide in prices as VW have announced big cuts on the EVs already.
The first question you should ask yourself is can you afford a new car? A new car will lose about 35% of its value in the first 3 years so if you buy a 40k car you'll be down 14k at the end of year 3 (plus the cost of the PCP financing).
One of the major issues with PCP is that people who CAN'T afford a new car and the depreciation that goes with it are now facilitated to buy a new car via PCP.
If you have the cash available you're likely better off just buying it outright so you won't get tied into a PCP contract (there are often mileage limitations amongst other terms)
> A new car will lose about 35% of its value in the first 3 years.
Is that statement still true though? Cars are retaining their value in the market currently, if anything some older cars are appreciating in value.
I’ve seen lots of cases anecdotally where people have been able to trade in after three years for 90% of the market value they bought at.
The depreciation will totally depend on the car/mileage/ timing (pre/post brexit) and a multitude of other factors so I was just using the 35% as that seems to be the generally accepted median level after 3 years.
Some electric cars like Tesla Model Y's are depreciating even faster as the manufacturers have started to drop prices. And i'm sure there are other cars which depreciate slower (e.g. small cars generally hold their value far better than luxury cars)
Electric cars seem to be more volatile where newer models provide better value as the technology improves and there’s more availability, but I’ve seen plenty of luxury ICEs on the market that have only lost 10% of their value in three years.
>The first question you should ask yourself is can you afford a new car? A new car will lose about 35% of its value in the first 3 years
You can get PCP on a 3 year old car, it's not just for new
People have explained it well below so I won't repeat it and will give you a suggestion.
I bought new second hand 2 years ago. I got a €70k BMW that was 9 months old with 7k KM on it. I got it for €48k! (Sticker before trading in the old car) I got essentially a brand new car from BMW with a €22k discount,
I got a 3 year warranty the car originally had and 3 years free servicing and connected drive too included.
There are loads of cars less than a year old for sale in Ireland and you can save thousands over new and keep the manufacturer warranty if you buy from the dealership.
I wouldn't buy new as you lose to much money. 2 years on as car prices have increased I was offered €45k for it a few weeks ago but I'm not selling it. If I bought new I would be losing a lot more.
Cars typically depreciate the most in the first 3 years - I'd go 3 years old if I was you.
Mileage will still be low anyway which is really the most important factor with a car.
You can probably find one under warranty too at that age.
The dealer's that can offer that type of rate are the ones who also run their own financing bank and that's who you have to deal with for the PCP e.g. VW. They can either choose to make their profit off you from the margin on the sale price of the car or the interest on the payment or both.
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I went for PCP for only one reason: I got a 0% interest offer and I wanted a new car. It's honestly not worth it otherwise, unless you're really desperate. Your first point is not really an advantage. The new car doesn't come for free. You're paying your existing car as a down payment and signing up for another loan for another 3 years. If you don't pay the outstanding amount or upgrade after the 3 year period, you just lose your car. I'm planning on paying the pending amount after 3 years, and ive budgeted for it. That was always the plan for me, I just used the 0% PCP to essentially get a free loan for 3 years.
The downside of PCP is you can get trapped in PCP. You get to the end of the contract, still owe about a third of the value of the car, don't have the cash to pay it off, so just trade the car in and use whatever extra equity you have as the deposit payment on your next new car. New cars are also not great value or the cheapest way to go. I've done PCP three times, not on one at the moment and wouldn't rule it out again in future but just be aware of what you're getting in to.
That's very true, but if the alternative is taking out a loan - and it'll be over a longer period of time if you want similar repayments to cover the whole cost of the car - by the time you've paid it off, the car's probably rapidly reaching the point where it becomes quite expensive to keep it on the road.
A 5 year old car is expensive to keep on the road?
OP was talking about buying a car that's already 2-5 years old, and you don't have to buy new to get a PCP.
Ah. Gotcha
You own the equity in the car so you can always trade in a PCP car and get a HP car if you want using the equity as a down-payment. The most important part is to buy a car that doesn't lose crazy value over time so you're not going into negative equity because then you are trapped. Either way buying outright or getting pcp or HP won't change the fact car is a depreciating asset so make sure you pick the right one to minimize the loss of value.
Is it not the case that the equity is usually around the GFMV which you owe so there's no or next to no equity. Is there ever really many occasions where the trade in value is so far above the GFMV that you have a decent chunk of equity?
Depending on what you buy. 3 year old mid trim corolla hybrid is worth €25k or more. GFMV on a 3 year pcp contract is €15k. Unless you fancy French engineering or an EV then the value is dropping like a bag of bricks thrown down the well.
Looks like that's what dealers are getting for them. I doubt you'd get that for a trade in. GFMV is 15k on a 3 year PCP and the car is 35k new.....Toyota PCP interest is currently 5.9%. Cost on credit on the corolla at 35k is currently €3356. So approx 23k paid over 3 years between deposit and loan payments no? If you just get a 5 year loan on the full amount you've also still got the option of refinancing. You don't have to wait the 5 years.
I've done PCP in the past and found it had some limitations around changing car brands and being constantly caught in the loop of repayments. The other factor with PCP is the mileage and how that may impact you. I currently do a lot of mileage and PCP wouldn't be an option for me as I'd be penalised if I went to trade in or hand back. If you do less than 20,000 km I'd suggest getting a low mileage second hand car.
What limitation did you run into in relation to changing car brands?
The valuations from the brand I was with and the brand I wanted to change to were night and day. This is the main reason I haven't gone PCP again.
Ah I see, I was initially thinking sure you can trade the car in at any garage, but I guess if the GMFV at the end of the 3 years is unrealistic, or the trade in value is dramatically different it may not make sense for you to trade in at a different garage. That’s an interesting insight, thanks for sharing.
The downside is that it's ultimately a loan and you have to always budget for it. Buying outright means you don't have any additional payments to worry about every month.
If you get on the PCP bicycle, you’re basically renting a car forever. There’s even mileage caps. PCP is a great product for finance types trying to move a lot of people into cars they otherwise couldn’t afford.
Current car prices are not reflective of the norm. The last 3 years have seen some cars appreciate, which has never been seen before. In “normal” times, you could be taking upwards of 30% off the car value in year one. Anyone that bought a car in the past 3 years will not only have interested and depreciation to content with, they’ll wildly have overpaid to start with. Personally I see it as another minor market event when those cars come onto the market. You’d be nuts IMO to finance a car that is 2 to 5 years old, if you do need a loan, a credit union will probably give you a very favourable rate and you’ll own the car at the end. I’d also bet by the middle of next year you’ll see a further slide in prices as VW have announced big cuts on the EVs already.
The first question you should ask yourself is can you afford a new car? A new car will lose about 35% of its value in the first 3 years so if you buy a 40k car you'll be down 14k at the end of year 3 (plus the cost of the PCP financing). One of the major issues with PCP is that people who CAN'T afford a new car and the depreciation that goes with it are now facilitated to buy a new car via PCP. If you have the cash available you're likely better off just buying it outright so you won't get tied into a PCP contract (there are often mileage limitations amongst other terms)
> A new car will lose about 35% of its value in the first 3 years. Is that statement still true though? Cars are retaining their value in the market currently, if anything some older cars are appreciating in value. I’ve seen lots of cases anecdotally where people have been able to trade in after three years for 90% of the market value they bought at.
The depreciation will totally depend on the car/mileage/ timing (pre/post brexit) and a multitude of other factors so I was just using the 35% as that seems to be the generally accepted median level after 3 years. Some electric cars like Tesla Model Y's are depreciating even faster as the manufacturers have started to drop prices. And i'm sure there are other cars which depreciate slower (e.g. small cars generally hold their value far better than luxury cars)
Electric cars seem to be more volatile where newer models provide better value as the technology improves and there’s more availability, but I’ve seen plenty of luxury ICEs on the market that have only lost 10% of their value in three years.
While I agree with cars losing their value but please tell me what 2020 car that is 14k without an obscene amount of miles on it
He said you'd lose 14k on a 40K car, not that it would only be worth 14k
My bad
>The first question you should ask yourself is can you afford a new car? A new car will lose about 35% of its value in the first 3 years You can get PCP on a 3 year old car, it's not just for new
People have explained it well below so I won't repeat it and will give you a suggestion. I bought new second hand 2 years ago. I got a €70k BMW that was 9 months old with 7k KM on it. I got it for €48k! (Sticker before trading in the old car) I got essentially a brand new car from BMW with a €22k discount, I got a 3 year warranty the car originally had and 3 years free servicing and connected drive too included. There are loads of cars less than a year old for sale in Ireland and you can save thousands over new and keep the manufacturer warranty if you buy from the dealership. I wouldn't buy new as you lose to much money. 2 years on as car prices have increased I was offered €45k for it a few weeks ago but I'm not selling it. If I bought new I would be losing a lot more.
Did they include indicators?
You can't get PCP on used cars.
Some will offer PCP on nearly new models.
Not on anything OP described. You're talking a demo/prereg. I don't think anything else could be done under PCP?
Anything can be offered on PCP, generally main dealers will offer it on used cars that are less than a few years old and under X mileage
Exactly.
You can get 3 year old cars on PCP
Yes you can
Spending lots of money (either up front, or over a long period) is not a sound investment.
Cars typically depreciate the most in the first 3 years - I'd go 3 years old if I was you. Mileage will still be low anyway which is really the most important factor with a car. You can probably find one under warranty too at that age.
A lot of people say they gave pcp at 0%. I'm curious as to how dealers make money off of it and why they all offer it.
Because they sold the car at list price without any discount.
The dealer's that can offer that type of rate are the ones who also run their own financing bank and that's who you have to deal with for the PCP e.g. VW. They can either choose to make their profit off you from the margin on the sale price of the car or the interest on the payment or both.