PCP v cash

[Soymochq]

Hi there, I think I'm probably being really daft but I can't get my head around this and hope knowledgeable Mumsnetters can explain.

We need to replace our car. DH is looking on Carwow and he points out the PCP offers all work out cheaper than buying the car new for cash. But how can that be? I always considered PCP to be good for those who want to change their car every few years but we don't want to do this. How is it possible that all the Carwow offers from dealerships show PCP to be cheaper than cash purchase of the same car?

Sorry if I'm being daft. It doesn't make sense to me at all. Hopefully someone can explain. Thank you so much in advance!

they are not cheaper if you account for the balloon payment at the end.

Sometimes there are incentives with PCP like a £1000 deposit contrdibution etc.

If it is cheaper and 0% interst rate then buy on PCP, pay it monthly and keep the balloon payment in a high interest saving account. OR if it is not interest free then take a deposit contribution and keep the PCP for the min imum time ans'd then pay it off as that is what I did.

Thanks all.

@therealpumpkinbumpkin that's how I've always understood it as well but Carwow offers from dealerships all show that PCP offer is at least a grand cheaper than cash payment.

@grannycab yes, exactly this. The manufacturer is offering a £1k deposit contribution but I suppose I don't understand what benefit the finance company or dealership get out of PCP in this case? Or is it only to appeal to those who aren't able to put the capital upfront?
I've asked the dealership for transparent on the repayment schedule so I can better understand it myself.

Normally it’s because the garage have sales targets related to the finance. You can take PCP and pay off pretty soon into the agreement, but read the small print.

I'm just coming up to the end of my contract. New car price was lower than for cash too and had 0% finance and 3 years servicing and breakdown cover too. Am just about to pay the balloon payment and so looked at 2nd hand car prices (which are high at the moment I know). It has lost £4K in value but I've had 3 years servicing plus breakdown cover for 4 years for £1k p.a. (not even reflecting interest I could have earned). Given the 4th year service just done was £500 I think that's pretty good for hassle free motoring!

I'm not sure many places will be doing 0% though?

If it is not 0% finance the fianace company get your interest in the hope you forget you want to apy it off early. I set a reminder on my phone for 3 months (minimum length allowed) and therefore only paid 3 months interst which was a lot less than the £1000 deposit contribution so it was worth it. The dealers hope you get sucked in and don't have the balloon payment and will continue to change car every 3 or 4 years, depending how long the PCP is for. I guess they receive money for referring you too, but I don't know for sure. It is really hard to pay cash!

You never own pcp unless you pay the large lump sum at the end

Do you mean HP which is the amount divided by the loan term equally

Most people lease cars now as far as I can tell