Buying a car with PCP

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Ok, I know I am not buying it. It’s really a hire but my car is on its last legs. It’s been brilliant but, it’s old and constantly has something wrong with it, needing the garage etc. Twice this year already but thankfully for minor things but that’s still cost me just over £400.

I have been looking at PCP. I’ve got £3000 deposit. It’s a Qashqui that I have seen. PCP estimates are £177 a month which is within budget. It’s a 2020 plate with low mileage.

I know there is a balloon payment or trade in at the end of the term. Bank loan direct is over £100 a month more expensive than PCP. I am going to see it tomorrow. Is there anything I should be aware of or ask the dealer? When I want to trade in, do I need to go back to the same garage?

I want to know about this too as my v old car is on its last legs and secondhand vehicles are still incredibly expensive compared to when I last bought.

I'd like to know about likely costs on trade in for any small exterior or interior damage/wear - how carefully do they check? One of the good things about having an old banger is you can be quite casual about minor scuffs etc.

What's the value of your banger? Can you sell it or use it as part ex on a PCP deal? And how much are the monthly repayments with no or very low deposit? A secondhand car a couple of years old with low mileage is likely to be cheaper and no less reliable for 3 or 4 years.

Minor scuffs and scratches are nothing to worry about on a PCP.

Are you looking at a main dealer or an independent? I got two years' free servicing on a car 2.5 years old on a PCP. No deposit other than one month's repayment upfront.

Thank you. The £3k I said above includes rough trade in price on my old car. It’s worth about £1k plus I have £2k available.

Minimum deposit would be £249 but that takes monthly payments up to 290 a month which I am not comfortable with.

Work out the total cost of the pcp (deposit+monthly payments+balloon)

then the total cost of the bank loan (monthly payments only)

pcp can seem like a way to get a car at a lower monthly cost but often the overal cost is higher. If that’s ok, fine, but do it with your eyes open

We done PCP twice and don't regret it, some limit mileage so ask about that. Don't put too much upfront as your end price when handing it back could fall. We had a guaranteed price when we changed the car to another PCP one.

As @CombatBarbie mentions there’s your annual mileage within the PCP to discuss as it affects the final value of the car.
Used to see some great deals on new cars in PCP, but they were on a 6000 miles/year which was 4000 too low for us.

Also investigate what will happen if for some reason you are unable to meet the payments/ or wish to hand the car back mid-contract.

All of those things already mentioned. But also check if you need a main dealer service or stipulations around servicing. Sometimes they offer a discounted service plan.

Warranties can also vary, so even though you're getting something newer do check this. Our 'new and reliable' pcp car went wrong and needed an expensive part replaced. Luckily it was within 12 months, as we didn't have the money for the repair.

This is invaluable. I am writing it all down. Thank you.

You’re probably better off getting your bank loan over a longer period. The interest rate on second hand pcp is really high and you’re paying interest on the lump sum at the end. If you get a loan over a longer period, you’ll still be in the same situation in 3 years time but with more ‘equity’ and you’ll have paid less interest.

PCP does hook you in!

We're on our second Qashqai on PCP. Each of them bought when they were around 3 years old.

What I'd make sure of is that you have a main dealer warranty (assuming you're buying from a main dealer) and to try and negotiate the best price for the warranty and ensure the warranty length covers the PCP term.

We had a PCP car and I wouldn’t do it again. I found knowing I had to stay in PCP or find the big balloon really stressful. I see a lot of people advocating for it on mumsnet but I actually don’t think they are good really unless you would normally want a new car very 3-4 years anyway (I don’t), as they trap you in to an expensive system and interest rates are now very high.

I think PCP is the biggest scam going, and encourages excessive replacement of cars when they're perfectly fine. You need to account for the balloon payment when comparing against the bank loan. We did the bank loan because we wanted to own the car fully from day 1, and if we are struggling to pay the loan, we can sell the car because it's an asset we fully own. It's far more complicated with a PCP, if you can't pay which can ruin your credit score.

Totally agree with @Rosesanddaisies1

I am naturally risk averse, so I don't like things like this anyway. But if I got into financial difficulties, I could sell the car and pay the bank loan off. If it's too high monthly payments, take it over a longer period. Then the asset itself is still yours.

Remember that you are still responsible for all the repairs, MOT, etc that the car may or may not need.

I would not go down this route I would rather take the bank loan out to pay for the car, and should you decide in 3 years time to trade in and change your car at least you will have the car as a deposit. With PCP you are technically just renting the car and will have no trade in as the car is not yours until you pay the balloon payment.

Thank you everyone for your input. I am now leaning towards a bank loan rather than PCP. We are going to look at cars tomorrow and take a few days to decide.

A quick question for anyone in the know, we’ve been looking at auto trader. They give an indication as to whether a price is high, reasonable or low. If a price is high, is it acceptable to haggle and negotiate if we find the right car and it is high?

Bumping this thread for myself:

I got a used EV on PCP from a dealer for 48 months. I m only 3 months into it.

The current re-settlement cost is £7500.

The APR is10% . When it comes to the end of my deal I can pay the balloon payment of approximately £3k or hand the car back, or get another deal.

Surely it makes sense to get a personal loan , or credit card on a lower APR and just settle the PCP?

Atleast I ll own the car and pay less overall. Giving the car back is probably the least cost effective thing to do as I will have no car at all.

Bank loans are approximately 6% APR so wouldn t it make sense to get the loan, and pay off the PCP?

It looks as though I ll save 3k overall..

By the way the car was almost four years old when I got it so wasn’t brand new.

If I’m paying for a car for four years, it makes sense to just pay for it and own it doesn’t it? Especially if a personal loan or credit card offers lower APR..

PCP is easy though it may cost a bit more. You don't need to go back to that same dealer at the end. Just p/ex for another PCP car

Some good advice on here OP. Another thing to take into consideration is that the 2nd hand car market has crashed so you might be better off shopping around. I’m shortly handing back my pcp it’s got no equity in it so is going to be classed as a hand back rather than a part exchange. I’m now looking to buy outright for various reasons but apart from the monthly payment pcp worked nicely for me.

The dealership will want you onboard so be cheeky with your negotiations. Ask if they can throw in the first service for free.

@Skibbidirizzohio

I’m shortly handing back my pcp it’s got no equity in it so is going to be classed as a hand back rather than a part exchange.

Could you explain your situation in more detail?
Why the hand back rather than p/x?