Getting a brand new car on PCP then complaining you're broke

[brexitstolemyfuture]

I don't understand why people go for these "deals", if you want a reliable car you can get a year old one and a personal loan for the same price but you get to keep it afterwards.

Friend has got one saying she had no choice, even though she's broke

Self, is that finance plan through the dealer?

brexit they may not make pure financial sense over the long term. However, if you have a car to trade in which pays the deposit, then the monthly payments are much lower.
Many people do not trust second-hand cars and dealers or have been burnt before. They also dislike buying privately, worried about money transfers/stolen vehicles etc.
Buying new gives them peace of mind.
this Fiesta costs £4.5k deposit, £129 a month and £4.5k at the end - Total £14k
this used Fiesta is a year old and costs £10k.
Borrowing at less than 10% makes the used vehicle lower total cost but:
1 year out of warranty
1 MOT to organise
Lower resale value after 3 years
If you have savings to pay for it, you earn interest on the final payment amount over the 3 years.

So (fairly minor) fiscal benefit vs peace of mind and ease?

My brand new car on PCP was definitely cheaper than getting a loan for a second hand one. I paid no deposit, it was interest free, came with free servicing and breakdown cover, none of which were available on the second hand ones that only cost a few hundred pounds less (it is a very small car costing under £10k).

The mileage rates are set in the contract - and you can negotiate this to be what you want, higher mileage costs more. But it isn't correct to say you can only do 10,000 miles pa.

DH had his cars on PCP for the last few years.
1st one he got what he said was a really good deal on as they needed to shift units. I don't know if that's true as I didn't see the details. He really liked the car but it wasn't practical with the kids and he swapped it when the lease finished.
2nd one was a reasonable deal, he didn't like it as much, but kept it on a further 2 year deal when the lease finished - annoyingly as he was dying and barely drove it and the contract needs buying out at expense now.

In his case there were a number of benefits.

• lease through the business so 50% of VAT on the monthly lease payment reclaimable (VAT on car purchases generally can't be).
• lease through business so annual cost (after VAT reclaim) allowable ad a taxable expense. Capital allowances would be available on a purchase but generally at lower upfront rates.
• he liked having a new car and wouldn't have brought every few years as wouldn't want the capital outlay, but was happy paying a monthly cost. His previous car he'd brought, probably with a loan but it was before we were together so I don't know, and he kept for nearly 10 years, likewise the one before that I believe.

I wouldn't do it, because I'm not interested in driving a new car off the forecourt, I'm not interested in replacing my car every few years, and I see the monthly cost as wasted (and wouldn't have the VAT or tax advantages DH had).

But different strokes...

I do however completely agree with the sentiment of not getting such contracts then moaning you are broke. You chose how to allocate your resources.

Mine is £130 pm for 10k miles per year but is very small so not suitable for everyone (Skoda Citigo).

We have a passat with 15k miles for less than that pm.

15k miles p.a. and had 15k to start with too

I would probably never have a nearly new second hand car again. If I didn't want to sign up for a new small car on PCP, I would get a very old car costing under £500 ish and consider it disposable before I would spend a few thousand on something and hope it lasts without big bills until I've got my money's worth.

The poster who has run an 18 YO car without expensive bills or it breaking down at an inconvenient moment for several years has been extremely lucky.

carlottos yeah it was.

I think PCP works for some people, it depends what you want. A lot of people enjoy driving new cars and changing their cars every few years and don't mind the continual outlay, car retailers and manufacturers absolutely love PCP because it keeps the market fluid because of the need to change every 2-3 years (or pay the balloon payment)
I tend to buy my cars with a personal loan and then I have a few years of no payments but it probably works out similar in the long run. On a recent car buying experience I wasn't courted with much enthusiasm and the BMW dealer told me explicitly that the car industry don't like people like me! Haha. I liked his honesty. I didn't buy the BMW.

Horses for courses.

I used to work for a car finance company. We sold new cars on PCPs and they were extremely popular. Some people want a new car every two or three years, with a PCP they can do that. Some people are used to paying out a set amount each month for a loan to purchase a vehicle - for them it makes more sense to get into a PCP where monthly payments are lower. There are options at the end of the agreement - hand it back, buy it, use it as a deposit for the next one.

Everyone's financial situations and preferences are different, there's no one buying a car model which suits everyone.

PCPs can work but very much depend on your personal circumstances.

They tend to work vest if you don't put down a deposit at the beginning (or the very minimum possible, c£500) and you do not want to keep the car at the end of the deal, you intend to return it and replace with another new one. In those circumstances what you're effectively paying for is the depreciation over the term of the contract, not the capital. Most of the advertised / headline deals are based on low mileage, because the monthly payments look good. It's very easy to alter the level of agreed mileage when you set up the contract, it's expensive if you exceed the limit.

If you want to keep the car at the end of the contract then it's not the best option and HP or a loan are probably going to work better.

Monkey Was your reply to me?

Are you saying you got a Passat on lease for 15k pa for under £130 pm with no deposit? That doesn't sound right - we lease at work and all the big cars are more like £3/400 pm.

I see they're starting to do similar idea with phones too which is to me just insane.

We ran a medium sized 4x4 for 10 years (ex demo, bought nearly new). Even after 10 years it was still a smart looking car that never let us down. BUT - old tech meant I was putting in £70 a week fuel, road tax was £500 pa and the safety features were outdated.

We ran the figures and bought a brand new (similar) car on PCP mainly because of the huge amount they offered on a px for our old one. Deal included 3 yr servicing, breakdown and valet service. We ran the figures and weighed up the pros and cons of buying something we could afford out right (not much!), what we could get with an affordable loan (which was a 3 yr old car that already needed MOTs) against a brand new vehicle with the latest safety features and pretty much everything included in the monthly cost. Plus the fuel efficiency was SO much better, a big chunk of the payment would be covered by what we used to put in our old car (from £70 per week to an average £25 per week).

We have to have a car of a certain size (3 older children and a large dog) so downsizing wasn't an option.

We are on our second PCP (they gave us a brand new, newer model for less a month after 18 months) and love it. I feel my family is safe and I have an eco friendly (as much as a car can be!) efficient vehicle that costs peanuts to tax and insure. I felt I was throwing money away driving my old car - which was also at an age where SOMETHING major could go at anytime, and now have worry free motoring.

It may not be for everyone but PCP works for us - the peace of mind having a new car is unbeatable (drove oldies for years in my youth and got on first name terms with the AA patrolmen!).

I thought the PCP model was effectively following what was already being down with mobiles (pay for it over the course of the contract rather than upfront) and that's where it's come from, rather than mobiles now going down that route?

Yes, I forgot about road tax Glum. It's not the same now but for the last few years, road tax on a lot of new cars has been £0-30 pa, when it was £150-200 on older cars, so a big saving. Insurance is often cheaper too.

Dealers often do deals on PCP though. We seriously considered (though didn't go for it in the end) taking up a deal where we got £1500 towards a deposit, free servicing for 3 years, 3 years warranty and 0% finance.

The figures did stack up very favourably against a nearly new car (including allowing for buying the car at the end).

Nothing inherently wrong with any one type of finance over another - the devil is all in the details so YABU to specifically claim PCP is the root of the problem. Th problem is buying a new car or even a nearly new one when you can;t afford one no matter how you finance it.

I bought a 6 month old car new for the dealer with delivery miles for £2000 less than the price of ordering it new from the factory. I buy almost new cars because I aim to keep them for 10 years (this is my third) so I get to make sure the car is properly services and maintained and it (generally) lasts better.

But aren't you worried about scratching or pranging it Comfortably ?

I have a brand new Ford Fiesta with sat nag and parking sensors as extra. I paid a £300 deposit and got a £200 trade I'm for my old banger (£500 In total). I pay £158 a month for three years and then have a balloon payment at the end for £3500. I have no car tax for the first year and no mot to sort our, plus free breakdown cover. In all I will be paying les then 10k on this car.

I don't want to own it out right though, I want to swap it in 18 months for a newer model. PCP allows you to do that.

you can get genuine 0% finance deals and also some of the upstart car companies have done great deals with some of the finance houses to secure cheap financing to encourage people to buy their cars.

barbara vw have done some phenomenal lease deals at the moment golf gti for £160 a month, scirocco for £103 a month with £2000 down.
Bonkers deals, they were a limited run of x amount of cars (it was enough volume to be worth mentioning here)

Anyway I digress, there is some evidence the pcp wheels are coming off in America. I don't think we are going the same way here as residuals are solid and whilst there's a used market bolstering the final payment. But if they keep throwing cheap lease new cars into the market it will eventually as those three year old cars won't be worth getting a loan for.

Back to your op I agree, spend £5000 on a decent second hand car. You won't pay the pcp cost, over three years and still have something worth £2000-£3000 at the end. You can service it at your local garage, if it gets dented you don't have to worry.

I can see with the small 107 type cars, £150 a month, maintained and insured type deal. That makes sense in a lot of circumstances.
But everyone has their own importance to sruff

Buying a 2/3 year old car may work out cheaper/no more expensive than leasing/PCP on new if you can get low rate finance or have the money up front and don't have any major breakdowns for several years, but if either of those don't apply it can get much more expensive very quickly and you have to not be unlucky in the murky world of buying and selling in the second hand market too.

I used to think people who bought new cars were throwing money away, but when I looked into it when I got mine, I found I was wrong. I was going to pay cash for the same car 2/3 years old but I found it was hardly any more to get a new one and there was the warranty and longer period without an MOT in addition to the free serving and breakdown cover that was worth a few hundred pounds on its own.