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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

Original poster

To ask your opinions on PCP when buying a car?

64 replies

Enigmasaurus · 03/05/2018 16:21

We’re looking to change our family car. I started another thread asking about types of cars for 3 car seats etc.

Our budget is in the region of £25-30,000. Most dealers now offer a PCP finance plan. I’ve only ever bought outright or via HP before. PCP seems to me a bit like an interest only mortgage (monthly payments, never owning the car).

Am I just being silly? Has anyone had a bad experience with PCP? Or am i just late to the party? Grin

OP posts:
The80sweregreat · 03/05/2018 16:59

My dh favours them as he works for a major car maker - i think they are a bit of a rip off really ( but he does get a discount and its not as expensive as the ones your looking at) and it does mean you have to be a bit careful on the mileage as well, but, its a good way of owning a new car and you can chop and change after 9 months so there a few up sides and it is nice having anew car.

Might be worth looking into a loan from a bank and doing it that way instead? Or a good second hand one, a year old and the price is a lot less and usually still in good condition. Means a lot of leg work looking around though.
I've just always left it to him i must admit, but other people have told me that we are mad to do this, but it must be popular as all the makers do these deals, trouble is we never get to actually own the car!

Rawhh · 03/05/2018 17:02

I wouldn't have one unless I had the final payment in the bank.

I spent 3 years with high anxiety making sure I kept the car in pristine condition only to be stuck with a large bill at the end.

My prefer our (higher spec but if it's time) 10 year old banger than I can enjoy using.

TheIcon · 03/05/2018 17:02

How often do you change your car? Most people are 2.5 to 3 years so, if buying on HP, the car would never be theirs anyway. Changing that often means you're always under warranty and never need to worry about MOTs either.

Monthly payments will be a lot less as they're only covering the depreciation rather than all of the car. Finance companies are taking the risk of the residual value falling rather than you as the consumer. You'll get a better APR and deposit contribution on a PCP than HP too.

FancyThatFenceEdge · 03/05/2018 17:05

"PCP seems to me a bit like an interest only mortgage (monthly payments, never owning the car)."

A repayment mortgage is exactly the same. You dont own the house till the last payment at redemption is made. So whats the difference?

None! Hmm

Bluelady · 03/05/2018 17:05

The benefits are a new car every three years and a really good purchase price for a car you know has been treated well at the end of the agreement if you then decide to buy it. I'm a year into my second contract and will probably buy this one when it finishes.

theunsure · 03/05/2018 17:06

PCP is usually much better, but it depends on the Guaranteed Minimum Future Value - as that is what you are paying for, the depreciation plus interest.

I usually lease (PCH) nowadays, but will PCP if the price is right.

I'd never do Hire Purchase, the sums never add up to me.

Bluelady · 03/05/2018 17:06

Btw, mine's 0% interest.

slbhill42 · 03/05/2018 17:08

it's exactly like an interest-only mortgage.
You're tied in, and it costs you more to buy out than the car is worth.

I'm told it's the common way to buy new these days... but it horrifies me. I wouldn't touch it with a bargepole.

slbhill42 · 03/05/2018 17:10

"A repayment mortgage is exactly the same. You dont own the house till the last payment at redemption is made. So whats the difference?"

The difference is you have equity. If you sell the house with some of it mortgaged, the rest of the money is yours. You don't have to pay the bank to take it off your hands when you want to sell.

Bluelady · 03/05/2018 17:10

That isn't true. You get a worthwhile discount on the book second hand price at the end if you buy the car.

The80sweregreat · 03/05/2018 17:11

Last few cars we have chopped in they didnt even come out to have a look at it and we keep them in tip top condition/ cleaned a lot and keep down the mileage.
I guess they would have got in touch if they had been abused or damaged, but mostly they take our word for it as we drive off in another car. Not boasting, id rather own a car and not have to worry about it all the time, but it works for us at the moment and dh has to have a reliable car for work/ commute and not have to worry about MOT's or service payments.

DailyMailBestForBums · 03/05/2018 17:12

I have my car on 0% PCP, with the balance owed in the bank. I'll probably exchange it next year. I like the guaranteed minimum value, especially because if the government introduce changes to the law about fuel/ emissions, I don't have to worry about being stuck with an unsellable car. It suits me to have a new car every 3 years because I have a fairly long commute.

Sunshinegirl82 · 03/05/2018 17:14

It really depends on what you want to achieve really. PCP's are unlikely to be the cheapest way to buy a car outright. Where they are useful is if you want a new at every 3/4 years for a fairly low monthly cost.

My car is on a PCP, it works for me as I prefer to have newish cars and I have no intention of ever owning a car outright (I'm not keen on buying an asset outright that will only ever depreciate, that's just me though, I appreciate others will feel differently!)

If you prefer to own the car at the end of it then a bank loan or similar might work out cheaper overall.

theunsure · 03/05/2018 17:15

Who on earth wants to buy the car at the end though? That's the point of it for me - you get to change the car!

I do at least 15,000 miles a year though so need something reliable, I don't want it once it is 3-4 years old. New cars are so cheap now, it's not worth it as the interest rates on used are so much higher usually (and I have had old bangers, nice cars and uber luxury cars and everything in between).

Leasing is far and away my favourite - no hassle, if it goes wrong its not my problem. My current lease deal is so cheap, they are practically paying me to have it!

howthelightgetsin · 03/05/2018 17:16

People who have 0%.. it’s not really 0% is it? That’s built in initially to the price of the car and therefore the depreciation you’re paying for which is a % of value, no?

howthelightgetsin · 03/05/2018 17:18

I’m quite conservative financially. A mortgage will be the only loan I consider really... but I do think that if the worst happens and we both lose our jobs, at least we have a car that is ours and no one can take off us. I know of some people who have furniture and cars on financing schemes and it adds up to a decent percentage of disposable income each month. And then what happens if your financial position changes?

Theknacktoflying · 03/05/2018 17:20

A car is not an asset - it is a cost/expense that just depreciates
A house is an asset -

BumpowderSneezeonAndSnot · 03/05/2018 17:22

As I said on your other thread

I did that with my last car realised I was effectively leasing and never buying so took out a far cheaper (for the same vehicle type) personal lease with servicing contract and saved over £100 a month.

Work out if you want a new vehicle every 3 years what will work best for you. If you plan on buying then look at finance

He11y · 03/05/2018 17:23

I think they come into their own if you plan on changing your car every 3 or 4 years.

As said, you don’t own a car on HP until the final payment is made so that isn’t any different.

The monthly payments are lower as you’re only paying off a third of the car with the loan so that’s something to weigh up too.

The downside comes if you want to buy the car after the three years and you don’t have the cash to do so. You can apply for a HP type loan to pay off the remaining balance at that point but that’s probably not the ideal solution.

Really you need to sit down and do some figure crunching for the different scenarios - that’s the only way to see for sure which will work out best for you.

Theknacktoflying · 03/05/2018 17:27

There is also the issue of gap insurance if you don’t own the car

19lottie82 · 03/05/2018 17:28

It really depends what you want in terms of a car.

Having a brand new car every 3 years is important to you. You like to have the latest model and not have to worry about repairs or unexpected costs....... yes PCP would be ideal for you, as long as you can afford the monthly payments.

Or

Having a new shiny car isn’t a big deal to you. You like to keep your costs down and are happy to set aside a small amount each month to budget for car repairs and / or a replacement when the time comes........ then PCP won’t be the best option for you.

BumpowderSneezeonAndSnot · 03/05/2018 17:28

You need gap insurance for a pcp car but not a lease.

PlausibleSuit · 03/05/2018 17:29

I don't look at PCP as a way of financing a purchase; I see it as renting a product.

All cars depreciate - new ones very heavily - and my personal attitude is that I don't like owning large, illiquid assets that only ever lose value. I do own another car outright, but it is much older and only worth about fifteen hundred quid anyway. That's our scruffy dog car. PCP relies on keeping the car pretty much pristine, as the finance company will charge for scratches and any damage that isn't normal wear and tear.

I've done PCP a couple of times (!) and I always give the car back as soon as I've passed the voluntary surrender point (usually 50% but can vary). Depending on the detail of the agreement, that point can often be sooner than the notional agreement length. Which can work to your advantage, depending on circumstances.

So, really, it depends on your attitude to renting cars vs owning them, and how likely you are to keep it in excellent condition throughout the agreement.

19lottie82 · 03/05/2018 17:29

And then what happens if your financial position changes?

I think that if you’re over halfway through the contract, you can hand the car back, penalty free and walk away. But if it’s less than half then there will be fees.

Original poster
Enigmasaurus · 03/05/2018 17:44

Some very useful insights here - thank you!

Just to help clarify a few points:

  • this would be the family car (and likely a 7 seater)
  • we also have a small hatchback which is due a change soon and we may think about PCP as an option for that car
  • we’re likely to buy second hand (though in the last few years)
  • we’d prefer to put in around £20,000 and I know most PCP deals wont accept deposits that high (any remainder I’d consider a low interest bank loan for)

What worries me a little is that with 3 kids, there will be some wear and tear which may affect whether we’d get what we’re expecting at the end of the 3 years.

Like pp, I’m also quite risk averse financially and have no experience with PCP. It all feels a bit alien!

OP posts: