To think car payments and pcp’s will be the next crisis to hit the U.K. and the world

[Lardlizard]

Yes or no

It’s part of the overall shift from ownership to rentier status for all but the wealthiest in society- houses, cars, music, movies, tv, furniture, electricals.

I doubt it will cause the next crisis, the feckless debt junkies and ten bob millionaires living beyond their means will just get bailed out and encouraged to do it all again.

Just look how well ''they'' ''fixed'' the housing market following the last financial crisis caused by irresponsible lending and borrowing.

The frustrating thing about the whole emergence of the PCP/Lease market is that, in theory, there should by now be a glut of cheap 3 year old cars flooding the market that cash buyers can snap up for a bargain price, yet that hasn't happened.

As someone has already mentioned the price of all cars new and used has actually increased in real terms in recent years.

I suspect the manufacturers are deliberately hoarding the exPCP cars away to prevent the market being flooded (Bruntingthorpe airfield?)

In fact I wouldn't even be surprised if they're actually scrapping perfectly good 3 year old cars just to keep prices artificially inflated.

Pcp does work if you do it properly.

Majority of cars do not hold value. Therefore by buying outright you are sinking money into a black hole (bit like renting imo) you will rarely be able to sell on a car for the same money or more than what you paid.

We got a ford focus on pcp, paid a tiny deposit by way of trading in my old banger. Knowing full well after 3 years before the balloon payment was due we would trade it in. However we had the security of knowing that many major mechanical failings( not wear and tear) would be down to the finance company to sort.

This worked well because when we traded it in, it turned out ford were recalling our focus to replace engines for free as they were failing. If we owned the car it would have been down to us to sort and possibly be without a car.

We traded the car in against a more expensive car which fitted our needs, we could afford the monthly payments (we figured this out what our max affordability would be)

It didn't matter that the car has scratches because effectively we used the car to pay the balloon payment and then deposit on the new car.

If you plan it right and are not stupid then pcp can and does work.

We now have a cycle of reliable cars which we only need to be responsible for general wear and tear on. In my mind it's like have a mortgage on a car. I would be less worried if my car was taken away than my house.

Live within your means, do research and have a plan and it works.

We’re about to take out a PCP. Another baby on the way means we need a significantly larger car but we are also hoping to buy a house in the next couple of years so want to keep our monthly payments down for the affordability calculations. DH works in a bonus heavy industry where half his salary is bonus so we would be able to afford the final payment if we decided to keep it but for now it’s just about getting something big enough that we can all fit in that doesn’t hold the risk of Sadiq Khan moving to goalposts on ULEZ and our car being made worthless overnight!

No - they have been around for years, we use PCP and leasing as a way to cheaply try out nice cars which don't need repair or much maintenance (i.e. allows us to buy new). The cars we had cost us less than an equivalent purchase-out-right car.

LENDING is the issue, and while people keep borrowing on credit cards and finance and increasing their debts, this will be an issue. I am aware PCP is just another component of lending but isn't the issue all on it's own.

I'm seeing more adverts for equity release again which hasn't really been a thing since the 90's, now there is a massive problem if ever there was one! Along with any form of payday loan.

It may not be the next crisis to hit the country but I'm pretty sure it's a crisis that will hit my FIL. He had a perfectly serviceable car that he owned outright that was fine for his approx 3k a year. He is nearly 82 so no commute. Then some idiot told him about PCP. Now he has just taken out a 3 year contract that is reliant in money he gets for caring for severely disabled MIL - it's an allowance from SS to enable him to manage care himself but a friend if a friend will do it for £10 cash in hand so that leaves him the money for the car. He has several health issues and, although still legal, his driving is terrifying. The chances of this friend not wanting to do it anymore, MIL dying or needing to go in a home or him having to give up driving during in the next 18 months, let alone 3, years must be around 90%. He has the state pension and about £2k private pension so God only knows how he passed credit checks. We pointed out early termination penalties but he just insists they won't happen.

I agree. They’ll give the cars to anyone regardless if they can afford it. I know 2 people on minimum wage driving BMWs. They like the status. They are just about affording it thanks to top ups

Yep I agree it’s an artificial bubble waiting to burst

Also cringe at 18 year olds living at home with parents that saddle theme selves with this debt they straightaway get used to driving a brand new car, how are they supposed to save the deposit for a house when 300 a month or whatever a month they’ve saddled themselves with

Yet it is now starting to be seen as the norm

Let alone the effects to the planet
And they fact car prices have risen for everyone due to this artificial bubble

And people on here swearing at others that disagree well I always think you’ve lost the argument when you resort to that

PCP’s are a bit like interest only mortgages, aren’t they? They work a bit differently in so much as the final lump sum is less than the starting value of the car and you’ll have paid the value in interest in 5 years rather than perhaps 10. I’d day therefore they’re a choice. But not a choice I’d want to take.

I agree and doing it so you don’t have a car that breaks down is a ridiculous reason.Always had old cars and they never break down, have started every morning.If you saved the extortionate amount you’re paying every month you could buy a really decent second hand car or have oodles for garage bills. If you need finance surely you’d be better off getting a loan. You could buy a newish car in warranty, own it at the end or sell if circumstances changed.

The system is bonkers.Who wants a car you’re limited on mileage or have to sweat over every mark?

@sall74. I always buy 3 year old cars with low mileage from a main dealer. Often ex motability cars but I think my most recent one was just a standard ex pcp one. There’s certainly plenty of 3 year old cars to choose from.

Never again .
I had to pay £2k to hand my car back at the end of the agreement because I had gone over the agreed mileage .
I took the PCP quite naively and didn’t fully understand the terms etc as the salesman convinced me that I would have equity in the car - but this turned out to be negative equity .

Is pcp the same as leasing a car?

What happens if you have a PCP and you lose your job?
Or if you can't afford the repayments anymore?
Can you simply return it mid contract with no consequences?

PCPs have been around for ages, at least 25 years. They are not a new form of financing and until you make the balloon payment the car is not yours. Same with leasing, you never own the vehicle.

Stop paying, they take it back. Easy.

@Fidgety31

Never again .
I had to pay £2k to hand my car back at the end of the agreement because I had gone over the agreed mileage .

^That was your own fault.

I use pcp. I'm still on first car but I like it because we don't have a lot saved to buy outright, and I do a lot of motorway driving so am glad to have a reliable new car and any problems needing to be fixed can be sorted under warranty. It isn't a fancy car it's a very basic model and costs me under £200 per month. I will probably be swapping for a new one when the 4 years are up!

If you’ve paid back enough. If you haven’t you hand the car back and have a big bill to pay.

Google helps

If you can't afford it, things aren't as simple

www.hpi.co.uk/content/advice-and-tips/i-cant-afford-my-pcp-payments-can-i-cancel-my-contract/

Depends on how long you've had a car and how much you've paid.

And there's a difference between a PCP and PCH if you can't afford repayments

www.moneyadviceservice.org.uk/en/articles/leasing-a-car

Are people talking about PCP with 0% interest or specifically the ones with interest?

I hope so

We had a car we always intended to keep and when IH went to pay the balance was told there was a £400 'admin' fee. We had not been told about this at all

Oh I should say we had intended on buying the car upfront but took the interest free option, (and yes we know the cost is in there anyway)

We were happy with the payments and final payment, the costs added up ok for us

PCP have indeed been around for yonks - I worked for a finance company (in their debt collection department!) 15 years ago and there were loads around then. I think leasing has grown a lot more over the period.

We use PCP or leases for our cars; DH is very in to cars and likes to change every few years, I'm good at hunting out deals so we've always had decent cars at monthly payments which are comfortable for us, often paying less than the depreciation on the car. Also never got shafted when handing back.

They're a perfectly valid way of running a vehicle if you understand them and aren't overstretching yourself.