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

[Lardlizard]

Yes or no

I don't think it's a world crisis but I do think it's a truly terrible model for car ownership which encourages the industry and consumers to make the worst possible environmental decisions, as well as bad personal financial decisions.

People like to know their running costs every month which is why PCP is so popular.

What it has done sadly is got a lot of people into ridiculous sized cars that project a "lifestyle", and as a result (because those cars suit diesel engines) has got people into 1.6 tdci SUV cars, belching out particulates as they do a run to the shops or school.

The worst part is that they fail to see that such cars actually suit long daily blasts up the motorway, and subsequently groan when their car gets a huge bill for DPF failure etc.

I personally have never bought on PCP and never will, but the preponderance of low salaried folk in Mercedes A Class/ BMW 1 Series / Audi A3 is a direct result of PCP, it's viewed as like a mobile phone contract.

Car ownership is in decline, I thought, especially for those in cities. I heard a very interesting programme about it. Car manufacturers are moving into car sharing schemes instead.

Cars are a depreciating asset, they never increase in value, and the older they are the more repairs are needed, and the more expensive those repairs become.

Like others on here, I want a guaranteed (4 year) spell of trouble free motoring because I don't want the hassle of maintaining an older vehicle. I have in the past, as we all have, when we're in our 20's and income is low but now my circumstances allow it. I'm not (as so unpleasantly put upthread) "spunking" my money on a lease, I've done the maths, and in real terms, and based on the amount of driving I do between work, family and social, a PCP works really for me.

If I fall ill, if I can't work, if if if, then I take that risk and keep some spare aside in case. I'm not saying that's possible for everyone. I've only done this since my finances have enables me to do so.

If someone goes into a PCP clueless as to what the financial implications might be, sorry, it's the school of Hard knocks, that's their fault. If they don't know the terms of the agreement and end up paying extra 000s due to going over the mileage, surely that's down to them not keeping an annual check of the amount of mileage they committed to when signing the PCP, which will have been an annual figure only they would know how to calculate and supplied to the car dealership.

All financial products in the U.K. are regulated by the FCA with much better, plain-language documents.

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.

Maybe you aren't looking in the right places. PCP vehicles invariably get sent to car auctions where they are bought up by dealerships for their forecourt, or in some cases they may be open to the public (mainly the former). There won't just be 1 "glut" from 3 year old cars, it will be a constant churn of vehicles, and the term may be 2, 3 or 4 years. So the effect isn't just one hit onto the market.

Sorry that was long!

why would you want to own a depreciating asset ?

with a new car you will more than likely have a manufacturers warranty and you will fix your costs

It doesnt suit everyone

Cars are a depreciating asset. If you want a car that is less than about 6 years old ( and for someone who isn't a mechanic and wants reliability this isn't unreasonable) then it makes financial sense to rent one via a lease, rather than buy.

If you are happy to run an old car and take the risk of it needing expensive repairs, that's fine but it isn't any more financially savvy than renting the car because it's luck of the draw whether you need to spend money or not.

Having said that some PCP deals are a con with a high apr and a big balloon payment. Better to go for a straightforward lease where you never own the car.

It's a,so worth bearing in mind there is some flexibility at the end of the lease term, depending on circumstances,

My previous PCP was due to end Dec 2018. That contract had been largely financed by a car allowance in my last job (which I left) and I wanted to reduce my monthly payments, so I contacted the finance company to see what they would do if I took a new PCP (which would be on a cheaper car).

They were willing to end the contract 7 months early, with no financial penalty, because they recognised I was handing back a good condition vehicle (no scratches or dents ) and was taking out a new PCP, so it was win-win.

It has saved me £100 per month, earlier than expected, and I got a similar model vehicle, and was able to move from diesel to petrol (better eco).

PCPs don’t work for me. I want a car from a reliable manufacturer that will keep going for 150k-200k miles, then I replace it, with a 2-3 year old vehicle with low mileage. I have a good local garage and keep my vehicles serviced properly.

150-200K mileage would probably be a diesel then. Petrol vehicles would not last that long, without needing significant expensive work, and highly likely to be very polluting.

Never used this type of finance but agree with you. I found when I was looking and this was years ago they didn't really well no they didn't say that at the end I would either have to repeat the process or loss all my money and the car, it was only a chance conversion which alerted me to the fact after three years I would have to trade it in and start paying all over again or be without a car, I asked directly this question the next few places and remember they way they managed to talk past the question and avoid it or in fact just lie.
So I would say people did get miss sold back then because they did deliberately avoid or lie.
Oh and the literature at the time also glossed over it by avoiding mentioning what If I want to keep the car.

What I would say is I do have friends who want a car every 3 years so maybe for them it is a better route but for someone like me without any interest in cars and who keeps them for about 7-10 years it isn't.

We both have cars on pcp, we don’t want to own a depreciating asset and we like having a new car every couple of years. It’s no different to renting a property instead of buying.

Why buy anything you cant really afford?
I hate the idea of debt, although I know some of its a necessary evil like your mortgage. I’d rather live in my own tiny four walls than risk it to buy a car or Holidays that would put it at risk.
I don’t see fancy car and go wow, I see Fancy car and think why waste all that money on something that is dead money

It’s my northern and Scottish upbringing that’s done it

I personally have never bought on PCP and never will, but the preponderance of low salaried folk in Mercedes A Class/ BMW 1 Series / Audi A3 is a direct result of PCP, it's viewed as like a mobile phone contract.

Absolutely goddamit, why should those low salaried workers get to drive comfortable stylish cars, they should know their place and stick with their beat up old Corsas and Fiestas.

The issue with mobile phones is, I think a much bigger ecological nightmare than cars. Mobile phone manufacturers deliberately encourage "built in redundancy", with non-universal charging cables and different shaped cases, so people have to buy all those new peripherals every time they upgrade, plus the encouragement to upgrade to the latest new sparkly toy in a box every 18 months.

I had my last phone for the past 5 years until the battery conked out and I couldn't source a new battery so was forced to buy a new phone, which hopefully will last at least 5-6 years. The interface is almost identical, so pretty much zero value-add and I can't even use my micro USB anymore, it's now USB-C.

That really has to stop!

Sorry a bit of a tangent but at least with a 3 year old car, it is resaleable and useable beyond the PCP.

Some people go into PCP on the assumption that having a finance company involved gives them an extra tier of protection if the vehicle has a fault. This is bullshit; I’ve been there and the company I was involved with did as little as possible to help - I ended up taking them to the financial ombudsman and winning.

I’d say that if you are going for a used vehicle then do your research about the marque and model and buy as simple a car as possible. Gadgets=problems on an old car.

I’ve been leasing for over 15 years, it works well for me. Many company car allowance payments come with restrictions of the age of car, I don’t want to have have a load of equity tied up into car that loses value and has to be replaced every three years, most car allowances cover lease costs easily.

"At the end of the period you hand back the car and own...nothing."
More fool you for doing it then. Save up and buy a cheap car instead.

You can hand the car back and owe nothing, but nobody does, if you paid the right price at the beginning, got a good price for your trade in and negotiated a good interest rate etc. you use the equity as the deposit on your next car, or you keep the car and refinance.

I

Yes ... a car is a basic necessity for my life.. so a big fat yes!

I’ve never paid any interest, every deal I’ve had has been 0%. It’s a complete no brainer for us.

People need to know what it entails. The last time I bought a car, the car sales man insisted on selling me one on PCP which I absolutely was not going have.. done my research prior... the conversation ended with him saying “at least you know what you are talking about the majority of people have no clue”

They dont like selling you a car for cash these days as they make more money off you doing on finance.

There's no point saving up to buy a car - they're dead money. Unless you are buying so cheap and old that you don't mind scrapping it if it develops a fault, owning a car is a gamble. Leasing one with a manufacturer warranty is a valid choice if you can service the lease payments.

colleague got pregnant with triplets a few months into a 3 year pcp of a golf.
cost them an extra 10k to get released/transferred to a more suitable car.