AIBU to get this car on PCP?

[Yummyy]

It costs £17000… we have a deposit of around £5000 and pcp payments would be around £200 per month for 4 years. Then £5000 to pay if we want to keep it. We are very likely to be in a better financial position in 4 years time (due to not having to pay childcare anymore and potential pay rises) and will probably just go for a different car.

What are the pros and cons of PCP?

Its debt and its not smart debt. By a second hand car outright.

I love my PCP car.

Second hand car prices are insane at the moment so I decided to buy new.
It made zero sense to buy a new car outright as the garages make money off the finance so incentive the pcp deals.
The cost of the car is the same if I bought it outright or through the pcp deal that I have but I didn’t have to pay upfront and if I decide to trade it in then I won’t pay the whole lot.
Or I can pay off the rest (4K) and keep the car.

I could have afforded to pay outright but it just made way more sense not to.

I would say that if you can I would keep your balloon payment to one side so that if your circumstances change and you need to buy the car then you can.

@Valeriane

Its debt and its not smart debt. By a second hand car outright.

Prices of second hand cars are insane at the moment. Many cars

Cons:

You don’t own the car

You generally can’t hand the car back if finances change unless you’ve paid back more than half the value of the total - so £9800 (as total is £19600 based on £5k deposit, £5k balance and £200 x 48), check the contract on that though.

You’re generally limited on mileage with most PCP

If you want to hand the car back then you will be penalised for damages beyond fair wear and tear.

Pros: errrrr they can be a cheap way of using a new car if you don’t want to own one.

I wouldn’t do it again, look at leasing instead maybe.

I used to be against PCP but after several huge garage bills I’m not so sure now. As long as you can afford it and are getting a sensible car (people on normal salaries with £500 a month range rovers is another matter) then I would consider it. It is worry free motoring and if you don’t mind paying a bit over the odds, it might be worth it if you need a reliable car with no surprises. Shop around though and get the best deal.

I love my PCP car.

Yes you don’t own the car, but I don’t care about that. You don’t own the car if you’ve got a loan. The loan company does.

I’ve got 3 years left and will probably trade in for a different car before that

I love my PCP car. Had a brand new car on PCP previously and this time we went for a 3 year old car but a lot bigger/fancier. We had no issues handing back the first car, even though there were a few scratches on the front below the lights and we actually got £1K equity to use towards our current one.

Pros: if new you won't have to pay for MOT, or only 1 MOT if you have it for more than 3 years.

Much less chance of any costly repairs/issues.

Nice/new car which (should) comfortably fit into your outgoings.

Hand it back and choose a different new car at the end.

Don't have to worry about selling the car and dealing with the loss of value (that's the dealerships issue)

Cons: limited on mileage (you can set up the plan so it works for your typical usage though)

Always paying for your car, unlike a one off payment to buy outright. There's no end in sight really.

Have to be a bit more careful to avoid any damages/accidents inside and outside of the car so it remains in good condition.

We don't regret going through PCP in any way, I'd say go for it, as long as you can comfortably meet the payments.

Yikes…I have a PCP car and advocate it on the whole but your numbers don’t seem good value- you must be getting a luxury vehicle!?

We converted to PCP after both our second hand cars clapped out within a fortnight of each other- we had just spent the money to get them through the MOT too. Having PCP car over the last few years has been cheaper then maintaining used! No MOT’s, no repairs except tires, nominal price for servicing at local garage, no worries about breaking down in the middle of nowhere again!

It’s low hassle, we upgraded to a bigger car as expecting a baby with no issues. The old car had been used for transporting garden stuff and wasn’t tip top but they didn’t even remark on it.

Our first car though was £500 deposit and £100 a month for a 1L petrol city car.
We have swapped with no additional deposit and now pay £200 a month for a 1.2L battery assist hybrid.
It’s the £5k deposit that I think is poor value!

The car I bought was 14k new
They had a three year old model on the forecourt for 12k which was probably slightly overpriced but shopping around 11k seemed average.

I’ll probably buy my car at the end for the balloon payment of 4K.

That means I’ve driven a brand new car for 3 years at £200 a month and then in 3 years I’ll have the option to buy a 3 year old model way way below market value.

I was going to do PCP but there are 6 month wait for a car and I needed one now. Nearly new outrageous, so I got an older low mileage one for 12000.
However I think the key thing to remember is that you need to accurately predict your mileage and stick to it. Keep up with the servicing as per schedule at the dealer. Make sure you have the correct GAP insurance. Be skeptical about "equity" built up in the vehicle.

I lease mine and love it. I pay £25 a month on top for a complete service package that includes tyres, servicing and breakdown. All I do is put fuel in and insure it. I change every 3 years, and it's fab. I've had my VW suv for 6 months and I'm chuffed to bits with it.

MN hates any form of this, however

Before you make your decision, find out what the costs would be if you had to terminate the contract early.

If having a car with the latest plate when you can’t really afford it is ‘your thing’, OP, go for it.

Otherwise buy outright and sensibly, secondhand. That can include a car loan to push your finances further, as long as you research to get the best deal. You will own the car at the end, not be faced with a huge balloon payment or handing it back and having naff-all to show for it.

If you buy second hand through a dealership you can pick up good, guaranteed and warrantied cars, that are still relatively new, that may have been pool/company cars and are much cheaper. They can often offer you finance too.

PCPs make more sense now due to the crazy secondhand prices and low interest rates. Without seeing all the details it is hard to judge how good this one is but as long as the interest rates are low it could be a good choice. Overall the financing cost is is £304 per month once you include the deposit- which is a good way to judge it

It's horses for courses I don't like PCP but I run a 14 year old car worth less than your deposit even at today's expensive rates. The depreciation is nothing nearly and I will trade it in at 200 k maybe and repeat. If I wanted and could afford a new car each 3 years then a PCP might be the way to go. I certainly doubt it's cheaper long term as the finance companies have to make money.

I've always bought new cars on 0% finance deals but last time i changed it there was none available so I looked into PCP but I couldn't get the figures to work for me, plus the uncertainty around the mileage restrictions felt too risky for me - my work can change location and my family are 200+ miles away so if anything happened with either of those it could drastically increase my annual mileage.
I bought mine with the old car as trade in, top up from savings and then took out a new credit card with 0% interest on new transactions for 12 months (with a plan to pay it off!) and a small car loan from Admiral which had very low interest rates. I also bought a pre-reg "ex demo" model which was technically second hand, thus saving 10% on the list price and it only had 13miles on the clock!

It's debt on an item that will depreciate in value. If I can't afford it in cash, then I can't afford it. No such thing as good debt

I've had both PCP and bought outright, and you have to be really careful to get the maximum value from it. The APRs can be ludicrous on PCP, mine was 12% APR but we didn't have a couple of grand sitting around at the time to buy a second hand one. At the end of the contract you literally own nothing from the money you have already spent, unless you have also saved for the bubble payment in that amount of time. As PPs have mentioned, any damage comes out of your pocket to get it to good as new, so to get a good deal this needs to be done before the hardback at a garage you choose, not by the car company. If you are stuck at home like in lockdown or on furlough, you're paying every month for something you can't use.

However, if you're using it very very often for activities where you're completely reliant on a car, it can be very reassuring to have one within warranty which is unlikely to break down or need a lot of garage time for repairs. I'd never buy a brand new car because the loss in value happens so quickly, but nearly-new can get some good deals, especially if you can wait a year or two.

Ignore that the servicing and MOT is sometimes included, as MOT charge is minimal and set by the government and servicing on a non-luxury car is rarely above £300 per year. Try and work out how much the overall cost is over the 3 years and get some comparison quotes, eg from carlow or autotrader.

Do the maths, add up the TOTAL figures, and see if it works for you.

We bought a 1 year car outright. Looked into all the finance deals, PCP etc, as everyone was swearing you get better deals, but when you add up the total amount paid over however many years it didn't work out cheaper.

Everyone always says the finance companies subsidise the purchase price as they make money off the finance... but who is paying the finance costs? The customer!

You can increase the annual mileage - check what your contract is and how many miles you need - increase BEFORE you sign your contract.

Dd gave her car back a few months early, no problems, no hassle - had to pay the remainder months balance but she knew that. Figures all added up, car collected without problems.

Often with leasing you can beat the depreciation and don’t have to worry about it for the 3 years you have it. Secondhand cars always seem to mysteriously develop an issue the minute you decide you want to sell it. Usually that’s the reason why someone is selling in the first place! Then you have to deal with weeks of tire kickers and low ball offers until you give up and sell for less than you wanted. Unless you buy a car to run into the ground it doesn’t make sense to own these days.

It's not only debt - at that rate its about 7-8% interest.

We always said we would never get a car on PCP and would never buy a brand new car.
We've just done both.

Our car was £18,000 new. Very similar figures to what you have provided, OP. An almost 3yr old car would have cost us £16,000. On top of the second hand cost would be new tyres, MOT costs etc so actually worked out more expensive than buying brand new. We were lucky enough to be able to find the exact car coming into the country a couple of weeks after we enquired. If we'd have had to wait the minimum 4mths advised, we might have gone second hand.

What we'd rather have done was get a loan, but the rates were ridiculous. Of course the day we signed the PCP agreement we got the nod for a cheaper loan than PCP, but it was too late by then.

I'd never do it again, it wasn't my choice, it was my ex who got it but I took over the finance. I can hand it back in December without any penalties or I can settle the finance, I'm selling it and settling and will come out with around 3k according to various valuations. I've barely used it though, it's an 19 plate and only has 6400 miles on the clock, despite paying for 10k annually.

We have just got a PCP car 7 months ago after previously using HP for my previous cars, it was silly to keep using HP as I never keep a car longer than the length of the HP do PCP worked out best for us. We have it on a low interest deal, set over the annual mileage I do and I have the security of knowing it is covered for warranty etc for the next year or so.