What's the pros and cons of pcp? How does it work?

Is it cheaper than finance? Surely it's more expensive than buying the car outright straight away?

I was in an audi dealership and the fella told me 85pc of the cars they sell are through pcp.

I'm a bit of a ludite and prefer to own my belongings (and how I've been brought up) but of course that's not possible all the time.

Cheers

 

Try and get hold of the April issue of 'Which' magazine as it rates the most common methods, viz. cash, bank loan, PCP, hire purchase (HP) and leasing.

 

PCP is so called because it's addictive....the new car hit for low £s....

 

You never own, unless you pay. A 30k car is 30k and you can't get it for less. Pcp makes it seem less but it's not yours. if you pcp you'll pay less but you're renting it in reality.

This all works out brilliantly for the dealer and manuf. When the term ends and you need to stump the dosh, guess what happens.... You are caught up gettin agnother from the same dealer. Unless you hand it back then the amount given is just a lease. You paid to use not own.

This has to be considered alongside depreciation.

The absolute best way into a car is decide what you want then buy used, via cash. Let someone else take the big hit. Privately is the best place. I have bought 100s of ks of private cars. It's the one place you minimise loss if you are sharp.

 

I've just leased for the first time ever with the GTD, and also only ever did buy cash. I considered pcp however leasing was cheaper monthly. We wouldn't fall into the trap of paying a big balloon at the end. Plus we can lease again at the end of our term, or get a small loan if we decide to go private again.

 

I did look into one. It was something like £25K car, £399 per month for 3 years and then you'd pay £10K or hand it back. So if you needed a loan to cover the £10K it'd probably cost you about the same for 2 years. So really all it is is 5 year finance with an opt out after 3.

The other thing was that was limited to a certain mileage, which I don't think I'd want.

 

Imagine a car worth £36,000 and you buy on hire purchase over 3 years. Ignoring interest rates you pay £1000 per month and at the end of that time you outright own a car worth for the sake of an example £18,000

With a pcp the dealer estimates the value of that car as £18,000 after 3 years and guarantees you that value assuming the car is in good condition and within an agreed mileage. That way you then only pay the depreciation so £500 per month in this case. But at the end of it you don't own the car

 

I'd say its only worth considering if you want new, as carper points out

I think my M cost someone £53k in late 2008

In 2012 i paid £30k

Now its worth £18k

If you think you can beat the dealer in terms of forecasting that depreciation you might get a deal i guess without the hassle of selling on. If you're flexible look for a good deal on a random car

 

I sometimes struggle to get my head around it. I think "I should lease" and then I change my mind.

There is the psychology/culture around owning versus renting and I think I can deal with that. For example, I long harboured an ambition to buy a holiday home but I lost that ambition based on renting somewhere far better than I could own with none of the responsibilities of ownership.

But that's for two to four weeks at a time whereas a lease car is for two or three years, coupled with the fact that I don't want the kind of car that £300 per month or even £500 a month buys. I'm not trying to upset anyone but I have no desire to rent, let alone own, a tarted up hatchback or 'executive saloon'. New Golf R or 4 year old Gran Turismo - let me think. In fact, new Golf R or ten year old Jag - yep, still the Jag. I've a pretty decent net worth and I'm planning on spending most of it, so it's not about being tight or only saying that because it's all I can afford.

I like top of the range cars like the M cars or their marque equivalents. They are a lot more than £500 a month and I'd be locked in. So, in a way like carper, I'd rather buy used and buy and sell on a whim. Since owning the latest Audi diesel or 1-series is never going to mean anything to me, I'll stick to buying a £50K car when it's £5K to £10K. I can only describe buying a new £50K car as 'unnecessary'.

Even when I see something my partner might be happy with, I think we will be stuck with it for years, she doesn't want or need brand new, I don't want the hassle of watching mileage or worrying about damage, so stuff £200 a month for three years, let's just buy 2yo for £10K and have done with it.

Maybe it's a lifestage thing as well. Perhaps 20 years ago I would have been attracted by the idea of getting into a car I couldn't afford to buy outright. I think I probably would.

 

To expand on that

Imagine second car you want to buy is 36k. You now own an 18k asset in the first car so you trade that in on a car you lease hire for 36 months leaving you 18k over 3 years. Now you pay £500 per month. At 36 months you own an 18k asset in the second car that in a car you leade hire for 36 months leaving you 18k over 3 years. Now you pay £500 per month.........repeat ad infinitum. ........that is where the dealers win.

on exactly the same example you have started at £500 per month initial payments meaning you win on that first year but every other year it all works the same.

add in above that the interest rates that the bank of ford/vauxhall/toyota etc now charges you because you are tied to them. Now maybe you don't lose but they definately win.

Now look at peoples behavior on top of that. Toyota aygo earns no profit to sell but it gets you tied to toyota and used to paying an amount and dealers making servicing profits........3 years later it costs little more to have a yaris and you still remain tied to them and servicing through them....3 years later auris........3 years later avensis.......3 years later rav 4.......etc

The system starts to break down when you decide to keep a car for 10 years or buy second hand (although pcp schemes can apply to second hand cars) as others have illustrated