Rant about PCP’s and how Dangerous they can be

[Adamki83]

First of all it’s been a while for me on here been under a lot of stress lately with work and house projects.
Recently me and my partner intended on financing a new car on pcp we currently have one on pcp.
Other half loves minis so we settled for a brand new not even built Mini Cooper S sport with the optional comfort pack. Positive equity in our car of £1,100 and deposit from me of £200 so total of £1,300 deposit.
our deal was 48 x £319 per month at a interest rate of 3.9% with the ballon payment being about £9,500. Signed for a credit search left the dealership all happy and smiling. Skip to Tuesday and I start thinking £319 a month is alot but then thought nah it’s alot of fun for us asked for the spec sheet again just to see what comes with the car.
I was shocked to discover apple car play is not standard nor is sat nav! Part of an “option pack” which adds £1k onto the price so added that on then added auto glym into it aswell before we knew it the payments were on £340 per month and by Wednesday evening I dawned on me that this is too much money to have going out for a car the next day I withdrew my application and walked away from the deal I felt terrible because I wasted 2 people’s time but looking back it was the best decision of my life.

couple things that really concerned me:
1: credit search application, this was far too easy my partner had it in her name and all they asked was for address and account number and sort code no income was asked and just saying her wage is significantly less than mine.

2: a lot of features are not standard, sat nav wasn’t even standard on a car that was costing £24,000 this is just unacceptable and for it to be only available in a £1,000 pack is just ridiculous.

3: Restrictions, I feel very restricted on pcp and the fact that this car will loose £6k as soon as it drives away makes me feel very ill (I know all new cars do this) but having an asset that will basically be permanently depreciating heavily for the first 3 years is just another horrible feeling.

also this isn’t to offend people on pcp as contradicting as it may seem my partner is on a pcp with Suzuki but on 0% with no deposit and it’s only £167 and it’s also a top of the range car with apple car play auto climate keyless entry etc.
What I want to know is people’s experiences with pcp in general weather you’ve had a terrible experience or weather it works out for you really well because I see the appeal behind it.
just feels like you can take out a loan of £12k over 4 years at 3% then own an asset that still could be worth at least 8 or 9k and the end of the 4 years!
sorry if this bores anyone but it’ll be interesting to see some people’s thoughts!

 

[Blobcat]

I’ve never been able to make a PCP work for me, always too expensive and too restrictive.

When I was getting cars for work I’d go for between 3 months and 2 years old, run it for 4 years at least, and in my calculations factored that it would be worth £0 at trade in.
They were always worth significantly more at sale time so that made a great deposit for the next one and a smaller personal loan for the remainder.

 

[T5R+]

Really do not understand why they are dangerous.

Why is it any different from any other "borrowed" money eg credit card or mortgage or loan.

Some people are snobby about others with PCP/PCH/Lease/etc/etc but it is upto to individuals how they decide to spend their disposable income.

If people did not "lease" how am I supposed to pick up a 2-3 year old gem.

 

[mioba]

I dont think there is anything out of the blue or concerning at all in anything you said. Infact on some of the points you should have done your homework.

Like alot of finance (whatever the name) its a sharks game, too easy to get things on credit plundering people with debt. Look at yoof today. Paypacket is gone before its in the bank.

One thing, I am glad you realised the package was not for you and you pulled out, as opposed to financial commitment which would have lumbered you with stress and unhappiness (the PCP and not the partner).

Keep smiling !

 

[sl500amgsport]

Think you summed it up quite well and woke up in time to the reality, good on you for walking away and thinking it through, most don't!

As for the drive away depreciation, makes sense to buy a demonstrator as the major initial depreciation would have taken place and if you are lucky all the extras will be on as dealers like to show the car at it's best.

If your credit is good a low interest rate may be available from your bank on a 60 month loan, payments will be similar as the car will cost less and after 5 years instead of 4, you will own the car outright with no debt and an asset you actually own.

If you have a flexible mortgage with permitted over payments that can also be a good option as interest rates are low and you can choose your overpayment to set your own flexible repayment.


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[sl500amgsport]

Really do not understand why they are dangerous.

Why is it any different from any other "borrowed" money eg credit card or mortgage or loan.

Some people are snobby about others with PCP/PCH/Lease/etc/etc but it is upto to individuals how they decide to spend their disposable income.

If people did not "lease" how am I supposed to pick up a 2-3 year old gem.

With cash savings, bank finance, offset mortgage the options are huge.....

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[Taffy7hfa]

The problem is depreciation. Buy at 4 years old with 20-30k on the clock and keep it for at least 10 years.

 

[Nicklas_Hidegard]

I’ve never been able to make a PCP work for me, always too expensive and too restrictive.

When I was getting cars for work I’d go for between 3 months and 2 years old, run it for 4 years at least, and in my calculations factored that it would be worth £0 at trade in.
They were always worth significantly more at sale time so that made a great deposit for the next one and a smaller personal loan for the remainder.

Same experience here. I'd never go for pcp, if you need credit go straightforward Hp. You can still trade before term is finished.

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[ssheikh93]

Credit search: I assume only the finance company who would be fca regulated would be able to carry out credit checks for relevant purposes.

 

[Adamki83]

Really do not understand why they are dangerous.

Why is it any different from any other "borrowed" money eg credit card or mortgage or loan.

Some people are snobby about others with PCP/PCH/Lease/etc/etc but it is upto to individuals how they decide to spend their disposable income.

If people did not "lease" how am I supposed to pick up a 2-3 year old gem.

The reason why I think they can be dangerous is the lack of credit check so my partner flew through a credit search for a £340 per month car bearing in mind she pays part of the mortgage plus any other things on top and she earns less than £10 per hour on a full time job. A bank wouldn’t ever accept her for that amount of credit!

 

[Adamki83]

It’s really good to hear a mixed debate because like I said I don’t necessarily disagree with pcp (can work for a lot of people) it’s way to easy to sign up to a car you can’t afford and then for things to start spiralling out of control.

 

[Adamki83]

Think you summed it up quite well and woke up in time to the reality, good on you for walking away and thinking it through, most don't!

As for the drive away depreciation, makes sense to buy a demonstrator as the major initial depreciation would have taken place and if you are lucky all the extras will be on as dealers like to show the car at it's best.

If your credit is good a low interest rate may be available from your bank on a 60 month loan, payments will be similar as the car will cost less and after 5 years instead of 4, you will own the car outright with no debt and an asset you actually own.

If you have a flexible mortgage with permitted over payments that can also be a good option as interest rates are low and you can choose your overpayment to set your own flexible repayment.


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I’m not trying to single out people on finance it’s just one of those things that it’s seems to easy!
we checke and I’m more than eligible to take out a large loan under my name which combined with some savings will actually creat a decent amount of money for a car.
and her commute is only 2 miles per day so she can literally have her pick of any car she wanted. The loan worked out waaay cheaper and you obviously own the assets at the end could well still depreciate but no where near as much

 

[Rory]

The problem here is that a new MINI with decent spec is £25K!

If it was £12.5K PCP would be cheap.

 

[Binnedit]

I do work at a dealership for another brand.

Dealer's love PCP as it keeps the customer on the renewal cycle when the balloon payment is due. It also provides incoming, good used vehicle stock. It makes new cars accessible for people. The majority of new cars we sell are on PCP's. Credit is easily accessible through the Franchise linked credit provider, if you are employed, mostly accepted through algorithm decisions.

If you had to pay (not that you could due to money laundering restrictions) pound notes for the cash price of the car - most probably would walk away. New cars are now hugely expensive. Having said that, most are now packed with so much tech, all that R&D and components come at a cost.

PCP's work for some - not for me. We purchased Mrs. D's new Fiesta on HP, because she had never had a brand new car.

Personally, I drive a 15 year old W211, which cost me £4k, 2 years ago, and now effectively owes me nothing. I dont need or want the latest & greatest. Quite enjoy not being able to answer calls when I'm in the car!

Folks just need to do their homework, and understand whats in the agreement.

 

[Craiglxviii]

Further to that:

it costs £300m in engineering resource to develop a new car, and £100m to “facelift” a car. Throw in another £150m to tool up for the new car.

The PCP model has done more for refreshing the used vehicle fleet than literally anything else. Would it work for me? Tricky, I do considerable mileage for work and put bluntly I want to do it in maximal comfort and safety. I was looking at a 535 BMW until I found the 221; that would’ve cost me c.£400/mth and restricted me to 15k miles per annum.

 

[mioba]

The reason why I think they can be dangerous is the lack of credit check so my partner flew through a credit search for a £340 per month car bearing in mind she pays part of the mortgage plus any other things on top and she earns less than £10 per hour on a full time job. A bank wouldn’t ever accept her for that amount of credit!I

I think its dangerous that you and partner even considered this knowing what her salary is. The choice is there, you fulfill the criteria, you make the choice.
What did the agreement say if one of you cant pay. It goes to the other I assume (ie yourself). These companies don't care who earns what, they only care that you meet the criteria to pay it back.

 

[Adamki83]

I think its dangerous that you and partner even considered this knowing what her salary is. The choice is there, you fulfill the criteria, you make the choice.
What did the agreement say if one of you cant pay. It goes to the other I assume (ie yourself). These companies don't care who earns what, they only care that you meet the criteria to pay it back.

I don’t think you understand. We were going to share the payments between us. Otherwise there was no way I would let her do it solely on her own. You’re welcome to make you’re own judgments about the decision I made at the time but ultimately I feel as if I made the correct decision at the end by backing out. Still though it should not be that easy, there’s a reason why bank loans are a lot harder to secure. This is just my opinion though and i obviously get what you mean in the fact that it was probably a bad idea we all make silly decisions once in a while!

 

[Adamki83]

Further to that:

it costs £300m in engineering resource to develop a new car, and £100m to “facelift” a car. Throw in another £150m to tool up for the new car.

The PCP model has done more for refreshing the used vehicle fleet than literally anything else. Would it work for me? Tricky, I do considerable mileage for work and put bluntly I want to do it in maximal comfort and safety. I was looking at a 535 BMW until I found the 221; that would’ve cost me c.£400/mth and restricted me to 15k miles per annum.

I completely get how much it costs to develop new cars (we do development parts for some MOD vehicles) and it can be extremely expensive.
it’s just one of those things I never said i disagree with pcp however I think sometimes it could end up being a financial strain without people realising.
I adore my W211 that’s fine 141k miles and hasn’t had any mechanical problems in over a year now.

 

[Adamki83]

The problem here is that a new MINI with decent spec is £25K!

If it was £12.5K PCP would be cheap.

Our swift was a £13,500 pcp on 0% so this makes it real cheap and it’s top of the range.

 

[Nicklas_Hidegard]

PCP is a glorified way of renting a car. If you went to hertz/ Avis (or anyone else renting cars out) and said you would like to rent a car over 5 years they wouldn't ask for earnings etc. Because of the balloon payment at the end you never own the car unless you pay the balloon payment. If you've looked after the car over the term you can return it at the end of the term, pay nothing and be without a car. If there's damage etc you end up with a payment at the end and still not own the car. That balloon payment is roughly what the car is worth, trade price.

Even on HP you need a deposit and the loan is secured against the car. You own the car at the end and as long as you've paid the HP for 2 years you've got equity in the car. That way if you can't pay and they repossess they won't loose any money on it.

Bank loans are unsecured and therefore much harder the get. If you can't pay the bank will have to through courts to reclaim the money which is costly and take time. They want to make sure you can pay the loan before they give it to you.

It's all business in the end and it's up to each individual person to take responsibility for their finances.