L33_WRX

A mate of mine has been talking about this Personnel Contract Purchase.

You make payments for 3 years and then its up too you to decide if you want to pay off the car or give back or upgrade the car to something new.

Anyone had any experience of this? He's unsure if he should sign up to it or not

Any help / advice appreciated

Cheers

L33_WRX

also - does this work on second hand cars too?

HOWY

Yes ive been doing it for years most dealers will offer PCP's including EU importers car warehouses. You have 3 options return the car at end of period pay nothing as long as you haven't exceeded agreed mileage, buy another and hope the agreed GFV amount leaves you with some equity or pay the agreed GFV and keep the car. Basically you are just paying for the value of the car minus its residual value. I find it allows me to get a new car without laying out large sums of money needed to buy one outright.

L33_WRX

interesting - what car did you buy out of interest? a scoob??

L33_WRX

ps what's GFV?

HOWY

Yes I have an 05 EU wrx £16K GFV £7600 £299 pm over 3yrs and have had lots of Peugeots on PCP's
the GFV is the guaranteed future value of the car when it is due for return usually 3 years this basically means I paid a relatively small deposit to get a brand new car and pay monthly payments that are significantly lower than if I was doing a normal hire purchase agreement.

THe good think about these schemes are you can have a new car for the price of a second hand one

Varboy

My wife has a PCP on her car.

A q for you Howy. Were you stung by the dealer for minor scratches to the alloys, bodywork etc?

Sclarke

PCP pros are lower monthly payment and low deposit = newer car

PCP cons are you pay interest on the monthly payment AND the GFV for the term of the PCP. PCPs have contractual tie-ins for mileage and condition which tend to have fairly high penalties should you choose to return the vehicle with any damage or mileage over the agreed amount. The other big disadvantage is you are forced to do 'something' at the end of the PCP, this is why dealers like them so much because you are forced into revisiting them sooner than you may want to!

Horses for courses and I know plenty of people who get on with them fine.

L33_WRX

Cheers everyone

Turbo2

I've used this system for my everyday (new) work car for nigh on 6 years. I got a VW Passat TDi 130bhp in 2002 and upgraded this for the new model 140bhp car 3 years later in 2005. The good news was that I had covered far less mileage than I had estimated, so the VW dealer gave me a couple of grand "cash-back" to reflect this when I ordered the second car. As for the older car's condition, he just gave it a 30 second look-over and was happy. The same mileage situation has arisen with the new car, so come decision day this summer I have 3 choices: (a) take the trade-in cash and order a new VW on a similar deal, (b) use this "extra" as a downpayment to reduce the new VW cost, or (c) pay off the remaining GVF and flog the car privately at the higher market price for a low mileage car and then put this money towards any new car.

Of course if anything I have lost out financially, because I have been paying higher monthly payments based on estimated higher mileage all along. This shows the weakness of the system: how do you honestly know how many miles you will cover in 3 years? I relocated 6 months after the second agreement started, meaning that most of my long round-trip business journeys were the best part of 200 miles shorter. That's a big difference over 2.5 years. I suppose it may be possible to renegotiate mid-term, but no-one at VW has ever suggested that to me and I'm too lazy to ask!

HOWY

Had no problems with most unfortunately some bu**er vandalised my last one so when i traded it in for the WRX I wasn't left with the residual I wanted to act as the deposit for the WRX. Also in the past the peugeot dealers were keen to get the business so they used to give you 2 monthly payments back so you could use this towards your next PCP purchase deposit which helped too.

I shall be waiting to see what PCP's I can get on a new EU STi high spec cos there is no way I can afford to buy one, they haven't worked out depreciation values yet I gather.

billythekid

The main thing to do is look at the total cost for the deal, including all interest and all fees. Ignore the "flat rate" and "base rate" the dealers quote you, just get the APR and the final price after 3 years once all done.

For example, BMW, Audi and Merc often charge upwards of 11% APR on their PCPs, you may be able to find a bank loan on the net for about half that which although the monthly payments might be a little more you will still own the car at the end.

You may also want to consider how much the car is going to depreciate, we bought an X3 just over 2 years ago. The final payment is £14,000. Its currently worth about that, at best. So in another 12 months its going to be worth less than the final payment, which means its time to hand the keys back to them then!!

HOWY

Yep good point Interest rates are rather high at present so hopefully they will come down again soon!