PCP Car Finance - A ticking time bomb


The tightening credit cycle (if it happens to any great extent) mostly affects new cars. There is always a cash market for nearly-new (3-5 y/o) cars because cars wear out and these have a good combination of reliability and cheapness. The values might take a bit of a hit, but they will shift.

It’ll be interesting to see the extent to which Brexit affects the UK-Ireland motor trade.

In the last crash a lot of dealers were left with debt servicing problems from overinvestment in premises combined with zero new car sales. A few PCP cars won’t be anything like as bad as that.

In any case, who takes the risk on a PCP deal? Is it the dealer, the distributor or the manufacturer?

edit: I dimly remember used prices going up after the last crash due to lack of supply. Did I imagine that?


I remember that too, but it was a lagging effect by a couple of years IIRC. In 2012-14 a second hand 2010 reg car was hard to get and so more expensive relatively.




boards.ie/vbulletin/showthr … 2057829641


PCP is actually a very clever way of getting around the ‘problem’ of a good product.
Probably because of competition and/or safety issues, it’s difficult to plan obsolescence into such a product.
Can see men in suits around a boardroom pondering ‘how do you get people to sell a product after 3 years when it’s good for another 17’ ?


And the garages owe money to the banks, and the finance companies are the banks. And who takes the hit when the banks take a hit? - the taxpayer does. After all it was only the banks that were taking chances with mortgages in the last financial charade :nin


Good luck to Volkswagen Bank getting a taxpayer bailout from Germany, if Paddy won’t pony up for the audi.


Well that thread was an interesting way to waste an evening, but I understand PCP now. Lessons from the thread seem to be

  • Don’t go near BMWs. The dealers don’t give any or much equity at the back end
  • PCP suits brands like VW that have strong residuals and are hungry to do deals
  • Shop around at the beginning AND at the end. Although you don’t own the car until the balloon payment, you can trade it in to any dealer who gives you best price
  • it’s all about “cost to change”. Typically the first PCP they’re putting in a 30% deposit but at the back end their equity (trade in price actually offered minus balloon payment) is only 15% of the value. There’s always cash required for the second PCP. For a good PCP brand like VW the cash can be low €2.5k to stay in a similar value car to what you’re in. Sometimes it’s more cash than they want. The first example doesn’t understand that the 7.5k extra cash for the second PCP is really because he’s moving from a Passat that he has done big miles in to a better spec Tiguan.

To answer this thread title - I don’t see a ticking time bomb. Unless of course Paddy is borrowing for his “equity”, which Paddy has a bad habit of doing before :stuck_out_tongue:
As long as the initial deposit and all following cash top ups for succeeding PCPs aren’t borrowed from somewhere then all is ok.


Based on those examples it seems like PCP is an excellent way for people to blow their savings on new car depreciation.

And they go back for more!


But that’s true of buying a new car in any format it’s not pcp specific

Look at it as renting a car that’s the simplest way, what’s it costing you a month to rent your brand new merc vw or whatever and what will it cost to rent a new one.

Keep the deposit low and that way there is no big shock come trade in time


Sure, at the end of the day there is no reliable way for large numbers of people to buy new cars without losing money, but I think the complexity of PCP agreements is sufficient that retail lust can overcome reality.

Regardless of how you do it, trading in new cars every two years like the example from boards seems like setting fire to money. I like new cars (most of my cars have been purchased new), but I tend to keep them for a decade and haven’t used credit since the first one. People justify trade ins by saying that new cars are more reliable, but that’s not my experience. If something goes wrong it’s most likely going to be in the first two years.

Anyway, no time bombs to see here. :smiley:


The ‘bathtub curve’ in action.

Agree - no timebomb but my biggest takeaway is not to ever ever consider a PCP, even with someone else’s money.


what is your reasoning for that?


Your problem is you’re a socialist so you don’t appreciate Western Capitalist Decadence :stuck_out_tongue:

You like new cars, and you know about cars, but the average age of your car during your ownership is 5 years old. For a PCP buyer it’s 18 months. In Ireland, like it or not people judge themselves and other on ‘how well they’re doing in life’ by the car they’re driving. Old car = I’m a failure or you’re a failure. People who drive old cars are the cranks. And I say that as the owner of a succession of Panzer Luxobarges, the annual motor tax of which equates over 3 years to a €6k top-up on a PCP.

I think you buy new cars because you like control. You want to know it was serviced properly and not abused. Psychologically, in car terms, you have Madonna-Whore complex. I have a worse problem. I have a Grab-a-granny fetish :stuck_out_tongue:


I do have an instinctive anti-consumption reaction, it’s not so much decadence as people measuring human worth by wealth, which is obviously absurd to anyone who has spent any time around first-generation international rich people who are for the most part boring, rude and selfish with bratty children. I prefer relatively poor people because they tend to be kinder, funnier and more interesting.

I like new cars because they have cool new features, like power assisted brakes and electric windows.

I come from a culture where rich people (or at least the interesting, polite and generous ones) tend to drive old shitboxes, or old classics, and so I tend to judge people that think nice new car = successful person (regarding themselves or others) as grasping aspiration proles.

You have excellent taste.


It empowers borrowing on a rapidly depreciating asset.
if you fall outside the glidepath of reasonable usage or have an accident it’s going to cost you.
Breaks in gainful employment mean the car could be taken repossessed in short order - inhibiting the ability to get back into gainful employment
Any repossession like this could exclude you from future PCP’s - I’m guessing.

My usual approach is to buy outright or with ~50% finance, usually a 3-5 year old car (in the optimal span of the bathtub curve), My current car had a full service history when I bought it and I could see a replaced starter motor, clutch & 2 calipers - all in the first 2.5 years. I’ve had it for nearly 3 and had nothing like this to fix.


Actually, I think depreciation rate is fairly constant at 20% for maybe the first ten years.

So the smart move is to buy a cheaper car, not necessarily an older car. Or just hold it long enough that it gets cheap.


As Arcade Fire sang…
“But they don’t know where and they don’t know when
It’s coming
Oh, when, but it’s coming
Keep the car running”

irishtimes.com/business/fin … -1.3751716


Smells of advertorial for cartell.ie or SIMI to me. Do SIMI own cartell. The irony (cartel) is delicious. I’d say they are praying for a hard Brexit - no more UK car imports.


That is assuming that a hard Brexit blocks imports, it may not, it may even not impose import tariffs. Then the cars will be even cheaper!