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 Post subject: Re: PCP Car Finance - A ticking time bomb
PostPosted: Mon Nov 12, 2018 5:17 pm 
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How did PCP work out in the end


https://www.boards.ie/vbulletin/showthr ... 2057829641

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The real damage is done by those millions who want to 'get by'. The ordinary men who just want to be left in peace. Those who don’t want their lives disturbed by anything bigger than themselves. Those with no sides and no causes. Those who won’t take measure of their own strength, for fear of antagonizing their own weakness. Those people who roll up their spirits into tiny little balls so as to be safe. Safe?! From what?
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 Post subject: Re: PCP Car Finance - A ticking time bomb
PostPosted: Mon Nov 12, 2018 6:25 pm 
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Dubhgeannain wrote:
Quote:
How did PCP work out in the end


https://www.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' ?


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 Post subject: Re: PCP Car Finance - A ticking time bomb
PostPosted: Mon Nov 12, 2018 10:31 pm 
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Real Estate Developer

Joined: Mar 17, 2008
Posts: 993
cyrusir wrote:
Luan wrote:
owenm wrote:
cyrusir wrote:
what exactly does everyone think is going to happen that there will be some massive issue?

worst that happens to the buyer is that they have no equity at the end, worse that happens to the garage is that they have set the GMFV too high and they take a small loss when selling it on,

what else can happen?


There won't be anyone to sell it on to, in a tightening credit cycle.

So? The garage or the finance company takes the hit.


exactly


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


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 Post subject: Re: PCP Car Finance - A ticking time bomb
PostPosted: Mon Nov 12, 2018 10:45 pm 
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Good luck to Volkswagen Bank getting a taxpayer bailout from Germany, if Paddy won't pony up for the audi.


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 Post subject: Re: PCP Car Finance - A ticking time bomb
PostPosted: Tue Nov 13, 2018 1:46 am 
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Posts: 2700
Dubhgeannain wrote:
Quote:
How did PCP work out in the end


https://www.boards.ie/vbulletin/showthr ... 2057829641


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.




Quote:
Was in VW this afternoon with my 161 vw passatt 1.6tdi comfortline with 80k kilometres on the clock. Trading against a 191 vw Tiguan highline with technology pack and R line exterior.

List Price of Tiguan €43,080 and a Part Exchange of €18,500 for my car
Settlement figure on my Passatt €12,750
Equity €5,750

New Deal

0% PCP
Deposit of 30% €13,250
GMFV €15,000
€410 monthly
Cash approx €7,500 needed




Quote:
Traded my 161 GTI-P against a 182 Tiguan DSG Highline R-Line with Tech Pack, Winter Pack, Heated Steering Wheel and Protection Pack.

Golf was 42k new April 2016, with 10k deposit and monthly payments of approx €500
Got 27.5k for the GTI, was 21,000 left on the settlement.
Tiguan for 42.5k
Put 2k towards deposit on Tiguan with a GFV of 15750 for payments of approx €506 a month which is nearly the exact same I had on the GTI.



Quote:
Audi have offered me a 191 A3 S-Line Saloon for a trade in plus €5k. Monthly repayments would be €300. APR 1.9% GMFV €14,500


Quote:
Got the following offer from VW,
Final Ballon Payment €12,000
Trade in Value = €17,500
Equity €5,500

On a 191 1.5TSi golf with no deposit gives me a monthly of €380. I'm currently €300 per month. If I put in €2,500 I can get the monthly down to €290.


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 :P
As long as the initial deposit and all following cash top ups for succeeding PCPs aren't borrowed from somewhere then all is ok.


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 Post subject: Re: PCP Car Finance - A ticking time bomb
PostPosted: Tue Nov 13, 2018 7:05 am 
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Of Systemic Importance

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Posts: 5380
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!

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 Post subject: Re: PCP Car Finance - A ticking time bomb
PostPosted: Tue Nov 13, 2018 8:32 am 
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Joined: Mar 30, 2016
Posts: 679
Eschatologist wrote:
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


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 Post subject: Re: PCP Car Finance - A ticking time bomb
PostPosted: Tue Nov 13, 2018 8:44 am 
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cyrusir wrote:
Eschatologist wrote:
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

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. :D

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 Post subject: Re: PCP Car Finance - A ticking time bomb
PostPosted: Tue Nov 13, 2018 12:02 pm 
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Posts: 371
Location: Middle Earth
Eschatologist wrote:
If something goes wrong it's most likely going to be in the first two years....


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.


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 Post subject: Re: PCP Car Finance - A ticking time bomb
PostPosted: Tue Nov 13, 2018 12:37 pm 
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Joined: Mar 30, 2016
Posts: 679
owenm wrote:
Eschatologist wrote:
If something goes wrong it's most likely going to be in the first two years....


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?


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 Post subject: Re: PCP Car Finance - A ticking time bomb
PostPosted: Tue Nov 13, 2018 1:55 pm 
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Joined: Dec 2, 2013
Posts: 2700
Eschatologist wrote:
cyrusir wrote:
Eschatologist wrote:
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

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. :D


Your problem is you're a socialist so you don't appreciate Western Capitalist Decadence :P

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 :P


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 Post subject: Re: PCP Car Finance - A ticking time bomb
PostPosted: Tue Nov 13, 2018 2:29 pm 
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Posts: 5380
GameBlame wrote:
Your problem is you're a socialist so you don't appreciate Western Capitalist Decadence :P

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.

GameBlame wrote:
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.

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.

GameBlame wrote:
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 :P

You have excellent taste.

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Tyrion Lannister


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 Post subject: Re: PCP Car Finance - A ticking time bomb
PostPosted: Tue Nov 13, 2018 6:39 pm 
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Old Time Landlord

Joined: Jan 31, 2007
Posts: 371
Location: Middle Earth
cyrusir wrote:
owenm wrote:
Eschatologist wrote:
If something goes wrong it's most likely going to be in the first two years....


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?


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.


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 Post subject: Re: PCP Car Finance - A ticking time bomb
PostPosted: Tue Nov 13, 2018 7:01 pm 
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Joined: Sep 13, 2012
Posts: 5380
owenm wrote:
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.

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"It's easy to confuse what is with what ought to be, especially when what is has worked out in your favour"
Tyrion Lannister


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