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 Post subject: Re: PCP Car Finance - A ticking time bomb
PostPosted: Mon Nov 12, 2018 1:32 pm 
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Old Time Landlord

Joined: Jan 31, 2007
Posts: 378
Location: Middle Earth
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.


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 Post subject: Re: PCP Car Finance - A ticking time bomb
PostPosted: Mon Nov 12, 2018 1:34 pm 
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Under CAB Investigation

Joined: Apr 9, 2014
Posts: 2126
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.


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 Post subject: Re: PCP Car Finance - A ticking time bomb
PostPosted: Mon Nov 12, 2018 1:39 pm 
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Of Systemic Importance

Joined: Sep 13, 2012
Posts: 5469
owenm wrote:
There won't be anyone to sell it on to, in a tightening credit cycle.

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?

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 Post subject: Re: PCP Car Finance - A ticking time bomb
PostPosted: Mon Nov 12, 2018 4:34 pm 
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Old Time Landlord

Joined: Jan 31, 2007
Posts: 378
Location: Middle Earth
Eschatologist wrote:

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.


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 Post subject: Re: PCP Car Finance - A ticking time bomb
PostPosted: Mon Nov 12, 2018 5:02 pm 
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Property Magnate

Joined: Mar 30, 2016
Posts: 694
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


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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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Too Big to Fail
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Joined: Aug 21, 2009
Posts: 4532
Location: Mesopotatia
Quote:
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?
Sophie Scholl


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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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Joined: Oct 29, 2007
Posts: 11786
Location: Multiverse
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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Planning Tribunal Attendee

Joined: Mar 17, 2008
Posts: 1004
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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Holiday Home Owner

Joined: Sep 9, 2017
Posts: 336
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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Under CAB Investigation

Joined: Dec 2, 2013
Posts: 2737
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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