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Finance question

Tim Richardson

Well-known member
Joined
30 Jan 2007
Messages
649
Hi guys,

I am looking to purchase a Range Rover Evoque, used and approved with a budget of circa 30K.

I have always bought my cars outright in the past but friends keep telling me that PCP is the way forward as it protects the value of the car better.

I know that I would want to upgrade the car in 3 years time, I do on average 12K miles per year and have a Golf TDI to trade in for the purchase.

Just wondering what peoples thoughts were on this, is there really a benefit to PCP?

Cheers,
Tim
 
The benefit simply is that you don't have to lay out the whole cost of the car up front.

The cost is the interest, plus any additional fees.

The danger is that, depending on the terms, the car can end up in 'negative equity' if you need to sell it for some reason before the contract term ends meaning a lump sum payment to pay back the outstanding capital. Some arrangements have a guaranteed final value of the car where the finance company will buy the car back off you for a fixed amount at the end of the term which at least removes that uncertainty.

A friend gets cars on lease arrangements- likes it because he pays a fixed monthly amount which covers everything bar fuel and Insurance, gives the car back at the end of the term and gets a nice shiny new one!
 
Tim Richardson said:
as it protects the value of the car better.

:floor:

The only way a GFV will be above market value is in the event of a nuclear war.

They don't want swarms of people handing back the keys at the end of the term and lumping them with a loss.

Of course they are happy to have your car back for 20% under market value (if you were that insane).

I would imagine WeBuyAnyCar could outbid most GFV!
 
You only get a GFV on a new car not a used one
What you do with used car is a balloon loan, whereby as your not paying off the whole capital ., there is still a balance outstanding at the end , which you calculate to be less than the cars future value.

You should speak to jamie at Performance Car Finance a member where who'll be able to explain it in detail
 
Hi,

Initially it's really about what you want to do with your cash, could you do something better with it than lumping into a depreciating asset?

PCP is where you have a guaranteed future value (GFV) and mileage restrictions. You can technically get a GFV on a used car but the level they are set at are conservative and the car should in theory be worth more than that at the end of the term which makes you question what is the value in having a GFV. The exception to that is generally on a brand new car where sometimes the manufacturer offers a GFV much higher than the car is expected to be worth - that's like discounting the car but not on day 1 but at the end of the term.

For used cars we typically do a simple agreement with a final balloon which isn't a GFV but set at a reasonable level which should afford you some equity at the back end, at a highly competitive rate AND you have some legal protection built in against negative equity which is your right to do a Voluntary Termination - once you have paid more than half the total amount payable you can hand the keys in and walk away from the deal with no mileage restrictions. You also have the VT right on a PCP but with the same mileage restrictions as you signed up to, pro-rata to the VT point.

Someone mentioned leasing, that is becoming increasingly popular on brand new cars, fleet style models i.e. 4 door saloons, diesel engines where the manufacturers heavily support the vehicle for this product only. Often you can drive a new car for 2 years for far less than the car would depreciate if you bought it, and that includes the interest as well.

Feel free to get in touch if you want to discuss options.

Jamie
 
Thanks for the responses guys and Jamie for the detailed explanation.
 

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