Jump to content

PCP why bad ?


mb
 Share

Recommended Posts

Sister is looking at a new car been offered 5.9% APR over 3 years on PCP which makes the payments OK (with deposit etc is borrowing 13k, paying back 18.5k at 230 a month) but leaves 6k "optional final payment".

I have warned her she will need to find (borrow) 6k in 3 years but is this the only real drawback to PCP - she will do below the max miles understand hard to get out of early if needed to ?

If car is 18k then 1/3 left after 3 years should be safe depreciation wise so the 6k she will be borrowing will be less than car is worth ?

I know PCP is considered the wrong choice but is it really so bad here (apart from the 3 year commitment) ?

Link to comment
Share on other sites

Have just thought does the APR look low (5.9%) because the loan is over 3 years but actually is over 5 (if pays back the "bubble" at same rate per month) ?

PS - Isn't it odd how 12x base rate now looks like "cheap" borrowing !

Link to comment
Share on other sites

Thanks for looking at this - the more I look at this the less I understand it !

There were some discounts etc. taking the price down a bit so hopefully this makes more sense now ! We have -

OTR Price = 15,905.00

Deposit = £3,184.25

Amount of Credit = £12,720.75

36 monthly Payments of £229.99 = 8279.64

GFV = £6,124.25

So to buy the car costs 3184.25 + 8279.64 + 6124.25 = 17588.14 so cost of credit = 1683.14 + whatever it costs to fund the GFV payment.

I think it is a bit deceptive as the payments realistically will be over 5 years rather than the 3 they suggest or if she wants to change after 3 years her deposit will only be the difference between what the car is actually worth & the GFV as she will still owe the GFV. So I guess is about OK as long as she thinks of it as a 5 year loan rather than 3 years ?

Cheapest loan from the small furry creatures over 5 years is 7.8% APR - 255 a month so I guess the benefit of PCP is she is only making payments on 12720-6124 = 6596 hence the lower payements & she just has to refinance the 6k at 3 years at whatever rate is in force at the time ?

Link to comment
Share on other sites

That makes more sense now!

The rate is right and is also good so if it suits her, then she should go for it!

The problem with pcp type deals is usually that the rate is much higher than she has been quoted (typically double) so at an effective flat rate of 2.6 ish % that doesn't apply in this case+++

Link to comment
Share on other sites

If they are offering 5.9% then she could just pay it back at £244 a month over 60 months and own it.

You can still got out after 3 years, or after a year if you want, just means you don't have the hassle of having to refinance it or find £6100 cash at the end of the 3rd year.

Link to comment
Share on other sites

Thanks for all the advice, it is Mazda finance they are offering 3.9 over 2 years with no minimum deposit, 5.9 over 3 & 0 over 2 or 3 years with 50% deposit which I have urged her to consider as would have to borrow 5,000 extra up front but payments are about the same (234) although need to also pay off the 5,000 so a bit more but works out less in the end - as always it is what can afford that counts though...

Link to comment
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

 Share

×
×
  • Create New...