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 Post subject: PCP car finance?
Posted: Fri Feb 21, 2014 12:46 am
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Just wondering if anyone knows about this and is it a good or bad idea? I recognise that it is essentially a form of hire purchase but is also an affordable way to move to a new car and change it regularly. I'd never have considered HP but this plan got me thinking.... Any experiences?

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 Post subject: Re: PCP car finance?
Posted: Fri Feb 21, 2014 1:59 pm
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Has nobody ever used this? We are going to trade in our car soon and this was put to us as an option instead of using all our savings. You pay a deposit ( we would opt for 30%) and then you make repayments over 2 or 3 years at which point you can pay off in a balloon payment, refinance the balance ( both not particularly appealing) or trade in for anew car for the same or very similar repayment value. Given that a new car depreciates the minute you drive it out the garage door, I am wondering is it more sensible to keep a new car this way instead of watching it depreciate considerably in a regular purchase agreement. The other option is to get a brand new car by trading in and using our savings - and just saving in the meantime to replace it in 3 years or so.... Opinions valued...

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 Post subject: Re: PCP car finance?
Posted: Fri Feb 21, 2014 2:10 pm
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I bought my first new car this way as I had no credit history in Ireland. The apr at the time was low but not sure how expensive it is now. Can you compare how much you will be paying back than say with a loan from CU or bank?

I had very little dealings with my company other than when I missed a payment and they were over the top about it. Called me the day after the missed date and were threatening to take the car back. I sold the car before my period was up and they reluctantly let me pay the remainder off. Check that you can do this before signing anything.


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 Post subject: Re: PCP car finance?
Posted: Fri Feb 21, 2014 2:28 pm
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http://www.boards.ie/vbulletin/showthre ... 2057152012

This is a bit longwinded but there is a good description of PCP and other finance options, just happened to be reading this last night.


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 Post subject: Re: PCP car finance?
Posted: Fri Feb 21, 2014 2:30 pm
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Thanks Tinky. The APR is 4.9 iirc . The disadvantage is obviously you don't "own" the car unless you pay the balloon or refinance or hand it back after 3 years having paid 2/3 of the price. The advantage is permanently having a car that is under warranty. It seems to be a better rate than a loan. We could buy using savings but the car would depreciate more than we were spending. I'm feeling very unsure about ruling it out....agapanthus thanks for that link. Off to read it now.

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 Post subject: Re: PCP car finance?
Posted: Fri Feb 21, 2014 2:31 pm
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Is that through Skoda or VW by any chance? Their interest rates are lower than credit union at the moment iirc.

But even if you go with a loan or HP you don't technically own the car until its paid off anyway. Sounds good to me! Wonder is there a thread on askaboutmoney on it.

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 Post subject: Re: PCP car finance?
Posted: Fri Feb 21, 2014 2:34 pm
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DH is considering going this route too so I'll pass that link to him as well. We don't have the savings to consider a replacement car otherwise but since he's putting over 1000km a week on a 10 year old car, it's needed.

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 Post subject: Re: PCP car finance?
Posted: Fri Feb 21, 2014 2:38 pm
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There is a mention on that link of a maximum annual mileage so watch for that if he is doing that sort of mileage.


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 Post subject: Re: PCP car finance?
Posted: Fri Feb 21, 2014 2:42 pm
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It's with VW. The rate is excellent. I am beginning to think I don't want to own a car - that a scheme like this means I have a nice car permanently ....

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 Post subject: Re: PCP car finance?
Posted: Fri Feb 21, 2014 3:01 pm
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Do you have to come up with a huge deposit again in three years though? Our car is fairly old so need to look into getting a new one in the near future, this sounds like a good option but from reading on boards.ie, not sure if it's the same link as above, it seemed you would need to save a hell of a lot to put towards the next car.


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 Post subject: Re: PCP car finance?
Posted: Fri Feb 21, 2014 3:06 pm
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What would happen if you damage it or crash it?


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 Post subject: Re: PCP car finance?
Posted: Fri Feb 21, 2014 3:18 pm
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As far as I recall goofy it was tough you'd still have to keep paying even if the car was a write off and your insurance didn't cover it.


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 Post subject: Re: PCP car finance?
Posted: Fri Feb 21, 2014 3:26 pm
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goofy wrote:
What would happen if you damage it or crash it?

Isn't that what comprehensive insurance is for? There are also terms and conditions regarding the mileage. There is no penalty for up to 20,000 k per year but for every 5000k over the car loses an additional €600 - sounds reasonable though doesn't it? It's a bad option if there is any chance you can't make repayments as they can just take the car back- in out case we have the money saved but by getting finance it means we get a new car in a few years for less than the depreciation loss iykwim.

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 Post subject: Re: PCP car finance?
Posted: Wed Feb 26, 2014 4:27 pm
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We are seriously considering this too.. It looks like a really affordable way to have a new car that you can change every 3 years if you want to. The mileage thing seems to be the main caveat.

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 Post subject: Re: PCP car finance?
Posted: Wed Feb 26, 2014 4:37 pm
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hypnomom wrote:
We are seriously considering this too.. It looks like a really affordable way to have a new car that you can change every 3 years if you want to. The mileage thing seems to be the main caveat.

I clarified and the mileage doesn't affect the value unless you surrender the car but not if you trade in. We are using this plan to finance a new car. It means we don't have to use up our savings and the interest rate is better than everywhere else at the moment.

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 Post subject: Re: PCP car finance?
Posted: Wed Feb 26, 2014 4:41 pm
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I suppose too Allgirlz you have the option of using your savings in the future for the car if needs be.

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 Post subject: Re: PCP car finance?
Posted: Wed Feb 26, 2014 4:49 pm
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Was just reading up shout it there. Sounds good. But do you have to pay the large sum at the end? Is that only if you are keeping the car?
If you are carrying on and getting another new car, would you need a lump deposit again also?

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 Post subject: Re: PCP car finance?
Posted: Wed Feb 26, 2014 6:37 pm
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You are also stuck with the same car brand again if I understand it correctly if you are trading it in, that mightn't matter but then again it might.

Another recent discussion here on askaboutmoney

http://www.askaboutmoney.com/showthread.php?t=183491


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 Post subject: Re: PCP car finance?
Posted: Wed Feb 26, 2014 7:04 pm
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You pay a balloon payment and the car is yours at the end. The cost is still cheaper than any car loan. You can hand the keys back at the end of 2/3 years and owe nothing. You can get the equity back from the guaranteed value at the end to put forward as a deposit for another new car and continue a similar arrangement for a brand new car. You can also trade in for any other car as many dealers would gladly take the car off your hands and pay off the balance because the guaranteed value is so good. We were told this by another dealer. Obvious
Y the original dealer doesn't tell you this but at any point before the loan period is up you can get a different brand with a different dealer .

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 Post subject: Re: PCP car finance?
Posted: Wed Feb 26, 2014 7:21 pm
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What happens though if you do damage the car? not enough to claim on your insurance but enough to give it a ding. I am thinking of my car park in work, people scrape off my car all the time. That's what would worry me. Sounds like a great deal though hate the idea of using up savings when the interest rate is so good.

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