#### hawk20

##### MB Enthusiast

Oh dear. Rory, best will in the world , you have got this all upside down, inside out and in a real bugger's muddle. PCP's may seem complicated but they need not be if you grasp the basic facts.You certainly did on the CLC deal - the £3K deposit means the real residual is more like 40% than the 60% you trumpted.

A high GFV % is easily achievable as the CLC deal demonstrates, because you've effectively already paid a chunj of the depreciation in advance!! How mad is that?

1. The deposit you pay does not affect the residual.

2. The residual on a PCP is the GFV (the guaranteed final value) -at least!

3. The residual MAY be higher if at the end of the 3 years (or whatever period you choose) if the dealer offers you a higher value in part exchange. But it cannot be less than the GFV.

4. What you pay for on a PCP is depreciation that will occur over 3 years (up to a maximum of whatever you pay for the car minus the GFV). AND

5. You also pay interest on capital borrowed at the APR rate they must show you.

So in effect you are buying over 3 years, say, half the car. If it loses half its value in 3 years, you pay for that -and you pay interest on the loan. You do not pay the whole cost of the car as you would on HP.

6. Where I think you are confused is that what you pay is not just the payments but also the deposit. The easiest way to allow for this is to say that the annual cost to you of buying the car is the sum of one third of the deposit (on a 3 year deal) plus the monthly payments. And the total cost to you over 3 years is the 36 payments plus the deposit (plus of course any arrangement fees etc).

That is it. No smoke. No mirrors. What you pay is what they tell you- a deposit and the monthly payments. What you get is what they tell you - a new car for three years for the payments shown. At the end you can buy the car for the GFV, or refinance it, or part ex against a new one, or walk away with nothing more to pay.

It does exactly what it says on the tin. If it didn't the FSA, 'Which' magazine and all the finance sections in quality papers would tell you so.

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