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How to Buy a Gas Guzzler

But your not borrowing that £7.5k, as at the end of there 3 years you don't fully own the car. That money never switches hands unless you want to buy the car outright at the end of the agreement.

PCP is a way of you putting less "equity" into the car, as you only pay its depreciation, not its fully price. At trade in time with PCP you have nothing, and have to raise a deposit for a car yourself, as you have no (or in some cases where the car is worth more than the GMFV) very little equity in the car.

Thats why the true cost of PCP vs HP isn't always clear, as if you put in a sizable cash deposit with a PCP deal, you have to save that up again to put the same amount into a car in 3 years time. So you have PCP repayment + cash sum to save /month vs 1 HP payment. In my limited experience the 1 HP payment is a cheaper option/month.

View it as a lease where you pay for the amount the car depreciates whilst its in your possession. If you still want the car to keep after the term, you have to pay the full GMFV, and this of course can be financed.

If you delete the first paragraph of this I agree.

In the other thread I gave a link to earlier, I show how more it costs to own the car outright via PCP that via an HP deal. It is surprisingly little.

BUT you need to check that the APR is competitive with AA, Direct LIne, Alliance and Leicester etc as the MB one really is. And the price is right, with discount. And the GFV is good. All three are needed to make a good deal.
 
I'm sorry but this is not correct. Many of your other points have been correct but not this one. See my answer to Scumbag above. You pay interest on all the money you borrow.

It is cheaper than HP because you are only buying half the car (if the GFV is 50% of new price). With HP you pay enough to buy all the car over three years.

http://www2.mercedes-benz.co.uk/con.../offers_portfolio/e-class_offers_q3_2008.html

I stand corrected as I am reffering to an MB example. I won't re-edit my flawed post as the correction you provide more clearly illustrates what is actually happening. The rest of your post I note and we agree on the rest. Because you repay interest on the GMFV and the depreciation element its doubly important to ensure you get a good rate of interest!

You pay interest on capital on the amount of credit, i.e. on both the GMFV and the sum you repay (i.e. the depreciation element) but only repay the principle on the difference between the OTR price and GMFV (i.e. the depreciation element)

You have the choice of repaying the GMFV upfront at the end of the agreement, handing the car back with no further obligation or PXing the car if the car is worth more than the GMFV (in other words you still have equity left in the car)

If you don't repay the GMFV then you never fully own the car.
 
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anybody got a PCP calculator that can work out something along the lines of the figures i am using?

It would be interesting to see what the total figures are if my example was followed up.

I still have not got the problem I think I have with PCP's. Mind you, it doesnt appear to be for the want of trying, nor of information being supplied.
 
so then you have paid the interest on the £7.5k using my example under a PCP but don't see it, as its still in the car, and you haven't paid any payments to write this off, (as an interest only mortgage), but under a HP or bank loan, you would have paid a part to all of it and therefore would have paid out the £7,5k and have a car to boot. One that maybe worth £8500, or £5000


So £6500 you pay interest and capital. £7500 you pay interest only. pcp. and then you have to fund the £7500 or refinance to keep the car, or part ex the car to have a car, or give it back and start looking for a new mode of transport!

HP, you pay £14000 interest and capital and have the car subject to no defaults etc

Cash you pay £15000, and have the car.


Now if you part ex, under any of the options above, in 2 cases you will have a car worth part ex of £7500, and under PCP you will have a car worth nothing as part ex! using my figures that is as an example.

Getting there. But if you read the first posting on my ealier thread you will see that the cost of PCP is much lower than HP -as it should be. You own less of the car, so you pay less.

It has two big advantages. You do not take the risk on depreciation. You do not have the fuss of selling a car at the end of the three years.

It has a third one too. You pay much less for the next three years than you would on an HP deal. For some that is a bonus.
 
anybody got a PCP calculator that can work out something along the lines of the figures i am using?

It would be interesting to see what the total figures are if my example was followed up.

I still have not got the problem I think I have with PCP's. Mind you, it doesnt appear to be for the want of trying, nor of information being supplied.
It is all done for you in the thread I linked to earlier.
 
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It has two big advantages. You do not take the risk on depreciation. You do not have the fuss of selling a car at the end of the three years.

Yes and the added bonus is you can negotiate a high GMFV as a hedge against depreciation, *and as an incentive come trade in the $tealler may well inflate the value of your car to give you some equity for the next PCP deal (*if you lucky)

It has a third one too. You pay much less for the next three years than you would on an HP deal. For some that is a bonus.

Debatable. You have to raise a fresh cash deposit for the next PCP deal so really its 1xHP repayment vs 1x lower PCP payment & a regular contribution to a savings scheme to get this cash deposit ready for the next PCP.

If there is a cash deposit of £8k to be saved up over 3 years, thats an extra c. £100/month. Is the HP repayment greater by this amount or less than this amount/month. If its less then the monthly cost of HP may very well be cheaper.
 
So this is what I get, trying to keep it understandable for me.

If I give you £15k for a car, and it depreciates, I have spent £15k and have a car worth whatever its worth at the point in time I come to sell.

where as, under HP/PCP, i give you £15k (£1k of mine and £14k of someone elses) however, I am paying for that £14k at a set interest rate, and don't own the car until a certain point in the years to come. Offsetting the money i kept in the bank earning interest am I right in thinking this is the more costly of the choices?

I am sure the argument is negated by the fact that not everyone has the money in the first place, so then its an argument over which is cheaper, and it seems to me looking at what has been said before now, that HP is cheaper over all, but PCP is cheaper per month! And paying cash appears to be the best bet.
 
So this is what I get, trying to keep it understandable for me.

If I give you £15k for a car, and it depreciates, I have spent £15k and have a car worth whatever its worth at the point in time I come to sell.

Yes

where as, under HP/PCP, i give you £15k (£1k of mine and £14k of someone elses) however, I am paying for that £14k at a set interest rate, and don't own the car until a certain point in the years to come. Offsetting the money i kept in the bank earning interest am I right in thinking this is the more costly of the choices?

Debateable re PCP vs HP cheapness. Remember the interest you pay out on a loan is probably higher than the one the bank gives you on deposit, thats how the western economy works. Borrowing for a car will usually be more costly unless the dealer gives huge incentives to do the PCP. A few months back this was the case with the GL class.

I am sure the argument is negated by the fact that not everyone has the money in the first place, so then its an argument over which is cheaper, and it seems to me looking at what has been said before now, that HP is cheaper over all, but PCP is cheaper per month! And paying cash appears to be the best bet.

You said it, I am guilty as charged of buying something I didn't have the money for in the first place.
 
right, thanks for that.

I shall invest in a home I think. they don't go down in price do they?



D'oh!:D
 
So this is what I get, trying to keep it understandable for me.

If I give you £15k for a car, and it depreciates, I have spent £15k and have a car worth whatever its worth at the point in time I come to sell.

where as, under HP/PCP, i give you £15k (£1k of mine and £14k of someone elses) however, I am paying for that £14k at a set interest rate, and don't own the car until a certain point in the years to come. Offsetting the money i kept in the bank earning interest am I right in thinking this is the more costly of the choices?

I am sure the argument is negated by the fact that not everyone has the money in the first place, so then its an argument over which is cheaper, and it seems to me looking at what has been said before now, that HP is cheaper over all, but PCP is cheaper per month! And paying cash appears to be the best bet.
Cling on. The light at the end of the tunnel is near at hand. Have run your calcs for you.

Buy a £15k car. For simplicity put down £3k deposit. Interest rate (as MB are offering) 4.6% APR. Brief digression: - the rates they are offering are so low you can earn more in the Abbey as a saver than you pay MB to borrow. Or pay off some mortgage and save even more.

So £15k car, £3k deposit. £180 admin fee and £90 option to purchase fee. The APR calculation correctly makes these part of the cost of borrowing.

If you do a PCP the payments will be £154.55p per month or £1,854 per year. Add on a third of the deposit per year and the total cost is £2,854 per year for three years to have this brand new car and at the end you can walk away nothing to pay.

BTW total interest is £1,064 and total payments including interest are £5,564. Add on the £3k deposit. You pay £8,500 to own the car for three years.

Now do HP AT THE SAME INTEREST RATE (brief digression,. You will find nobody who will give you HP at the amazing rates MB are currently offering on PCP's on some models.)

The HP payments would be £352.18p per month or £4,225 per year. Plus the one third of the deposit for each year and the annual cost of HP is £5255.82p and you own the car after 3 years.

BTW the total interest is less (as you pay off more capital) at £677. But the total payments are more at £15,677.
 
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P.S. If you have a mortgage the after tax interest is now probably around 7%. Pays to pay off some of that and do a PCP at 4.6% rather than pay cash for the car.

Or do a PCP and invest the money. Tesco pay 6.25% on saving. So do many ISAs. Lots of others paying good rates just now.

I did PCPs becuase I think we are going to see huge changes in car design over the next few oears, and changes in legislation and taxation, and maybe huge changes in fuel prices. I have guaranteed depreciation and lots of peace of mind with new cars, fully guaranteed and paid for at a very low APR. It is not for everyone but it does have some attractions.

And when the new model A or B or E has come out in a couple of years time I shall be free to jump with no car to sell.
 
hang on.

A, Cash, Car £15k....paid £15k.....car worth market value.

b, HP
Car £15000- £3000 deposit AND £352.18 X 36 =£12678.48 +£3000 = £15678.48 and car worth market value.

c, pcp
Car £15000.- £3000 deposit +£180+£90 =£3270 and £154.66x36 = (£5567.80+£3270) £8833.80. And no car at the end.

Now assuming you used my figures and the car was worth £7500.

In choice a, I have a car worth £7500.

In option b i have a car worth £7500 and its cost me £678.48p for the privilige

In option c I have added the £7500 to the cost so I can keep the car and its total costs are £16333.80, or I give them the car, worth £7500 and I am left with nothing for a cost of £8833.80

Is this right?
 
hang on.

A, Cash, Car £15k....paid £15k.....car worth market value.

b, HP
Car £15000- £3000 deposit AND £352.18 X 36 =£12678.48 +£3000 = £15678.48 and car worth market value.

c, pcp
Car £15000.- £3000 deposit +£180+£90 =£3270 and £154.66x36 = (£5567.80+£3270) £8833.80. And no car at the end.

Now assuming you used my figures and the car was worth £7500.

In choice a, I have a car worth £7500.

In option b i have a car worth £7500 and its cost me £678.48p for the privilige

In option c I have added the £7500 to the cost so I can keep the car and its total costs are £16333.80, or I give them the car, worth £7500 and I am left with nothing for a cost of £8833.80

Is this right?

I believe so.
 
Scummy. You are correct.
PCP is the most conveinent but usually the most expensive method of financing a car.

The only thing you haven't factored in is the loss of interest on capital if funding yourself..

Personally I prefer the flexibility overall ownership gives me. I can change my car if/when I chose to, not when someone else thinks I should.
 
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Okay,


anyone want to define depreciation then?
 
Scummy. You are correct.
PCP is the most conveinent but usually the most expensive method of financing a car.

The only thing you haven't factored in is the loss of interest on capital if funding yourself..

bummer.


£16390.91 at 3% I think. (£15k over 3 years ish)
 
anyone want to define depreciation then?

Easy.
It's vast on a new car and much less on an older one...:)
 

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