Not sure if quite understand the pro cons of agility finance?

[BlackSilk]

Basically I've done a search on past threads and I'm still not completely sure on the real benefits/cons of pcp and hire purchase

I will be taking a bank loan out to cover the deposit as per say as I'll need to take out some anyway for home renovations and since on the market for a new car why not?

Question is. Is there any merit to putting a huge deposit down vs a low deposit except for the monthly payments being lower?

For example offer was around 34k for the car finance over period of 4 years
if deposit (via bank loan) of 18k
plus a deposit contribution £1,171.93
My total monthly payment worked out almost £100 cheaper than say putting a comparison of only £5k deposit?

Would it be nigh on impossible to achieve a positive equity through pcp?

I've read also on other threads that many people pay off the outstanding balance and part exchange the car for a new pcp deal at the end of the term? Or something along the lines of that? In the above examples would that be worth doing at the end of the term?

Thank you in advance for anyone kind enough to sit down and simplify everything for me to understand

 

[Giantvanman]

HP= You pay the total amount for the car over a defined period less any deposit.
PCP= You pay for part of finance leaving an amount at the end, normally a guaranteed future value. If the market value/trade in value at conclusion is higher that guaranteed future value, you have that amount of equity (the difference between the two) IF they buy the car from you. The GFV really only works if you buy and car from the same manufacturer in most cases.

Remember, the PCP numbers they offer (with the GFV) aren't plucked out of thin air; they are very carefully worked out so highly unlikely there would be a significant difference in equity at the end…

When you do the calculation, with same amount of deposit and same period of time, the amount you pay for HP equals PCP plus the settlement amount to within a few pounds.

EG> Making all the numbers up for clarity…
HP- £20,000 car, £1000 deposit = £250 per month and the total paid in the end equals Depost + X per month plus interest which comes to £23,000 total.

PCP- £20,000 car, £1000 deposit = £150 per month but at the end there is £10,000 outstanding, the Guaranteed Future Value OR the amount you have still to pay to own the car. Or you hand the car back.

If you want to own the car at the end, the amount you pay IN TOTAL for either scheme is about the same. HP spreads the cost equally over the period whilst PCP reduces the monthly actual cost, deferring part of the cost until the end.

Many like the low deposit and low monthly outlay, intending to return the car and start again. Others prefer to own their car so either opt for HP or save money alongside the PCP scheme to settle the GFV at the end. The latter gives flexibility with monthly finances but requires financial discipline. Remember, on PCP, the more money you put down as deposit does reduce the monthly payments (as it would with HP) BUT it also means that more capital is lost if you hand the car back at the end….

Personally, I would not be raising finance using finance to finance the deposit, though. Much better to buy something from the deposit and save separately for a deposit further down the line. There's no rush; they'll always be making cars.

Simples.

 

[Giantvanman]

I've read also on other threads that many people pay off the outstanding balance and part exchange the car for a new pcp deal at the end of the term? Or something along the lines of that? In the above examples would that be worth doing at the end of the term?

They don't normally pay the GFV, settling the finance and then part-ex the car. The dealer normally does them a "very special deal for a valued customer" I suspect and allows the GFV plus an amount. That 'amount' becomes or goes towards the deposit on the new car and the next PCP deal.

 

[Deleted member 6183]

No offence to the OP but this is exactly why the car finance industry needs tighter regulation.