Pcp & Gfv

[talltimtam]

Hi,

I am looking at trading in the MB and the dealer is offering my various financial optiont that I am looking at. I currently own my car outright and for my new car they are suggesting a PCP. Has anyone here had experience of whether the ballon payment or GFV actually meets or execeeds its target ?

Many thanks

 

[Bobby Dazzler]

Residual values and therefore GFVs are in a state of unprecedented flux and so any trends observed pre-2008 are unlikely to hold true in the future.

If PCP is right for you, then just aim to get the GFV as high as possible to reduce the repayments to the minimum.

 

[talltimtam]

Cheaper monthly payments sound great, but if the final ballon is huge then it will reduce the cash amount I could get for trade in the next car after the PCP contract has finished.

 

[Bobby Dazzler]

A balloon would normally apply to HP rather than PCP - a PCP might have a final payment though.

I personally would not want to pay money any more than the absolute minimum into a car on PCP at the moment, as you may still fall short of how far the cars value could plummet in these uncertain times.

If a contribution to your next car is important, but the extra in jar on the kitchen shelf - that's yours then, and can't get lost in the maths of changing, or returning at the end of the contracted period.

 

[Smiley]

Dont fall into the trap that a colleague of mine fell into with a MB dealer sales guy - the sales guy went through with him the max amount he could afford every month and then sold him the most expensive car that he possibly could for his budget and his p/x. Two years later he was made redundant......

 

[scumbag]

- a PCP might have a final payment though.

If you wish to own the car at the end of the term, it WILL have a final payment. That payment is the GFV.

you will have paid interest on that amount over the term too. A pcp offsets the payment of the GFV against the cars value in future years and accordingly you don't pay that part of it back unless you wish to keep the car at the end.

As has been pointed out a few times, the GFV is a bit uncertain, but they usually try to keep it a bit less then the cars exepcted value, so you get something back, although it is not much but could be a couple of grand.

As Hawk had pointed out a few months ago, The larger engined cars, and the heavy value losing cars, A PCP may means the GFV is significantly worth more than the actual value of the cars today. This may be making its way felt on the lesser cars too now. There will be some cars that do buck the trend, but these are probably the niche models.

Everyone would need a crystal ball to tell you what it will be like in 2 or 3 years time, but I think it is probably a fair guess to suggest it won't be much better than today.

You need to decide whether you want to own the car outright, today, or whether you are prepared to have a car, and pay for it over a term, and still owe a large chunk of money for the car in 2 or 3 years time to own it. If you don't wish to pay that chunk, you will have nothing to show for the money. You can borrow again to pay that chunk if you like, but thats a further drain and more interest and so on.

You should be able to argue for a good deal, however you buy a car at present, but once the cars in the system (parked somewhere) have gone, I imagine the prices will settle and less deals will be around.

PCP's do offer a low deposit, low monthly payments, and if you are no good at haggling, some decent prearranged discounting!

Would be a good idea to try out a few other dealerships and see which one does the most to sell you a car.

For what its worth, I am waiting to see what the car market does, and when it bottoms out. I don't need to buy a car at present, and I don't need to pay a large chuck to keep it. In fact, other than fuel, service and insurance, it costs me nothing at present.

And even though it is worth less every month, I am not going to put it in for a car, that maybe reduced in price, the day after I buy it.

Check out the prices of Range Rover Sports at present! £55k cars can be had for £40k. Imagine paying £43k for it, to find next week you can have it for £38k

I have had 3 cars in the past that were all PCP'd. I never went to full term with them to see if they were above or below the GFV. The price I got for one of them (A Mercedes SLK200) was pretty good and a decent amount was left for another Mercedes.

The others were not particularly high value cars, and I wanted rid of them at the time.

 

[st4]

If you don't wish to pay that chunk, you will have nothing to show for the money. .

Not quite, you've had 3 years or driving x number of miles in a car. There is tangible benefit @ the end of the term, as the car is handed back (unless the balloon payment is made) but you've still had the usage of a car you wouldn't have had if you hadn't taken out the PCP.

Of course you could have committed your cash or taken out an HP loan for the same usage and have full ownership, but then you've not also had the security of the cars value set in stone before you bought.

Where PCP's fall down is the ability to get out of them in a hurry, the penalties may be higher and the 50% rule (as its technically a hire purchase type agreement) really isn't an issue as 50% is often repaid until very near the end of the term

 

[Dieselman]

Of course you could have committed your cash

Which at current interest rates is a sound option unless you think you might need it for something else.
As far as I can see there is little point paying someones commission and interest on money on a rapidly devaluing asset, which you can't sell if necessary.

The salesman wants the O/p to take a finance option because it guarantees future business on their terms and timing. The next car becomes a distress purchase due to timing.
In addition to paying a kickback commission.

 

[st4]

Which at current interest rates is a sound option unless you think you might need it for something else.
As far as I can see there is little point paying someones commission and interest on money on a rapidly devaluing asset, which you can't sell if necessary.

Depends on the interest rate of the PCP and how good the GMFV is. If the rate is low and the GMFV is high then it may will be cheaper to PCP the car.

The salesman wants the O/p to take a finance option because it guarantees future business on their terms and timing. The next car becomes a distress purchase due to timing.
In addition to paying a kickback commission.

100% right. A PCP as has been pointed out time and time again on this place puts the customer in a situation at the end of the agreement where some type of action is required.

1. Hand car back and walk away
2. Make GMFV and keep car
3. Hand car back and take out another deal

With points 1 and 3 the pressure is on the customer to find another car quickly, which puts them in a weaker position when coming to haggling and indeed finding a suitable replacement. A salesmans dream I think

 

[scumbag]

, but then you've not also had the security of the cars value set in stone before you bought.

but that is where a problem exists. Unless you pay that amount, you have nothing. If your cars market value is less than the GFV you have nothing. If your cars value if £1000 more than the GFV then you will have £1000 to put down on the next car.

If you had a gfv of £18000, and your car is worth £19000, you have that £1000 as a deposit on the next car, plus you have paid interest on the £18k over the last 2 or 3 years.

If your car is GFV at £6k in 3 years, and its value then is £8k, then you have 2k to put down, and the chances are, that kind of value for a car, means it is not that much in the first place, something around £15k.

Which ever way you buy the car, you are able to run about in it over that period, and its the very fact of you running about in it, and the time you own it, that makes it worth less anyway.

PCP's have low monthly payments, and have a choice at the end. Whether its the best way to buy a car, depends on your circumstances and the car in question.

PCP's can allow you to buy a car you can't afford however! And this is one reason why a lot take them out.

The OP here wants to know if anyone has had a decent GFV when having a PCP deal come to the end.

As I stated, the 3 I have had I never let go full term so I am not the best person to show if they were reasonable at the time. All my PCP deals we done at a time when I had bought a new home too. so I was after lowest monthly repayments. I would only choose 0% deals, unless I need to finance a car for some reason. PCP for me is a means to an end at the time. I would not choose it for owneship of the car however.

I would like to see some answer from others who have, and whether they would to it again, or indeed, continue with another car.

Would be nice if we got some figures too.

 

[st4]

but that is where a problem exists. Unless you pay that amount, you have nothing. If your cars market value is less than the GFV you have nothing. If your cars value if £1000 more than the GFV then you will have £1000 to put down on the next car.

But you've "saved" the difference between the GMFV and market value so you actually have saved money. The lowest you'll ever get for the car is the GMFV. The finance company may have taken a greater hit. A thread that wound on and on re negative equity proved the point that cars are now worth less than their GMFVs are consumers are being saved feeling the full wrath of the cars market value as the GMFV is > cars market value.

Think about it, a £30k car can be bought if you commit £30k of cash to it. Its yours end of. You PX it 3 years later, salesman gives you £10k. Thats what you get, that car has cost £20k in depreciation. Now imagine you could have pre-determined that figure @13k. The cost of interest lets say is £2000. You're still £1k up.

Which ever way you buy the car, you are able to run about in it over that period, and its the very fact of you running about in it, and the time you own it, that makes it worth less anyway.

PCP's have low monthly payments, and have a choice at the end. Whether its the best way to buy a car, depends on your circumstances and the car in question.

PCP's can allow you to buy a car you can't afford however! And this is one reason why a lot take them out.

The OP here wants to know if anyone has had a decent GFV when having a PCP deal come to the end.

The bit in bold is what I have against PCP's and I suspect is the crux of the matter. It devalues prestige cars as it makes them more affordable and fuels this "borrowing" culture that got us here in the 1st palce.

Tell someone it costs £50k and they'll run a mile. Tell them its theres for £500/month and they sign up.

However cars depreciate and a PCP with a high GMFV and low interest rate may mean the OP takes on a deal which minimises the depreciation hit he takes on.

The deal the OP was offered would reveal whether its a good 'un if the forum could see the numbers. A rule of thumb if the PCP interest rate is less than 5%APR and the GMFV is greater than 50% of the cars value then its good.

 

[scumbag]

Think about it, a £30k car can be bought if you commit £30k of cash to it. Its yours end of. You PX it 3 years later, salesman gives you £10k. Thats what you get, that car has cost £20k in depreciation. Now imagine you could have pre-determined that figure @13k. The cost of interest lets say is £2000. You're still £1k up.

Are you saying you get £13k as part ex value here?

This is the area that the OP wants to know. Has anyone gone full term with their car, and what is the end result of that PCP. has anyone gone and handed the car back, has anyone actually found actual value is less then the GFV recently. is someone about to find out, and what are they intending to do?


Would those who PCP continue with another PCP? would they PCP one off? would they never touch a PCP again ever?

These are all questions that will help the OP

In relation to your example, if you choose to part'ex the car, and its actual value is £12k, you will have nothing at the end of your term so you can walk away, or take out a new deal. But suppose its worth £13.5k, thats £500 towards your next deal.

Some people do believe that its future Gaurenteed value, is what they will get given to them. Its not, its what is offset against the loan. You still owe it. If you don't pay it, then you voluntarily agree to give them the car.

If you part ex, this amount is removed from the valuation, and you get whatever is left.

lets not go down the road of fictious examples. Lets see some actual reality today.

 

[scumbag]

The bit in bold is what I have against PCP's and I suspect is the crux of the matter. It devalues prestige cars as it makes them more affordable and fuels this "borrowing" culture that got us here in the 1st place.

.

You are so right here. This is the "keep up with the Jones's" brigade. They are the ones who bang on about what a great deal they have, when reality suggests they should downsize, but then they would be humdrum ordinary's.

I think status seekers is the term.

I shall now retreat and await the onslaught of derisory comments about how wrong I am, and how right they are!

 

[oldcro]

Looking at Mercedes Agility plan, it states:-

Option 2
Hand back the Mercedes-Benz: Leaving you free to take another contract. You will have no further financial obligation, other than charges for excess mileage and excess wear and tear, if applicable.

I wonder if anyone has suffered high charges for small marks on the bodywork and interior etc or mileage higher than agreed. What I mean is did the dealer look for any excuse to reduce the GFV.

 

[st4]

Are you saying you get £13k as part ex value here?

This is the area that the OP wants to know. Has anyone gone full term with their car, and what is the end result of that PCP. has anyone gone and handed the car back, has anyone actually found actual value is less then the GFV recently. is someone about to find out, and what are they intending to do?


Would those who PCP continue with another PCP? would they PCP one off? would they never touch a PCP again ever?

These are all questions that will help the OP

In relation to your example, if you choose to part'ex the car, and its actual value is £12k, you will have nothing at the end of your term so you can walk away, or take out a new deal. But suppose its worth £13.5k, thats £500 towards your next deal.

Some people do believe that its future Gaurenteed value, is what they will get given to them. Its not, its what is offset against the loan. You still owe it. If you don't pay it, then you voluntarily agree to give them the car.

If you part ex, this amount is removed from the valuation, and you get whatever is left.

lets not go down the road of fictious examples. Lets see some actual reality today.

Nah, my hypothetical but not so far removed from reality example was the £13k was the GMFV that you could have had with a PCP (a bit less than 50% value) and the £10k p/x what one normally see's (about 33% value) on a brand new car after 3 years.

But yes, lets have real figures etc and what would be nice from the OP is the figures he has been offered on that E class.

For the record I've never had a PCP, and can't recount any personal experiences, by old man has had 2. The 1st was a sucess and there was some equity left for the next deal. The one he is on, not so good, circumstances have changed and he is stuck with a car thats surpluss to requirements.

I am a young fella, and the inflexible nature of a PCP is very off putting for me.

 

[st4]

Looking at Mercedes Agility plan, it states:-

Option 2
Hand back the Mercedes-Benz: Leaving you free to take another contract. You will have no further financial obligation, other than charges for excess mileage and excess wear and tear, if applicable.

I wonder if anyone has suffered high charges for small marks on the bodywork and interior etc or mileage higher than agreed. What I mean is did the dealer look for any excuse to reduce the GFV.

The excess milliage charges are a per mile basis and can be quite putative. Its very important to set the agreement up properly so that excess milliage isn't an issue.

And this is my next issue with PCP, unless your driving habits and personal circumstances are very set and not likely to change then fine, but if not then a PCP may not be a good idea.

 

[Rory]

Hi,

I am looking at trading in the MB and the dealer is offering my various financial optiont that I am looking at. I currently own my car outright and for my new car they are suggesting a PCP. Has anyone here had experience of whether the ballon payment or GFV actually meets or execeeds its target ?

Many thanks

There was a comment some time ago from an E Class owner who bought his car outright. He went to p/x the car at 3 years and the p/x value was substantially less than he'd been offered as a GFV if he'd taken the car on a PCP. No doubt though, GFV's on new agreements will have been adjusted down recently.

I think you need to assume that car will be worth the GFV or less. It's never going to be worth significantly more even in the best of circumstances.

If you are thinking of treating it as a way of hiring the car for 3 years then it might be worth getting a Personal Contract Hire quote.

 

[Dieselman]

I am a young fella, and the inflexible nature of a PCP is very off putting for me.

I'm an Old Git and it is to me also, so don't feel it's a young persons issue.

In general finance arrangements have one purpose. However glossy they appear they are designed to give the salesman control over future deals.

If the O/p knows he wants to change his car every 3 years to the day then that's fine, but if a new model is coming out in 2 months hence say, he's stuffed.

 

[scumbag]

I wonder if anyone has suffered high charges for small marks on the bodywork and interior etc or mileage higher than agreed. What I mean is did the dealer look for any excuse to reduce the GFV.

On the Mercedes I had, I got a part ex, that was around £600 less than what the car was on the forecourt at the next week. I had only had it 11months, and the part ex carry over was the difference between the value of the car, and the amount outstanding. I actual felt they had gone quite far in making the deal look pretty good. Obviously, I am the only person who actually realises that the deal is still better for the dealer, unlike the armchair car buyers who always manage to get that impossible deal, when the dealer gives you more money than your car is worth, and sells you a car for less than they have paid for it, and then halfway thru the term, offer to buy the car back, for more than you paid them!

Having moved a few times since, I have slung the paperwork out, other wise I would have put it up here as an example.

 

[st4]

I'm an Old Git and it is to me also, so don't feel it's a young persons issue.

In general finance arrangements have one purpose. However glossy they appear they are designed to give the salesman control over future deals.

If the O/p knows he wants to change his car every 3 years to the day then that's fine, but if a new model is coming out in 2 months hence say, he's stuffed.

Sorry, I should have justified the comment a bit more. Because I am young my circumstances may change as I am not yet set into my ways (I now drive to work rather than take the train as I have a different job and actually use the car to travel between sites @ work) and a 3yr set milliage commitment is therefore very off putting. Hell, my earnings are 70% of what they were this time last year. That X5 they were trying to talk me into PCPing in November 2007 would have disastrous has I taken it out....

People who have been around longer than me, may well be more established in their place of work (and therefore more secure in their jobs and more likely to be able to continue to meet the monthly repayments) and have a better idea of how they may use their car (and hence predict the milliage to take out on a PCP agreement).

But yes I take the point, a lack of flexability is bad, no matter how old you are.

And for the bit in bold. Well, thats probably why PCP deals were concocted. They aren't a consumer invention afterall....