PCP VERSUS HP. A view

[Dieselman]

NO. There are now reports of people being offered settlement figures which value the car at less than the GFV - in other words the industry isn't interested in taking the car back early and wants people to serve out the full term and keep making their monthly payments.

Presumably they can do that as the GFV is based on the premise that the whole term is served and any alteration voids the GVF.

Gocha..

 

[Rory]

Don't forget the deposit, I have a recollection that when talking half or two-thirds it's the full cost of the car that's relevant and that is deposit plus interest as well as the amount of the loan.

Deposit is not part of the calculation - the calculation is on the total amount financed, and you don't finance the deposit, you just pay that.

Oh, and the significant points are one-third and half.

 

[st4]

Presumably they can do that as the GFV is based on the premise that the whole term is served and any alteration voids the GVF.

Gocha..

The GMFV is based on the basis that the whole term is served and the car has done a particular milliage.

However the settlement figure will incorporate the GMFV as that is a part of the principle that has to be repaid (either by handing the car back at the end of the agreement or by actually paying it).

The GMFV is an intergral part of the PCP deal and its settlement process, as this is what determines the "rental payment" Higher GMFV, lower rental.

Therefore settling out of a PCP after 18 months (on a 36 month deal) with low monthly repayments with a high GMFV means there is more money owed on the car (i.e. the owner has less equity in it)- so when you settle it and the car is worth less than the GMFV plus the monthly repayments you have to a) hand the car back + the value of the negative equity.

Why on earth in that situation will the dealer value the car above the GMFV and monthy payments owed, it would give the owner +ve equity meaning they hand money over.

 

[scumbag]

I need to top myself.

I have obviously mismanaged my life to such a ridiculous level that I did indeed buy a flat (negative equity here I come) instead of a big engine car which will save me loads of money as they are giving them away practically free.

Now considering I only managed to get the flat £25k less than they wanted, and conveinently, Mr Darling decided I had managed to do such a usless deal, that he would help out and and let me off Stamp Duty, what with me squeezing under his new threshold, and as its Scotland, I am now legallty committed to buying......how am I going to take advantge of these deals?


Woe is me...............................................


And they don't do PCP's on houses. I aksed and said, can I pay for 3 years then walk away and owe, and indeed own nothing?

No.


Oh well, I guess I will have to make my own bed, and lie in it.....

If anybody wants to help out, I have another house what I should now get rid of then I can buy an SLK55AMG while they are good value at this time? (stupidly I rent it out so you would need to buy it with lodgers too)


Buy high, sell low thats what I say.......


Please, nobody follow my lead, I really don't have any idea what I am doing.....

 

[st4]

And they don't do PCP's on houses. I aksed and said, can I pay for 3 years then walk away and owe, and indeed own nothing

Erm intrest only mortgages and/or endowment ones. Similar...

 

[scumbag]

Erm intrest only mortgages and/or endowment ones. Similar...

Except you can't walk away and actually own nothing....sorry owe nothing at the end of the term.

Mind you, as I am so daft, I have actually gone and got one of them captial and repayment jobs. So it costs me a bloody fortune.

I really am nuts.

 

[robert.saunders]

Well, I admit I am now confused. I thought PCPs were something you declined at a party which would involve hallucinations

 

[hawk20]

You can do the same with houses. It's called renting. You could sign a 3 year lease and walk away owing nothing and owning nothing after 3 years. Very similar to a PCP.

In fact you can do an interest only mortgage and walk away with no equity whatever, however long you make the payments, unless house prices rise.

 

[scumbag]

You can do the same with houses. It's called renting. You could sign a 3 year lease and walk away owing nothing and owning nothing after 3 years. Very similar to a PCP.

In fact you can do an interest only mortgage and walk away with no equity whatever, however long you make the payments, unless house prices rise.

D'oh!!!!!!!

I have just given notice on the flat I rent.......double D'oh!!!!

unless house prices rise

In these uncertain times I can't imagine that happening

 

[st4]

.

In fact you can do an interest only mortgage and walk away with no equity whatever, however long you make the payments, unless house prices rise.

Thats what I was driving at. V. similar to a PCP. Except no capital has been repaid (unlike a PCP where a mixture of capital and interest on capital has been repaid/month). So an interest only mortage is an even more effective way to have 0 equity in an asset that you have "used".

 

[scumbag]

Well, I admit I am now confused. I thought PCPs were something you declined at a party which would involve hallucinations

Thats people with Lisps isn't it?

 

[hawk20]

Why on earth in that situation will the dealer value the car above the GMFV and monthy payments owed, it would give the owner +ve equity meaning they hand money over.

Because he is selling you another car;
Because your car may be worth more than the GFV plus the payments owing (as mine is) so the dealer buys the car for more than the settlement figure if he thinks the market value makes that worthwhile. It is just a part ex deal but settling the old finance deal. All I have done is check the settlement figure on the PCP deal, and then got the best price I can in part ex against another car. Same as I would have done if I had done HP.

 

[st4]

Because he is selling you another car;
Because your car may be worth more than the GFV plus the payments owing (as mine is) so the dealer buys the car for more than the settlement figure if he thinks the market value makes that worthwhile. It is just a part ex deal but settling the old finance deal. All I have done is check the settlement figure on the PCP deal, and then got the best price I can in part ex against another car. Same as I would have done if I had done HP.

Ah, I wasn't aiming at that angle but this one:

You've been made redundant and you can't keep the payments up, you have to hand the car back, you're going to get one lousy figure as the value of the car, which will be lower than the settlement.

 

[hawk20]

The settlement figure will therefore be the GMFV + however many monthly payments you have left. if the car is worth more then you're fine, if it isn't then its 1990's mortgage time....

No; they give you credit for the interest you do not need to pay as you are not going on with the deal. The way it is calculated is apparently governed by law -as in my posting above. My settlement figure letter says "The rebate has been calculated in compliance with the Consumer Credit Act (Early Settlement) regulations 2004"

 

[st4]

No; they give you credit for the interest you do not need to pay as you are not going on with the deal. The way it is calculated is apparently governed by law -as in my posting above. My settlement figure letter says "The rebate has been calculated in compliance with the Consumer Credit Act (Early Settlement) regulations 2004"

Okay, but its comparatively small due to the principle amount owed.

 

[hawk20]

BTW it seems to me likely that in general one should expect to have some negative equity when ending a PCP deal early BECAUSE the whole point of a PCP is that you have chosen not to buy any equity. It is like renting. You are paying a 'rent' that covers depreciation plus interest on capital borrowed while it is borrowed. You are not buying a share of the car.

And virtually all finance deals involve some penalty if you end them early.

 

[st4]

BTW it seems to me likely that in general one should expect to have some negative equity when ending a PCP deal early BECAUSE the whole point of a PCP is that you have chosen not to buy any equity. It is like renting. You are paying a 'rent' that covers depreciation plus interest on capital borrowed while it is borrowed. You are not buying a share of the car.

And virtually all finance deals involve some penalty if you end them early.

That is actually a good point, in terms of the penalty aspect of it.

 

[hawk20]

Ah, I wasn't aiming at that angle but this one:

You've been made redundant and you can't keep the payments up, you have to hand the car back, you're going to get one lousy figure as the value of the car, which will be lower than the settlement.

If you then sold the car privately, as a sensible person would who was not buying another car, then in my case at least the Glass's Guide figure for a private sale comfortably exceeds the settlement figure. But i did get a good deal to start with and that may not always be true.

Trouble nowadays is that depreciation on the first year or two of cars is so ridiculous that all methods of buying cost plenty if you buy new.

 

[Rory]

If you then sold the car privately,

Difficult if the car's the subject of a finance agreement.

 

[hawk20]

Difficult if the car's the subject of a finance agreement.

Yes. I think you are right unless you have the loot to settle and then sell. And unless the finance people let your buyer pay the settlement figure and pay you any surplus above that?