PCP VERSUS HP. A view

[gIzzE]

Glass's report for this month is now putting depreciation for most cars at 40% in year one, loosing another 10% in year two and 5-10% in year three. So still holding 40-45% over 3 years, but taking a massive hit in the first year.


I don't actually like any deal with a guaranteed future value, the only person that pays for that is you, the borrower.

We worked out the other day that financing an M3 through Lombard on a lease purchase was £600 a month, through BMW it was £860 a month to get the same balloon figure at the end. Both £26k I think it was.
Now 90% of people said they would pay the extra for piece of mind, what most people don't work out is if they stick that extra £260 a month in an account you will have an extra £10k sat there at the end, so even if the car was only worth £24 or £22k, so what? You will still have £6-8k back in your pocket compared with the guy who has gone with the GFV.

 

[hawk20]

Glass's report for this month is now putting depreciation for most cars at 40% in year one, loosing another 10% in year two and 5-10% in year three. So still holding 40-45% over 3 years, but taking a massive hit in the first year.


I don't actually like any deal with a guaranteed future value, the only person that pays for that is you, the borrower.

We worked out the other day that financing an M3 through Lombard on a lease purchase was £600 a month, through BMW it was £860 a month to get the same balloon figure at the end. Both £26k I think it was.
Now 90% of people said they would pay the extra for piece of mind, what most people don't work out is if they stick that extra £260 a month in an account you will have an extra £10k sat there at the end, so even if the car was only worth £24 or £22k, so what? You will still have £6-8k back in your pocket compared with the guy who has gone with the GFV.

That is not a fair comparison. You must look at the APR being charged which by law they must tell you. There is no point in having a high GFV if you pay for it by paying a high APR. The MB deals (the offers on the website) are at around 4-6% -very competitive indeed. And you get a good discount on the car. And they give you an excellent GFV. They are paying for that -not you.

 

[gIzzE]

That is exactly my point, with a GFV you are always paying a higher APR.

The only time you get a decent APR from a dealer is when they are throwing money at metal they need shifting.

Best I could get through MB with a GFV on an E320cdi the other day was 9.8% apr, they tried to get it down for 2 days, started at 14% cheeky feckers!!
They even said they could not do a lease purchase, but then came back saying they could when I said no problem I will leave it, and that was at 7.25%, but no GFV.

 

[gIzzE]

Look at this offer....


http://www2.mercedes-benz.co.uk/con...rs_portfolio/e-class_offers_q3_2008.0003.html


It's and old, outgoing model that they need to try and shift, the last thing they want is customers going to BMW or Audi, so they make the deal so tempting that they stay with Mercedes.

 

[hawk20]

That is exactly my point, with a GFV you are always paying a higher APR.

The only time you get a decent APR from a dealer is when they are throwing money at metal they need shifting.

Best I could get through MB with a GFV on an E320cdi the other day was 9.8% apr, they tried to get it down for 2 days, started at 14% cheeky feckers!!
They even said they could not do a lease purchase, but then came back saying they could when I said no problem I will leave it, and that was at 7.25%, but no GFV.

Just been to the MB website; click on new cars-current offers -E class. Up comes a choice of E class offers including the 320cdi at an incredibly low APR and with a discount and with an excellent GFV.

But it is on saloons only. Annoying.

 

[gIzzE]

That is my point, the offers are for cars they can't shift, ML's, S Classes, outgoing E saloon etc. etc.

 

[hawk20]

That is my point, the offers are for cars they can't shift, ML's, S Classes, outgoing E saloon etc. etc.

All manufacturers do promotions. The S class is the best selling luxury saloon in the world. The E is a classic IMO and in the top ten on JD Power. A great car. I like the ML too but 4x4's are hard to shift at the moment.

 

[Colin_b]

It may be considered old fasioned nowadays, but I prefer reverse finance. If I want to buy a car (or similar expensive object with a life of a few years), I'll save up for it, and buy it cash. The downside is I had to drive around in older cars for a few years until I got the first decent car, then put the 'payments' towards its replacement.

If I lose my job and cant afford the 'payments', I'll just continue in my old car and not worry about debt.

I plan to keep this car 5 years, so if hard time come, I'll either keep it longer, or flog it.

It always seemed a bit illogical to borrow money to buy an asset that will always depreciate.

 

[hawk20]

Good thinking for many Colin B but not all. Round here, and in many areas of Britain public transport is useless. The car is a necessity to get about. So some need a car to get a job and get to work. Sensible for them to borrow to begin with so they can earn. Later on saving may well make sense.

 

[scumbag]

It may be considered old fasioned nowadays,

It always seemed a bit illogical to borrow money to buy an asset that will always depreciate.

What? Have you not read this thread?

It seems Mercedes are paying you to buy a car, and offering you money to do so? And a really big engined one to boot.

How can you be so old fashioned as to want to pay for it with savings? You must be as bonkers as me. We should leap off a bridge together....I will look for a 2 person jump suit to save a bit of cash for us.



Of course its always better to borrow money, and more so when you don't have any. It is even more important to borrow it when the amount you need is acheivable within 2 or 3 years, that way you can impress people by having a car that they can't by offloading part of the car, knowing in 2 or 3 years, you will have nothing.

I have said this before, but PCP's allow you to buy a car that you really can't afford, and the idea you are saving money, or beating the manufacturers is delusion of the highest order.

And having read most of this thread, I see no evidence that makes me change my mind.

I am now off to look at why double glazing is less efficient than big heavy draught reducing curtains!!!!! (Hazards of buying a listed building)

 

[robert.saunders]

Good thinking for many Colin B but not all. Round here, and in many areas of Britain public transport is useless. The car is a necessity to get about. So some need a car to get a job and get to work. Sensible for them to borrow to begin with so they can earn. Later on saving may well make sense.

That sort of advice gets a lot of people into a lot of trouble Precisely why GB has a massive credit debt, and we're now all paying the price. Foolish indeed

Total UK personal debt

Total UK personal debt at the end of July 2008 stood at £1,449bn. This has increased 6.9% in the last 12 months which equates to an increase of ~ £93bn.

Personal debt has forged ahead of UK GDP which, according to latest available data, currently stands at £1,410bn having increased by 5.1% over the past year.

Total secured lending on dwellings at the end of July 2008 stood at £1,218bn. This has increased 6.9% in the last 12 months.

Total consumer credit lending to individuals at the end of July 2008 was £231bn. This has increased 6.8% in the last 12 months and £10.1bn in the first 7 months of 2008.

Total lending in July 2008 grew by £4.3bn. Secured lending grew by £3.2bn in the month. Consumer credit lending grew by £1.1bn.

Average household debt in the UK is ~ £9,475 (excluding mortgages). This figure increases to £21,590 if the average is based on the number of households who actually have some form of unsecured loan.

Average household debt in the UK is ~ £59,375 (including mortgages).

Average owed by every UK adult is ~ £30,270 (including mortgages).

Average outstanding mortgage for the 11.7m households who currently have mortgages now stands at ~ £103,705.

Britain's interest repayments have soared to £95.0bn in the last 12months. The average interest paid by each household on their total debt is approximately £3,900 each year.

Average consumer borrowing via credit cards, motor and retail finance deals, overdrafts and unsecured personal loans has risen to £4,830 per average UK adult at the end of July 2008.

During 2008 Britain's personal debt has increased by ~ £1 million every 7.3 minutes.



Have a read through, it's sobering:

http://www.creditaction.org.uk/sept08.html

Rob

 

[Colin_b]

Good thinking for many Colin B but not all. Round here, and in many areas of Britain public transport is useless. The car is a necessity to get about. So some need a car to get a job and get to work. Sensible for them to borrow to begin with so they can earn. Later on saving may well make sense.

I know all about the lack of public transport - I live in rural Cumbria. And yes, getting on the mobility ladder is a problem. The biggest aspect of that is probably insurance, between 1 and 2 thousand for a new driver, though most insurers offer monthly premiums.. yes a loan

Getting a cheap first car for a couple of hundred + VED shouldn't be loan territory.

It will probably be tough for the first year or so, but thats life!

 

[hawk20]

I'll bet most of you who are against borrowing will have a mortgage -or did so at some point in your life.

Sensible borrowing at a sensible level is -um -sensible some of the time. Some find it hard to save but are good at keeping up payments on a loan. Why not? Freedom of choice.

 

[hawk20]

What we need to ask is what is wrong with renting. If renting a TV is economical, why not? If a company chooses to lease a car, rather than buy it, why not? And the lease is really like renting and is really just like PCP in so many ways (except for companies which get the VAT back on leasing deals).

And all over Europe people who rent houses are in the majority. No worries about negative equity. No problem about long waits to sell the house if you need or want to move. No maintenance worries etc. Some real advantages.

And what is a PCP. Just another form of renting really. You buy no equity and own no equity. You pay a known, fixed amount each month and at the end of the 'lease' can walk away. Why is that so bad compared to a company doing virtually the same, and people who rent houses and TVs?

 

[gIzzE]

Borrow, borrow, borrow, borrow.

If you can make it work then why not.

I bet the guys who are banging on about not borrowing are all 50+.

 

[gIzzE]

The rest of Europe laughs at our obsession with buying properties, we spend all our early working lives struggling to pay the mortgage, we then get a few years when the mortgage is comparatively low compared to our incomes but we are getting too old to really enjoy it or we are then making up for it by helping our kids out, and then when we retire and need to go into a home or have some care we have to sell the house to pay for it as we have a massive asset as far as the government are concerned.

 

[MBManInKen]

I've tried to stay out of this as it's inevitably going to end in acrimony, but it's hard in the face of some of the guff that has been posted here.

The idea that borrowed money comes at no cost, or even worse, comes at a cost to the bank who lends you the money is delusion of the highest order. It's called capitalism, folks. If you think any lender will actually give you money and take the hit on the costs, then you are exactly the types I would like to talk about regarding some very interesting financial deals I would like to propose .

I'll bet most of you who are against borrowing will have a mortgage -or did so at some point in your life.

Well, I don't, but a mortgage is an entirely different matter because a house is one of the only real capital items in the proper sense of the word. A normal car most definitely is not. A capital+interest repayment mortgage leaves you with a valuable asset after paying the banks for years. A car leaves you with a worthless pile of metal (rust ) after paying for it. Even in a falling housing market ownership makes sense and the issue of people with negative equity (usually as a result of the effects of the characteristic called "stupidity") is really not germane to that principle.

The same applies to the rental argument: you have paid a lot of money for housing. In case of a mortgage, you actually pay towards your ownership. In case of rental you end up owning bugger all of the property.

If you can't afford it, don't buy it. Even if you think you should do it because the neighbours do...

 

[Rory]

That is not a fair comparison. You must look at the APR being charged which by law they must tell you. There is no point in having a high GFV if you pay for it by paying a high APR. .

I think you might have missed the point in the exmples gIzzE gave that the balloon figure in lease purchase is NOT guaranteed - that's why the monthly payments are a lot cheaper - it's nothing to do with APR.

As I always say (and you always disagree) don't get blinded by the APR - look at the true cost in real money. On a PCP deal where you're happy to hand the car back, a high APR might be OK if the GFV is set very high - all you need to think about is the monthly cost as you're basically paying monthly rental.

 

[Dieselman]

The rest of Europe laughs at our obsession with buying properties, we spend all our early working lives struggling to pay the mortgage, we then get a few years when the mortgage is comparatively low compared to our incomes but we are getting too old to really enjoy it or we are then making up for it by helping our kids out, and then when we retire and need to go into a home or have some care we have to sell the house to pay for it as we have a massive asset as far as the government are concerned.

Can you substantiate the claim about Europe. When I researched this a few years ago home ownership was broadly similar across Europe and in particular Germany, which is where I was interested in.

Over a lifetime, owning a property is the cheapest form of living in one and additionally provides a nice sum of capital to retrieve when moving down.

 

[Dieselman]

Borrow, borrow, borrow, borrow.

If you can make it work then why not.

I bet the guys who are banging on about not borrowing are all 50+.

Nope..
Borrowing only makes sense on an increasing asset, not a depreciating one. There could be an argument for borrowing if you can borrow at less than the rate of interest or capital growth you can achieve with your own money, but that's the only time, and given that the additional growth would be minimal is it worth it for the problems being tied into a contract can create.