What Car? - V2

[Ponty]

PCP looks fantastic right now because may people took on those 3-year leases at a time of surplus, and are ending them in a time of constrained supply, thus used values are higher than the agreed minimum. However, that also applies to anyone who bought a new car outright in 2020, so it’s not proof that PCP is “better”, just that this is a great time to be selling a 3-4 year old car.

PCP is the best option if you do not have the cash to buy outright, you are on a good salary or have an employer benefit that must be spent on a car, and you want to change your car every three years. It’s also probably the second-best way to own a “flash” car, as these generally depreciate like a stone, so manufacturers inflate the GFMV as a form of discounting. (the best way is second hand, and not for long)

But, if your needs are more mainstream, and you have the cash, buy the car - either outright or on a 0% finance. Yes, it’s a depreciating asset, but that’s not the point: the big advantage is that there is nothing forcing you to change it at any time - no early termination fees, no need for secondary finance. (That’s 36-month decision point why manufacturers love PCPs: the pricing structure strongly guides the customer into replacing their cars after 36 months, even when it’s not in their financial interest to do so).

PCPs are less common here in Ireland than in the UK, but we also have practically no company-car sector here either, and it’s company car leasing that drives most PCP business. (The Irish tax code is very straightforward, and very clear that all employment benefits are taxable as income, so it’s highly unusual to see a company car benefit on job offers, even for salaries well into six figures).

If you have no cash but an income stream with which to leverage against, it’s generally cheaper to PCH rather than PCP, certainly in the UK IMHO.

 

[Ginger]

I just looked at PCP on a BMW 118. 7.9% APR. £4300 deposit and £396 a month for 4 years and a 10k mile contract. Excess miles at 9.45p.

That's £136 a month in interest. At the end of the term customer has paid c. £23k and owns nothing. Including the deposit, that's £480 a month for 10k miles p.a.

Or take a Tesco personal lan of £20k for 4 years at 5.1 %. £377 a month, add your own £2k and take a 70 reg BMW 118 with 12k miles on it and own something at the end.

Of course I accept that some people haven't got the cash to buy a car outright, but it doesn't take 2 mins to see that a PCP just ain't great for your long term finances. Hopping in to a perfectly good used car saves thousands. As if that should be news to anybody. Why am I even bothering to type this?

 

[gintonic]

PCP is the best option if you do not have the cash to buy outright, you are on a good salary or have an employer benefit that must be spent on a car, and you want to change your car every three years.

indeed

is that there is nothing forcing you to change it at any time

no but some like to

That’s 36-month decision point why manufacturers love PCPs

can be way less than that - depending on how much has been paid

they’d be better off buying what they can afford with cash

no - who doesnt want a new car regulalry

But people are free to make choices, I always think there is a degree of elitism in this thinking. As I said before, people are paid monthly so they think I’m these terms

Indeed - we are paid monthly, our bills are monthly outgoing, cars paid monthly, mortgage was monthly, savings are monthly...... very easy to budget.

 

[Woodface]

As I’m sure you know, the sales tactics were clear. Let’s just say you had a punter looking at a £20K car. Could be a cash buyer or if not, they could afford the payments under straight HP. After 3 years, they own the car outright. Happy days. Instead, sell them a £30K car for the same monthly payment on a PCP. After 3 years, the punter has to fork out the balloon if they want to keep it, or start paying monthlies again. All the while, the dealer and bank are laughing. Punter can impress the neighbours at how well they’re doing, so that’s OK. It’s bonkers for most people, just drive the £20K car. Now of course, prices are so high that PCP is the only way many are going to get into a car. They can’t even buy a second hand one because they have no money but can ‘afford’ the new shiny German thing, apparently. Until the music stops.

As my old boss used to say, 'profit is not a dirty word'. I had a few customers who would keep a car for 5 years & then pay cash but that's easy when 2nd hand Mondeo was circa £10k. Many also took personal loans or even added to mortgage (the daftest thing to do). We used to make way more on finance than on the car, back then you didn't pay VAT on finance commission but not sure whether this is true any more. People paid less for the car in terms of sticker price if on finance as we used to roll back the value of car so the PX stood us at less money.

Ultimately people like a new car & its cheaper to buy a new one on finance as the interest rate is lower; you can subvert this by getting a bank loan but some like having the debt secured on the car. It's a nuanced picture & I dislike it when people get sniffy about the wrong sort of people buying nice cars.

 

[gintonic]

they own the car outright.

some dont want to own the car

start paying monthlies again

no problem with that -

All the while, the dealer and bank are laughing

makes no odds to me

Punter can impress the neighbours at how well they’re doing

that is about the most unlikely of reasons.

 

[gintonic]

i am giving up now - it has become circular and uninteresting. If was interesting when the thread was about cars......

 

[Nic Robinson]

no - who doesnt want a new car regulalry

Assuming you intended that to read:
No. Who doesn't want a new car regularly?
The answer is me. My 10-year-old car, assuming no catastrophic failures, will be with me another 10 at the very least.

 

[chartz]

Same. Cars are a waste of money, unfortunately. A necessary evil.

 

[KrisW]

@gintonic - just want to be clear that I wasn’t making criticism of your choice of what to do with your money. I’m a car fan too, and if I were in your exact situation I’d probably do what you’re doing (albeit without Porsches - they have always left me stone-cold).

This is the age-old argument of capital versus operational expenditure, but on a personal level. There’s no right answer, because everyone’s circumstances differ.

In my situation, for example, I steer clear of PCPs. While I enjoy driving cars, I currently need to do very little driving, so my transportation needs are fully met with one of the new electric FIAT 500s, a car which we bought outright. That might sound crazy to some here, but in my case it makes the most sense: first, my income has fluctuated quite a bit in the past so I try to avoid taking on fixed outgoings like car plans, and second, I have a habit of keeping cars for several years (my last three have been 8, 7 and 6 years old at time of change) so going on a lease would end up costing me money in the long term.

As for the “all cars lose money” argument, well so does everything that you enjoy, really: wine, fancy meals, concert tickets, hi-fi equipment or foreign holidays. If you don’t get pleasure from driving a car, by all means buy something reliable and well-priced and keep it forever, so you can spend your cash on what makes you happy.

 

[Ponty]

some dont want to own the car



no problem with that -



makes no odds to me



that is about the most unlikely of reasons.

What you do clearly works for you and that’s great, however you’re not really the average punter!

 

[gintonic]

however you’re not really the average punter!

maybe not - but all punters are not born equal.

 

[Ponty]

Well, the emphasis is on comfort rather than speed. Just received a ticket, 81 on the M5. First offence in over 30 years, so offered a course or £100 and 3 points. I’d argue it was safer to be travelling at safe distance with the speed of the traffic rather than sat at 70 with an HGV 2 feet off my bumper but guess that won’t wash.

 

[Woodface]

Buying a car is proving to be a royal pain in the rear. I have a budget, I have the cash but can’t seem to find the car I want.

In reality I’m in no rush but once the ‘need’ takes hold my wish for forward momentum tries my reserves of patience.

 

[Ponty]

Buying a car is proving to be a royal pain in the rear. I have a budget, I have the cash but can’t seem to find the car I want.

In reality I’m in no rush but once the ‘need’ takes hold my wish for forward momentum tries my reserves of patience.

What are you after, something specific?

 

[dweezil]

Hardly anyone would buy a new car outright even if they had the money, it doesn’t really make sense. Of course there is always someone being a bit sniffy about this, I don’t really understand this, is it jealousy that they can’t get credit?

I think my pension fund depreciated more than my car since 2020. Opportunity cost of that cash is negative.

 

[Woodface]

I think my pension fund depreciated more than my car since 2020. Opportunity cost of that cash is negative.

Same here but these are untypical times.

 

[Woodface]

What are you after, something specific?

Not really, 330i M-sport with the odd extra. There seem to be loads of 330e’s & a few diesels. I have seen a few but I don’t think white suits the car (looks like a taxi) & others are either a bit too old or overpriced.

Not sure I want 19inch wheels but the better optioned cars come with.

It’s a first world problem.

 

[gintonic]

I have seen a few but I don’t think white suits the car

i keep thinking about car colours - and keep wondering if it is worth the extra to choose a colour over and above standard spec.....which of course is white.....

 

[Woodface]

i keep thinking about car colours - and keep wondering if it is worth the extra to choose a colour over and above standard spec.....which of course is white.....

I think it look nice on some cars but not on others. My wife’s golf GTi looks great but saloons less so.

 

[Ponty]

Not really, 330i M-sport with the odd extra. There seem to be loads of 330e’s & a few diesels. I have seen a few but I don’t think white suits the car (looks like a taxi) & others are either a bit too old or overpriced.

Not sure I want 19inch wheels but the better optioned cars come with.

It’s a first world problem.

Yes, first world indeed. I’d go for SE spec with BMW to give a comfy ride and to avoid big wheels given the state of many roads.