General Discussion around PCH vs PCP

[Prufrock]

With all the subvented rate deals around PCPs look good from a customer perspective but trouble is brewing in the medium/long term.

There are issues with affordability tests: and the captive finance houses (those directly linked to the NSCs) are subsidising advance payments (deposits) which is also a problem.

And are franchised dealers always using their captives or are they using a panel funding model (partly rhetorical question) ?

Big subject.

Jon.

[Munro83]

Save up or get a loan. Crazy to put so much money into a car and never technically own them at the end.

I sell my car and use the money & £2-3k I've saved up and buy a newer car. I never own a new car and will always be in the £6-8k bracket but at least I own my car.

[NigelDay]

I'm a high mileage driver. Always buy new and run them (almost) into the ground. If I ever become an '8,000 mile per year driver', then the PCH / PCP deals may well make sense.

[Considered1]

Originally Posted by owyn

From a luddite who buys my cars......

Nearly 30k for a car that's not mine, what the!

I'm not paid badly at all and find all this very distressing, I like cars and consider myself a car man but these sums are the sort thing that could buy me a nice little second house.

You are the sensible one, Buying a car for £50k that's worth only £25k after 3 years. In the example above of course.

The smart move is to buy them at three years when they have lost the most. The problem with Volvo Contract Hire when I looked at it you couldnt purchase the car afterwards..

[Prufrock]

Originally Posted by Considered1

The problem with Volvo Contract Hire when I looked at it you couldnt purchase the car afterwards..

It is not a problem with Contract Hire (Operating Lease) per se, the product is not designed for people that want ownership.

If you want to own the car then look for a different finance method.

Jon.

N.B Contract Hire, which attracts VAT is designed for business users - that's VAT registered business users.

Not to be confused with PCH.

[Considered1]

Thanks I know exactly what Contract Hire is having leased 2 for business. Although being Self Employed I did use Personal Contract Hire, something VW said they only did for limited companies! which was rather strange as I had an Audi/VW PCH at the time! And you can just pay the VAT if you are not registered.

All I was pointing out was that Volvo Dont let anyone in your family buy it afterwards, unlike other manufacturers who do give you the option to purchase for a silly admin fee like £1. Just thought most folks should be aware as usually better to buy the car you know the history of, should you want to keep it of course before it goes to a closed auction of dealers.

[Prufrock]

Originally Posted by MtillingVolvo

Of course. Below are the full details of the PCP quote with the pch being the same term/deposit/mileage but 114 less per month....

Vehicle Cost £ 50,260.00*
Less deposit* £ 5,000.00*
Payable by
36 monthly payments of £ 673.60*
1 Final Payment of £ 27,487.35*
Annual Percentage Rate 5.9%*
Guaranteed Future Value * £ 27,487.35*
Total Amount Payable £ 56,736.95*
* Based on an estimated annual mileage of 12000 miles per annum

Where is the £5k advance coming from; it equates to 7.42 monthly payments ?
The principle of a Personal Contract Purchase assumes customer has some equity at contract end, but with a £5k advance how does the customer obtain another contract at a similiar monthly rate ?
Very unlikely that there'll be £5ks worth of equity as the forecasting of future values is not a science.

Jon.

[MtillingVolvo]

Originally Posted by Prufrock

Where is the £5k advance coming from; it equates to 7.42 monthly payments ?
The principle of a Personal Contract Purchase assumes customer has some equity at contract end, but with a £5k advance how does the customer obtain another contract at a similiar monthly rate ?
Very unlikely that there'll be £5ks worth of equity as the forecasting of future values is not a science.

Jon.

The £5k advance is customer cash deposit.

Correct, the likelihood of having £5k equity at the end is very minimal, but it does reduce the payments down in the meantime hence saving interest.

The likelihood is that if the customer wanted a vehicle with similar payments at the end of the term they would have to find some more cash to put into the agreement.

[isleaiw]

I love all of the change of topic to "spending all that money and never owning is a waste" stuff. The whole point is that it is your money and you can do with it as you wish, whether that is a good investment or not is not up for debate. I currently own my XC70 and love not having any finance payments. However, cars are a hobby for me so I will swap it and buy something on some form of credit. How much and what form of credit remains to be seen, but the top and bottom is that if I didnt do that I would probably waste it on something else (which might be another house but that is likely to benefit the kids more than me).

Of the two, PCP for the flexibility if the two costs were similar. I dont like the thought of lease being more rigid and the checks and potential bills on return. If I PCP, then i save some money each month and swap probably before the final payment due as long as car is ahead on the capital v depreciation curve. I do put in a fair deposit.

but as with all things, having the choice is the most important thing....

[jimboelliott]

For the last thirty years I have changed my car for a new one every 12 to 18 months, probably costing me £6000 to £7000 per year. So have decided to go down the pch route. Which works out £4000 per year, so in my case I will be better off with a pch. I have wasted a lot of money on new cars.