Reply With QuotePCP and the like can work out well financially if the vehicle has very strong residuals e.g. Audi R8 but in normal cases the car will cost a good bit more this way. Sounds like you are a long-term keeper, so just pay cash and be done with it.
Okay, so i have just about picked a car i like and not having bought a car for 12 years i am faced with the normal sales talk and am now somewhat confused.
I am a cash buyer on a Merc from a dealer, i planned to agree a price and pay the balance with a cheque, the Merc dealer has provided me with a scheme they run PCP and come up with figures where i can pay off a some straight away and pay he rest over a three year period, i know HP in effect but they guarantee a minimum price on the car if i trade it in after 3 years.
Anyone used this scheme or anyone care to offer up some advice, i am old school and feel better just paying off the price but should i protect my capital, i know the car will never make me any money but happy to listen to the experience of others.
Thanks
PCP and the like can work out well financially if the vehicle has very strong residuals e.g. Audi R8 but in normal cases the car will cost a good bit more this way. Sounds like you are a long-term keeper, so just pay cash and be done with it.
PCP is a clever way of getting you into "more car than your monthly payment would suggest" as you aren't actually funding the car, merely the deprecitaion as the GFV (guaranteed future value) they make sound like a "bonus" at the end is still to be paid for... So say the Merc was 10k instead of making payments over 3 years on 10 k (10/36 = 277 a month) by deciding it will be worth 5k after 3 years you only have to pay 1/2 this (5/36 = 139 a month) so looks cheap/tempting etc.
The problem to my mind comes after the 3 years are up, as you choices are 1) Walk away (literally as you won't be driving anywhere...) 2) Buy a new car off them and start again or 3) Finance the 5k over another 3 years (unless of course you saved the spare money a month).
If you have the cash, buy a 1-2 year old car for a third-half off and keep it for another 12 years you will be much better off financially if don't mind not driving a new car every few years.
GQ and MB2 Thank you for the replies, i was just working the figures out and came to the same conclusion re me paying for any depreciation, the car is a pre registered car so ineffect it is brand new but with a chunk off obviously on the new one and i reckon if i rocked back up to the dealer after 3 years anyway he would give me a top price otherwise i would just go next door to another dealer.
PCP can also guard you from the "unexpected" as they will try to get the GFV as high as they can (to keep the payments low so upsell you) but if residuals took a big hit you could just give them back the car at the end of the term and leave them with the problem.
On the flipside if your circumstances change you will be on a fixed mileage contract which may not be any use to you.
Hevily discounted nearly new is a good buying choice, especially if plan to keep the car for some years, strike the deal as if going ahead on finance then at the last minute pay cash. Also accept the stupid part-ex offer they will give you - focus on them reducing the cost to change (but not the part-ex price) then when you can just bring them cash for the part-ex vehicle having sold privately in the mean time (Merc dealer won't want a 12 year old car anyway).
It can be good, and merc deals can be very silly indeed. I saw a quote given to a customer on a CLC a few years back that was a 4 year PCP on a £23000 car. The dealer had given £1500 more for the p/x than it was worth and the finance at 10,000 miles a year had a GMFV of £16000 with an APR of 10.3%. Needless to say the payment was silly cheap and I stood no chance of selling my customer a Scirocco.
So with Merc it does pay to look at the finance deal very closely as some of their cars are much cheaper with Merc finance.
Posting Permissions