That's a result for you Ferg. Well done and if my maths is correct you'll have €100 left over to add to your watch fund!

However, as l've written before, if you keep the deposit low, and can afford the payments, it makes the 'deal' easier to repeat in the future. So, my advice would be to hang onto the €1000 for a rainy day.

Guy

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downer wrote:

Bahnstormer_vRS wrote:That's a result for you Ferg. Well done and if my maths is correct you'll have €100 left over to add to your watch fund!

However, as l've written before, if you keep the deposit low, and can afford the payments, it makes the 'deal' easier to repeat in the future. So, my advice would be to hang onto the €1000 for a rainy day.

Guy

Sent from my Xperia Z5 Premium

Guy, not wishing to derail the thread at all, but how does this work? I assumed the guaranteed minimum value for the car at the end of the pcp term is the same regardless of the deposit/payment profile?

If Ferg adds more deposit, his payments will reduce and overall he'll pay a bit less as the interest charges would be a bit lower - since he is actually borrowing less over the term.

As I said, not wishing to derail - just interested (for my own understanding).

No problem Richard.

I had a reply all typed up on my PC, but have lost my BT broadband connection (seems to be a major outage) so unable to post.

Have got it saved and will post once broadband connection restored. (Thankfully I have 4G on my phone).

Guy

Sent from my Xperia Z5 Premium

Just got my Broadband connection back after BT have had a major National outage this afternoon.

downer wrote:

Bahnstormer_vRS wrote:That's a result for you Ferg. Well done and if my maths is correct you'll have €100 left over to add to your watch fund!

However, as l've written before, if you keep the deposit low, and can afford the payments, it makes the 'deal' easier to repeat in the future. So, my advice would be to hang onto the €1000 for a rainy day.

Guy

Sent from my Xperia Z5 Premium

Guy, not wishing to derail the thread at all, but how does this work? I assumed the guaranteed minimum value for the car at the end of the pcp term is the same regardless of the deposit/payment profile?

Correct

downer wrote:If Ferg adds more deposit, his payments will reduce and overall he'll pay a bit less as the interest charges would be a bit lower - since he is actually borrowing less over the term.

Correct, again

downer wrote:As I said, not wishing to derail - just interested (for my own understanding).

I don't mind a brief trip onto the branch line on this. let me explain it this way.

First of all I think it helps to understand the raison d'etre behind why Car Manufacturers and dealers offer PCP which is;-
1. to sell new cars and
2. to help make them affordable.

It is the affordability issue that is the key.

Let me give two simplistic examples of buying the same car costing, say, £15,000 which, after three years and 30,000 miles, will have a Guaranteed Minimum Future Value (GMFV) of £6,500 on a PCP with, for simplicity 0% APR (i.e. no interest)

Buyer A; Cost £15,000 less deposit £1,000 and GMFV £6,500 gives balance to fund of £7,500 @ 36 months = £208 pcm.

Buyer B; Cost £15,000 less deposit £4,500 and GMFV £6,500 gives balance to fund of £4,000 @ 36 months = £111 pcm.

At the three year point both buyers are really happy with their choice of car and would like to buy another which, coincidentally, still costs only £15,000 and will again have a GMFV of £6,500. Their dealer is willing to offer a Part Exchange price on their existing car of £7,500 which gives 'equity' of £1,000.

This equity of £1,000 can be used by buyer A as his/her deposit and get a new car for no additional outlay.

However, Buyer B needs either an additional £3,500 to top up his/her deposit OR face an increase in monthly payments from £111 to £208.

As a rule of thumb, for a typical car buyer, this need to find cash towards a deposit (which last time around was perhaps the value of a P/X car) or face an increase in monthly payments which, with other commitments of mortgage/rent, etc. etc., may not be affordable, is a fairly major problem.

Buyer B is therefore likely to just keep running his, now three year old car, which may result in additional maintenance/repair costs and the dealer/manufacturer has lost a new car sale.

Overall, Buyer B would have been better to have kept £3,500 in the bank earning interest, admittedly not much, but available for other commitments and have paid £208 pcm; which will be repeatable in three years time.

I trust these, admittedly simplified, examples makes sense.

Guy

downer wrote:Thanks for the explanation, Guy. I see where you are coming from.

Although in overall cost terms, it still makes sense (to me) to use the highest available deposit and therefore, pay the least interest, I can see how the psychology of a lower deposit can make repeat business easier.

I agree with your sentiment Richard however lest not forget that the majority of PCP based car purchases are with buyers who have a reasonable credit rating to be able to get finance but, due to other commitments, are 'cash poor' and thus the low deposit model makes sense.

Also, I see it from the dealer's viewpoint (been there, done that) that having a finance model which is repeatable on a 2-3 year cycle is good for business with the initial new car sale, and a following new car sale & P/X-Used car sale.

Everyone's a winner.

Guy