PCP Interest Rates

[Mr R]

My current car was on a 2 year PCP which ended in March 2021. Final payment was £26.5k which I paid in full after a LOT of debate with myself.

Webuyanycar valuing it now at £32k and I’ve been watching that figure very closely!!

 

[Mr R]

My current car was on a 2 year PCP which ended in March 2021. Final payment was £26.5k which I paid in full after a LOT of debate with myself.

Webuyanycar valuing it now at £32k and I’ve been watching that figure very closely!!

 

[dave99]

That's a pity . I am with Lloyds, and I have a PCP offer from them.
Unfortunately with what's been happening with the economy the last few weeks, the APR is now 5.8%. MG are quoting 7.9% though.

did you have any trouble getting the Lloyds quote? I tried this afternoon and it just kept saying it couldn't quote me because the repayments were "too high". It was only when I upped the deposit so high that repayments came down to £33 a month that it actually showed me the figures. I wonder if it uses the history of the spare cash in the account - I have had it open for a while but only to pay a couple of bills (and to grab their £125ish switching offer ) so there is rarely a high balance

 

[Sloucher]

I don't think it does look at "spare cash", although your credit rating is taken into account.
The only problem I had was that I initially kept getting an error message when I submitted my application. After ringing Lloyds, the reason was explained. The deposit I wanted to use (including the part ex on my existing car), turned out to be more than the amount of credit I'd applied for. Apparently you have to borrow more than half the value of the car in order to be considered for PCP.

 

[tintin]

Hi all,

My partner and I have placed an order with our local MG dealer for a Trophy in Volcano Orange. We are both new to PCP and EVs as a whole.

The offer we’ve been given is with 7.9% APR interest, over 48 months. Works out at around £400 per month.

I’m just wondering if that’s a good rate for PCP?

Thanks in advance,
Ash

I think your better off going to your bank, a £20,000 loan over 60 months is £377 per month and the car is yours to own or sell at any time, with an APR of 5.9, used to be 3.9 only a couple of months ago

 

[MrAshieB]

I think your better off going to your bank, a £20,000 loan over 60 months is £377 per month and the car is yours to own or sell at any time, with an APR of 5.9, used to be 3.9 only a couple of months ago

Forgive me, but the car is around £32,000… I suppose we’d need to put the £12,000 as a deposit to the bank?

 

[McPhee]

It happened a lot in 2017 when the inflated GFV and heavily discounted Leafs were handed back in. My 24 Tekna GFV was £2500 over market value at the time so just told RCI to collect it. Think it was late 2014 when they pushed a load of Leafs out on the same deal. Thank god for PCP then!

There was a similar thing with Zoes around the same time.

Got mine in 2015. £500 deposit, £40/month PCP, £79/month battery lease. GMFV was £8,500. Difficult to believe it given current values, but when the agreement came to an end two years later, the car was only worth £5,500-£6,000. The lowest I could haggle RCI down to was £6,800. So it went back. Bought a Leaf for £400 more (and no battery lease).

 

[4ND]

Well, I was causally looking on an MG site at the PCP 'deal' offered on an MG4 standard range SE (the only one the site would allow me to look at for examples of 'deals')

1) Deposit of £4,538.27
2) 49 months @ £246.13
3) No deposit contribution
4) An optional balloon of £15,417
5) Customer would pay, overall, £5,774.51 in interest, and hence that figure MORE than the RRP of a new car if they did the whole hog, paying in total £31,769.51 (repeat, that's for the SE standard range mind you)
6) The supposed 'owner' is also capped in 'their' car to 6K miles per year

So if I walk in and buy the car with cash I've diligently with will power saved up, plus a part exchange of my current car (or sold before hand to Motorway etc), explain why I'd be 'better off' not spending £5,774.51 more than I need to, and also not having my mother capping how many miles I do in 'my' car

Got to love these finance 'deals'

Edit: If someone can let me know what bank saving account will get me £5,774.51 interest over 49 months on £26K ish deposit, so I can keep the money in the bank and do that^ 'deal' instead, I'll be most appreciative

 

[McPhee]

Edit: If someone can let me know what bank saving account will get me £5,774.51 interest over 49 months on £26K ish deposit, so I can keep the money in the bank and do that^ 'deal' instead, I'll be most appreciative

RCI Bank's 4 year fixed savings account lands within £300 of that figure. If the interest rate holds up in month 49, then it would be within £160.

 

[4ND]

RCI Bank's 4 year fixed savings account lands within £300 of that figure. If the interest rate holds up in month 49, then it would be within £160.

So I'd almost break even, not gain anything?
For lining a company's pockets with north of £5K (they'd still get their interest, I'd merely get it back, not making anything), not owning a car until the end, and having a finance mummy inform me of how many miles I can do, and penalize me if I do more.
Sounds great.

 

[Sloucher]

A finance deal isn't compulsory you know. If you can't afford it, don't buy it, simples VV

 

[4ND]

A finance deal isn't compulsory you know. If you can't afford it, don't buy it, simples VV

Very true.

 

[McPhee]

So I'd almost break even, not gain anything?
For lining a company's pockets with north of £5K, not owning a car until the end, and having a finance mummy inform me of how many miles I can do, and penalize me if I do more.
Sound great.

You asked. I (almost) delivered.

Your calculating this wrong though.

Scenario A
You buy the car outright and put £246/month back in to savings. After 4 years, you have £13k in savings and own a car worth approximately £15.5k.

Scenario B
You finance the car using MG's PCP offer. This leaves you with £21,500 in savings. After four years, your savings have grown to £26k. You have the option to purchase the car at this point for £15,500.

Scenario A is significantly better than Scenario B. Though potentially a bank loan could beat both options.

N.B. The excess mileage charge is (theoretically) irrelevant. It's simply an adjustment for the impact of higher mileage on the final value. If you buy outright then you should, in theory, see the same impact via a reduced value for the car. In both scenarios, the impact of excess mileage is only realised if you dispose of the car. If you keep it, it doesn't matter at all.

Also worth noting that there is a fringe advantage to PCP; you're effectively protected against a crash in used values. If the car is worth less than the GMFV, you hand it back and move on.

 

[4ND]

You asked. I (almost) delivered.

Your calculating this wrong though.

Scenario A
You by the car outright and put £246/month back in to savings. After 4 years, you have £13k in savings and own a car worth approximately £15.5k.

Scenario B
You finance the car using MG's PCP offer. This leaves you with £21,500 in savings. After four years, your savings have grown to £26k. You have the option to purchase the car at this point for £15,500.

Scenario A is significantly better than Scenario B. Though potentially a bank loan could beat both options.

N.B. The excess mileage charge is (theoretically) irrelevant. It's simply an adjustment for the impact of higher mileage on the final value. If you buy outright then you should, in theory, see the same impact via a reduced value for the car.

Scenario A : Not sure if you factored in putting that monthly amount into an account with at least an 'ok' interest rate, so over 4 year will gain a little bit extra, too.

Owning the car (at least in my friend's experience of both!) makes rejecting a dud car a lot easier, when a finance company are not involved.

 

[siteguru]

The finance co are bound by the Consumer Credit Act 1974 (Section 75), so if there's a justifiable reason for rejecting the car then the consumer can legally (via court) pursue either/both of the seller and finance co. If the consumer is aware of this (the finance co.s don't tend to offer this info) then that might smooth the road.

The flipside of that is ... if you pay any part of the transaction (e.g. deposit) by credit card, and the balance in "cash", then you're still covered under S75 for the whole amount.

(In both cases the limit is £30k ... so you'd be fine for the SE models but not the Trophy).

 

[4ND]

The finance co are bound by the Consumer Credit Act 1974 (Section 75), so if there's a justifiable reason for rejecting the car then the consumer can legally (via court) pursue either/both of the seller and finance co. If the consumer is aware of this (the finance co.s don't tend to offer this info) then that might smooth the road.

True, but that by definition is an example why rejecting a dud after a cash purchase is easier.

 

[siteguru]

True, but that by definition is an example why rejecting a dud after a cash purchase is easier.

But it's not ... quite the opposite. For a whole cash purchase you're entirely dependant on the seller being willing to cooperate, else you're on your own with pursuing court action, and only against the seller. (Who, depending on their reputation and longevity, may simply fold and phoenix and your money is gone).

With a finance/credit-backed purchase you have an established credit offering company to co-join to any claim.

 

[4ND]

But it's not ... quite the opposite. For a whole cash purchase you're entirely dependant on the seller being willing to cooperate, else you're on your own with pursuing court action, and only against the seller. (Who, depending on their reputation and longevity, may simply fold and phoenix and your money is gone).

With a finance/credit-backed purchase you have an established credit offering company to co-join to any claim.

Yes, that seems clear enough.
Thankfully I've no experience of it, but a mate of mine had two duds, one after the other and said the finance one was a nightmare, as they were kind of a 3rd party always making it difficult, whereas the cash/part exchange one was a bit of grief, but nothing in comparison.

 

[4ND]

Interest rates are expected to go up again today.
I like playing a game at this time, called 'let's see what manufactures raise it first'.
Hyundai are classics.

Another hike, then, and in all probability on car finance, uh, 'deals' too.
That self inflicted social hierarchy of keeping up with the Jones's, of a 'new car every three years' is getting tougher and tougher by the month

 

[Kithmo]

You asked. I (almost) delivered.

Your calculating this wrong though.

Scenario A
You buy the car outright and put £246/month back in to savings. After 4 years, you have £13k in savings and own a car worth approximately £15.5k.

Scenario B
You finance the car using MG's PCP offer. This leaves you with £21,500 in savings. After four years, your savings have grown to £26k. You have the option to purchase the car at this point for £15,500.

Scenario A is significantly better than Scenario B. Though potentially a bank loan could beat both options.

N.B. The excess mileage charge is (theoretically) irrelevant. It's simply an adjustment for the impact of higher mileage on the final value. If you buy outright then you should, in theory, see the same impact via a reduced value for the car. In both scenarios, the impact of excess mileage is only realised if you dispose of the car. If you keep it, it doesn't matter at all.

Also worth noting that there is a fringe advantage to PCP; you're effectively protected against a crash in used values. If the car is worth less than the GMFV, you hand it back and move on.

Very unrealistic savings interest rates I think.
If you have details of where we can obtain these rates I'd be very interested.