Is it safer to buy performance ICE cars on PCP now?
Discussion
Hey,
As I continue toying with buying a car like an M3 (F80) or possibly something in similar realm such as the Guila Quad or S5/RS5 etc I've recently been wondering if due to all the threat of ICE being taxed to hell, hybrid/ev becoming more popular, plus big unknowns to the economy/future such as covid and brexit, it makes sense to PCP instead??
If you PCP does it lock in a guaranteed value so even if ICE performance cars dropped heavily in value i'd still be guaranteed x amount when the term ends? I don;t like the idea of paying any interest, but by the time you factor in maintenance, warranty, risk of future unknowns would PCP offer more peace of mind and safeguard against them, rather than buying slightly older car outright? (spend 30-35k max if buying outright.).
Is it realistic to thinking ICE cars could plummet under one of those circumstances.
What do you think, could be completely off base as I'm ignorant to how pcp/leasing works. I'm not looking for an excuse to buy new (or newer) just working out best option really, considering above. I'd like to think that if I wanted to sell in a couple of years, theres not much threat of the car losing crazy amount of value and I could recoup and half decent % of the initial outlay.
I'd be happy to pay a small premium to know I'm reasonably protected against a crazy down turn in ICE car values.
Cheers!
As I continue toying with buying a car like an M3 (F80) or possibly something in similar realm such as the Guila Quad or S5/RS5 etc I've recently been wondering if due to all the threat of ICE being taxed to hell, hybrid/ev becoming more popular, plus big unknowns to the economy/future such as covid and brexit, it makes sense to PCP instead??
If you PCP does it lock in a guaranteed value so even if ICE performance cars dropped heavily in value i'd still be guaranteed x amount when the term ends? I don;t like the idea of paying any interest, but by the time you factor in maintenance, warranty, risk of future unknowns would PCP offer more peace of mind and safeguard against them, rather than buying slightly older car outright? (spend 30-35k max if buying outright.).
Is it realistic to thinking ICE cars could plummet under one of those circumstances.
What do you think, could be completely off base as I'm ignorant to how pcp/leasing works. I'm not looking for an excuse to buy new (or newer) just working out best option really, considering above. I'd like to think that if I wanted to sell in a couple of years, theres not much threat of the car losing crazy amount of value and I could recoup and half decent % of the initial outlay.
I'd be happy to pay a small premium to know I'm reasonably protected against a crazy down turn in ICE car values.
Cheers!
Edited by b80 on Thursday 12th November 07:44
If you are a worrier, and tbh you do come across as a little bit of a worrier, then yes PCP may well be for you irrespective of whether a dry financial analysis indicates that it's likely to be more expensive. My own take is that all the 'ICE is DEAD ALREADY' stuff you read on PH is totally overblown. Dieselgate blew up over 5 years ago and I'm yet to see all these premium used diesel cars at rock bottom prices we were promised. That would have been ideal political cover to raise motoring related taxes too, but nothing really happened. Some people said that covid would hammer used car prices but it didn't (if anything the opposite's happened). I'd wager that Brexit will be the same. There always seems to be some reason why a wholesale crash in prices is just around the corner, and I get the impression that lots of people would like there to be so they look like financial geniuses for taking PCP, but I very much doubt it'll happen.
Edited by Roger Irrelevant on Thursday 12th November 08:48
I suspect a lot depends on your definition of losing a load of money and how likely you will want to bail in 2 years time or potentially less.
If you consider that currently the cheapest 2018 BMW M3s on Autotrader are in the £28-32k range going up to £40k for a very good one, a new one is £70k.
The current BMW M4 deal from BMW finance @2.9% over 4 years is £4600 down then £650pm which is going to be the best part of £35,000 with £20k still to pay + potential for excess mileage payments, I expect if you hunt around there will be better deals!! Financing a 2 year old one @ £30k over 4 years is also going to be around £650pm yet you end up with a £15-17k car.
With regards to an enormous change to how ICE cars are taxed or significant changes to the use of ICE cars which could dramatically affect the values , i can't see it happening in 2 years, maybe 5-10 but consider that typical M3 buyers aren't getting into these cars for their environmental credentials and are expecting higher running costs than an electric Mini...
If you consider that currently the cheapest 2018 BMW M3s on Autotrader are in the £28-32k range going up to £40k for a very good one, a new one is £70k.
The current BMW M4 deal from BMW finance @2.9% over 4 years is £4600 down then £650pm which is going to be the best part of £35,000 with £20k still to pay + potential for excess mileage payments, I expect if you hunt around there will be better deals!! Financing a 2 year old one @ £30k over 4 years is also going to be around £650pm yet you end up with a £15-17k car.
With regards to an enormous change to how ICE cars are taxed or significant changes to the use of ICE cars which could dramatically affect the values , i can't see it happening in 2 years, maybe 5-10 but consider that typical M3 buyers aren't getting into these cars for their environmental credentials and are expecting higher running costs than an electric Mini...
My own view on your post (and I may be wrong), is that even if you PCP a BMW M3 as an example and they give you a GFV of I don't know say £25k as a figure I pluck from thin air but it will illustrate my point. That is not a guarantee that you can sell the car and get £25k out of it. What it means is that you will have to pay that £25k to own the car outright or give it back to the finance company.
The way you protect yourself with PCP is to try and get the deposit and monthly payments as low as possible with no intent to keep the car at the end and you give it back at the end of the PCP therefore your cost is the deposit plus monthly payments and the depreciation at the end is not a massive concern.
Your original post to me sounds like you are looking for someone to say they will guarantee to pay you the GFV for the car rather than the other way around.
The way you protect yourself with PCP is to try and get the deposit and monthly payments as low as possible with no intent to keep the car at the end and you give it back at the end of the PCP therefore your cost is the deposit plus monthly payments and the depreciation at the end is not a massive concern.
Your original post to me sounds like you are looking for someone to say they will guarantee to pay you the GFV for the car rather than the other way around.
PCP does prevent negative equity at the end of the term (as long as mileage / condition are within limits) so yes it can offer peace of mind. BUT, do you not think manufacturers have the same concerns as you and pitch their GFV's accordingly, unless of course they are chasing volume and simply want to shift metal.
Have not looked at where GFVs are for anything for a number of years but would be surprised if they are as high a % of RRP as they used to be
Have not looked at where GFVs are for anything for a number of years but would be surprised if they are as high a % of RRP as they used to be
I PCPd my 440i 2 years ago this month. Combination of big discounts and 0% APR meant it was a decent enough deal for me. With COVID hitting I am not driving the car at all and am looking to get out now. Normally that would mean horrific neg equity, but mine sits at about £1500 right now which I can swallow. The tax is expensive but that's due to list price not engine type.
It was always my intention to buy the car at the end with the 16k GFV but things have changed so for me right now it's a question of selling when the time is right to minimise any financial hit. I think the demise of ICE is massively overblown myself. Until EV cars RRP drop significantly people will continue to buy 1.4 Golfs in their droves.
It was always my intention to buy the car at the end with the 16k GFV but things have changed so for me right now it's a question of selling when the time is right to minimise any financial hit. I think the demise of ICE is massively overblown myself. Until EV cars RRP drop significantly people will continue to buy 1.4 Golfs in their droves.
carparkno1 said:
I PCPd my 440i 2 years ago this month. Combination of big discounts and 0% APR meant it was a decent enough deal for me. With COVID hitting I am not driving the car at all and am looking to get out now. Normally that would mean horrific neg equity, but mine sits at about £1500 right now which I can swallow. The tax is expensive but that's due to list price not engine type.
It was always my intention to buy the car at the end with the 16k GFV but things have changed so for me right now it's a question of selling when the time is right to minimise any financial hit. I think the demise of ICE is massively overblown myself. Until EV cars RRP drop significantly people will continue to buy 1.4 Golfs in their droves.
Have you done the numbers to see if it would be better to run until the end of term and simply hand it back? It was always my intention to buy the car at the end with the 16k GFV but things have changed so for me right now it's a question of selling when the time is right to minimise any financial hit. I think the demise of ICE is massively overblown myself. Until EV cars RRP drop significantly people will continue to buy 1.4 Golfs in their droves.
A year or two ago I would have said yes, but guaranteed future values are a lot more conservative at the moment so monthlies are higher and the protection isn't as great.
I think the two reasons deals have gone this way are to protect dealers from a 2008-scale market crash, and to put consumers in a stronger position at the end of term so they can afford to keep buying cars (in theory, having higher monthlies and lower GFV should leave buyers with some equity to roll into the next deal at the end of term).
Personally, I'm going to finance my next car with a personal loan. I would rather pay 2.9% interest and take the risk on values tanking, rather than pay 5.9% or higher and have a guaranteed value which in all probability is going to be way lower than the car is worth anyway.
As evidence of what I've just said, I bought a BMW M2 just over a year old with 6,000 miles. I took a 3 year, 6,000 mile p/annum deal, and the guaranteed future value was £24,500 - for a 4 year old 24,000 mile M2
I've just had a very quick look and a current PCP offer on an M2 comp (48 months, 6k miles per annum so representative comparison) has a GFV of £22,800. I'm pretty confident a 4 year old M2 comp with 24k miles will be worth closer to £25k.
I think the two reasons deals have gone this way are to protect dealers from a 2008-scale market crash, and to put consumers in a stronger position at the end of term so they can afford to keep buying cars (in theory, having higher monthlies and lower GFV should leave buyers with some equity to roll into the next deal at the end of term).
Personally, I'm going to finance my next car with a personal loan. I would rather pay 2.9% interest and take the risk on values tanking, rather than pay 5.9% or higher and have a guaranteed value which in all probability is going to be way lower than the car is worth anyway.
As evidence of what I've just said, I bought a BMW M2 just over a year old with 6,000 miles. I took a 3 year, 6,000 mile p/annum deal, and the guaranteed future value was £24,500 - for a 4 year old 24,000 mile M2
I've just had a very quick look and a current PCP offer on an M2 comp (48 months, 6k miles per annum so representative comparison) has a GFV of £22,800. I'm pretty confident a 4 year old M2 comp with 24k miles will be worth closer to £25k.
b80 said:
If you PCP does it lock in a guaranteed value .....
I know it's just terminology but generally they've stopped using the GFV (Guaranteed Future Value) term, I guess becuase people were getting upset when they found their cars were worth less than that, but were still expected to pay the GFV figure if they wanted to keep it. Usually it's referred to as Optional Final Payment now.The only thing that's guaranteed is that you can walk away at the end of the deal with nothing further to pay - well, apart from excess mileage and damage charges.
b80 said:
What do you think, could be completely off base as I'm ignorant to how pcp/leasing works.
If you're going to run a car for 3yrs and then hand it back, PCP and lease (Personal Contract Hire - PCH) work in a very similar way. Lease can be expensive to get out of early (but then so could PCP) and you may not have the option to keep the car at the end of the lease (although sometimes you can, but the price tends to be high).The beauty of PCP is that as long as you're happy with the deposit, monthlies and tax, you can hand the car back end of term.
We will loose big capacity and everything will be hybrid, but to be honest I cant see diesel or petrol going anywhere in the next 20 years. And I work in the EV industry!
Budget, buy and enjoy.
We will loose big capacity and everything will be hybrid, but to be honest I cant see diesel or petrol going anywhere in the next 20 years. And I work in the EV industry!
Budget, buy and enjoy.
thanks everyone. good to get a range of idea/opinions.
still appears to make more sense financially to buy one thats a few years old outright,and already taken the main depreciation hit. perhaps from main dealer and extend the warranty for peace of mind against catastrophic issues.
Like mentioned appears I misunderstood the end of term GFV and the way its set means I'm guaranteed to take a massive hit financially for the privilege of owning a new car, regardless. Whereas buying a few years old car should be less of hit unless somehow the ICE market completely crashes for whatever reason and that event seems unlikely.
Just to clarify, I don't envisage having to bail out of a lease deal early, I'd see the term through, more if I owned outright and decided to bail and I'm stuck with a huge lose due to a big crash in value (although that appears unlikely, particularly as buying a performance car like this.)
still appears to make more sense financially to buy one thats a few years old outright,and already taken the main depreciation hit. perhaps from main dealer and extend the warranty for peace of mind against catastrophic issues.
Like mentioned appears I misunderstood the end of term GFV and the way its set means I'm guaranteed to take a massive hit financially for the privilege of owning a new car, regardless. Whereas buying a few years old car should be less of hit unless somehow the ICE market completely crashes for whatever reason and that event seems unlikely.
Just to clarify, I don't envisage having to bail out of a lease deal early, I'd see the term through, more if I owned outright and decided to bail and I'm stuck with a huge lose due to a big crash in value (although that appears unlikely, particularly as buying a performance car like this.)
Edited by b80 on Saturday 14th November 07:25
Edited by b80 on Saturday 14th November 07:26
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