PCP vs shedding
Discussion
I was idly looking at PCP options instead of shedding. You know, get a new car, pay about £2k a year, give it back after 48 months.
I'm not seeing anything other than basically paying more than the cost of a car but as a loan under the guise of PCP. I mean, I might as well just pay the amount outright rather than pay 6% interest over 4 years.
Am I looking in the wrong place?
I'm not seeing anything other than basically paying more than the cost of a car but as a loan under the guise of PCP. I mean, I might as well just pay the amount outright rather than pay 6% interest over 4 years.
Am I looking in the wrong place?
With PCP you are essentially paying for the depreciation over 3-4 years plus some risk money and margin.
So, that's going to be about half the cost of the car, give or take. Plus profit. Plus an amount to cover any tomfoolery about the "guaranteed future value".
Whenever I've seen cheap headline PCP monthly figures, there's usually a footnote that this is the monthly cost if the downpayment is equivalent to 9 months, you keep it for 48 months, and the mileage is 8,000pa. So the £200 per month is actually more like £4k for the first year.
It's been a while since I looked properly at PCP but last time I did it was clear there was an aim to lock people in to the brand by giving them a sweet deal to trade in for a new PCP agreement at the end of the 3 years. "You'll forever surf the new car wave", the man in a shiny suit said, unironically.
So, that's going to be about half the cost of the car, give or take. Plus profit. Plus an amount to cover any tomfoolery about the "guaranteed future value".
Whenever I've seen cheap headline PCP monthly figures, there's usually a footnote that this is the monthly cost if the downpayment is equivalent to 9 months, you keep it for 48 months, and the mileage is 8,000pa. So the £200 per month is actually more like £4k for the first year.
It's been a while since I looked properly at PCP but last time I did it was clear there was an aim to lock people in to the brand by giving them a sweet deal to trade in for a new PCP agreement at the end of the 3 years. "You'll forever surf the new car wave", the man in a shiny suit said, unironically.
Hoofy said:
I was idly looking at PCP options instead of shedding. You know, get a new car, pay about £2k a year, give it back after 48 months.
I'm not seeing anything other than basically paying more than the cost of a car but as a loan under the guise of PCP. I mean, I might as well just pay the amount outright rather than pay 6% interest over 4 years.
Am I looking in the wrong place?
PCP is a loan with a deferred balloon for part of the capital to be repaid. You pay interest on the total amount of credit but only part repay the capital thus reducing the monthly repayments.I'm not seeing anything other than basically paying more than the cost of a car but as a loan under the guise of PCP. I mean, I might as well just pay the amount outright rather than pay 6% interest over 4 years.
Am I looking in the wrong place?
It can be a great tool when fully understood but is likely to lead to overall higher acquisition cost than buying outright unless 0% finance.
Venisonpie said:
PCP is a loan with a deferred balloon for part of the capital to be repaid. You pay interest on the total amount of credit but only part repay the capital thus reducing the monthly repayments.
It can be a great tool when fully understood but is likely to lead to overall higher acquisition cost than buying outright unless 0% finance.
Right, so is it not actually better than shedding? (Paying £1k-£2k a year.)It can be a great tool when fully understood but is likely to lead to overall higher acquisition cost than buying outright unless 0% finance.
Hoofy said:
Right, so is it not actually better than shedding? (Paying £1k-£2k a year.)
I think, as others have said, that it can work in the right circumstances. Sheds are abnormally expensive currently and that skews things currently. On the PCP side you want to be renting the absolute cheapest car and the one that at that moment in time the manufacturer wants to shift a load of and I'm not sure that's happening much at present either. For me, the true pleasure of the shed isn't so much the money aspect but the freedom of not caring. The idea of borrowing a cheap car for a couple of years to use it as a cheap car would be used but having to return it looking like a new car is just far too much hassle. For me, I'd rather have the worry of me breaking the shed than some random punter scratching someone's car I was responsible for.
My latest shed is a £2.5k Gold diesel. It's easily saving me £200/month in fuel so while I had to pay way more than its worth, I'll get my money back inside of 12 months. The maths will suffer if I pick up a bill but bills would be just as likely if I were to use any of the other cars more.
On the whole, I favour shedding over renting new for an economical, basic, no frills runabout.
Hoofy said:
Venisonpie said:
PCP is a loan with a deferred balloon for part of the capital to be repaid. You pay interest on the total amount of credit but only part repay the capital thus reducing the monthly repayments.
It can be a great tool when fully understood but is likely to lead to overall higher acquisition cost than buying outright unless 0% finance.
Right, so is it not actually better than shedding? (Paying £1k-£2k a year.)It can be a great tool when fully understood but is likely to lead to overall higher acquisition cost than buying outright unless 0% finance.
I PCP'd my Alpine for the following reasons:
Helped secure a discount on the capital purchase
Protection against a falling market whilst being able to take advantage of a strong one come the end of the repayment period
Finance rate was competitve
Allowed me to keep my savings for other stuff (not investment, home improvements etc).
Due to the overall strong market and Alpine's holding their price the market value never really dipped below the price I paid for the car so at any time during my ownership I could sell up and get my cash back having only really paid interest charges. As it happens it was written off, the insurance company paid out the market rate which was within a few £100 pounds of what I paid for it. Overall cost to me for a brand new £54k sports car was 18 mths interest and a service. Totalled up probably what you'd pay for a good shed.
I bought my current shed five years ago for £1200. In that time, other than an injector for £80 I have only spent money on servicing (cheapest oil and filters from ebay), wipers and a set of tyres.
I could scrap it for £400 today which would mean I lost £800 in depreciation in 5 years.
£30 annual road tax and 60 MPG. Be warned, it ruins you for ever owning anything remotely expensive ever again
I could scrap it for £400 today which would mean I lost £800 in depreciation in 5 years.
£30 annual road tax and 60 MPG. Be warned, it ruins you for ever owning anything remotely expensive ever again
Hoofy said:
Right, so is it not actually better than shedding? (Paying £1k-£2k a year.)
It's down to personal preference and affordability upto a point too. Many people want to own a new car in perpetual cycles and PCP is a way of having the shiny new german car on the drive at an affordable payment.
Shedding is for people who don't care about all that and just want transport and will be happy to run the risk of the odd mechanical repair.
Horses for courses.
Joey Deacon said:
Be warned, it ruins you for ever owning anything remotely expensive ever again
This is very relatable. Having got too used to shedding, and it proving hugely cost effective for me, looking at even a great deal on a new car just seems ridiculous for my situation. My sister recently bought a Dacia Sandero and even the quite cheap monthlies on that only further enforced my view. If you shed smart, and buy cars that are unlikely to lose much value over a year, or with 15k extra miles on, then you can probably sell it for more or less what you paid for it. It's possibly the closest you'll get to free motoring, minus the cost of fuel, servicing and consumables.
That said, my circumstances allow me to shed. If I still needed my car to commute, then I might not be so keen on it.
I find a half-way house is the best of both worlds. Buy something 5 years old or so with a low interest personal loan. That way, the car has probably already lost 2/3rds of its value and you still get something reasonably modern and reliable that shouldn’t be breaking down all the time, at a fraction of the cost of a pcp deal and you can do as many miles as you want and don’t have to give it back after several years, so don’t have to worry as much about dents & scrapes etc.
georgeyboy12345 said:
I find a half-way house is the best of both worlds. Buy something 5 years old or so with a low interest personal loan. That way, the car has probably already lost 2/3rds of its value and you still get something reasonably modern and reliable that shouldn’t be breaking down all the time, at a fraction of the cost of a pcp deal and you can do as many miles as you want and don’t have to give it back after several years, so don’t have to worry as much about dents & scrapes etc.
Plus you can sell the car at any point, pay the loan back and start all over again. Given used car prices right now you might even make a profit on the car to cover the interest. Tend to agree above, it does ruin you once you've gone shedding as it's so cheap, if you pick sensibly.
I made the jump last year and had a few sub £1000 cars, yes there are decent cars out there, despite the seemingly higher prices for some, you just cant be fussy.
Good luck with what you do, but since owning a car worth so little, but still manages the A-B comfortably, it's totally liberating. Give it a go
I made the jump last year and had a few sub £1000 cars, yes there are decent cars out there, despite the seemingly higher prices for some, you just cant be fussy.
Good luck with what you do, but since owning a car worth so little, but still manages the A-B comfortably, it's totally liberating. Give it a go
Gassing Station | Car Buying | Top of Page | What's New | My Stuff