AnyBody Paying FDor Their Mini Using The PCP Finance Scheme??

[PortRhombus]

Iv opted to pay for my new Cooper using the PCP scheme instead of paying for all of the car straight away or taking out a dirty loan.

Is thier anyone else who has used this as a payment method and what did you think of it?

Did it work for you in the long term?

[tagheuer]

I work in advertising and do a lot of Car adverts. This is the only way to buy a car these days if you are going to change the car every three years. You pay your initial depsoit Say £1500 for example then pay £320 a month for 3 years and your final payment is £6500, but the actual value of the car will be £10500 (cooper S) giving you a £4000 deposit to put down on your next brand New Mini/BMW what ever.

[PortRhombus]

Yeah it does seem like an excellent way to purchase a car. But then I confuse my self. For example.

I bought my old MiniOne for 13000, after two yeahs I could sell for 10000. (3000 loss over 2years)

Using your example....
Buy my new Mini using PCP, 1500 deposit, 11500 of monthly payments over 3 years. So Iv paid 13000 all together so far.
If I only get 4000 back, so (overall loss 9000 over 3 years.)

Its these figures which are giving me second thoughts, Is my interpretation correct?

[tagheuer]

When you go to the dealer he will ask you what you want to pay each month 'don't tell him' just tell him you have a £1500 depsoit. He will then come back to you with some figure for a monthly payment (usual very inflated figures). If your car costs £17000 in total then you put down £1500 leave you £15500 to pay. The car has a GFV (garanteed future value the manufacturer sets) this is usual a lot less than the car is worth say £7000 (in 3 years) that amount is then taken of the money you owe leaveing you with £8500 you only pay interest on this amount. So with this example you should only be paying £310 a month on a apr of 8.7%. The dealer will start at around £345 a month you then tell him you only want to pay £300 you will get him down to £310 a month. So over 3 years you are only paying £11160 and at the end of the 3 years your car won't be worth only £7000 (gfv) because mini's hold there value so well the car will be worth at least £10000 giving you a nice £3000 deposit for your next car.
This only really works if you are planning on getting rid of your mini in 3 years and get a nice new one.
The problem with PCP in the past was that the GFV was set to high and when people were bringing there cars back the car was only worth the GFV and they had no deposit for the next car.

[PortRhombus]

When you say my dealer will start at around £345 a month for example, then I say I want to only pay £300. Are you saying that I should ''barter'' with the dealer to get my monthly payments down? I thought there was a fixed APR?

[Toasty]

I'm going to chat to my dealer about the same thing this week and will pass on any info. I've had my car for three years and I had used PCP to finance it.

[tagheuer]

Sorry not been on over the weekend.

The dealer has an APR that is set by mini finance but he will always up that APR if he thinks he can.
The dealer always has movement in a deal, so yes barter away. He wants you to buy the car.

[Hat]

you need to check all the figures very carefully on these deals. it makes it easy to buy a new car but typically its the most expensive method. its easy to get sucked in with a low monthly payment but in reality to make these deals work you need to pay as high a monthly amount as you can. The MGFV, or 'final value' isn't a value at all, its the amount of loan outstading that you still have to pay. with depreciation on the mini you should be ok but in the past people have ended up in a negative equity situation with the car worth less than the outstanding amout to be paid. basially you are taking a risk based on the future value of the car.

Also they are normally mileage limited as the dealer is also taking a risk based on the car's condition in 3 years time. there can be heavy penalties if you go over the agreed mileage (up to 10p per mile). The more miles you intend to do, the higher the monthly premium will be.

Another consideration should be what will you want to do in 3 years time? Delaer PCP's are fine if you intend to stay with the same brand but what if you don't want another mini? you still have to pay off the residual amount & usually within a month of the end of the agreement. It would be worth looking at what the banks are offering - they used to do PCP-type loans which have the advantage of not tying you to one brand.

One big word of caution - until you pay that final residual/MGFV amount you do not own the car. This is basically hire purchase & the car is owned by the finance company, not you. Check out the normal hire purchase rates - they could be cheaper. Also with HP you have the option of terminating the deal early without penalty if your circumstances change, you don't get this with PCP. With a personal loan you owe the finance company money, but you own the car from day 1.

[tagheuer]

Like I said before "This only really works if you are planning on getting rid of your Mini in 3 years and get a nice new one." & "Mini's hold there value so well the car will be worth more than GFV".

Plus
Quote from HAT "The MGFV, or 'final value' isn't a value at all, its the amount of loan outstading that you still have to pay."

"GUARANTEED Future Value" so if the car is worth less than the GFV then Mini will still take the car back and you don't have to pay anything just hand the car back and walk away. The only problem is you have to find another deposit for your next car.

[tagheuer]

Quote: Originally Posted by Hat

Its easy to get sucked in with a low monthly payment but in reality to make these deals work you need to pay as high a monthly amount as you can.

No you don't! because the GFV is a set figure this amount will not change no matter how much you pay each month, so you want to pay as little as possible. And pay as much deposit as you can afford to bring those payments down.

[Hat]

you need to stop thinking about the GFV being anything to do with the value of the car - its not. its an offset amount of the loan which is set at a limit which, if the scheme works properly, should be around £2-3k less than the residual value of the car after 3 years. This then allows you to trade in the car with a £2-3k deposit for your next one.

The GFV isn't a set amount - you can set it as low or as high as you like. you should aim to set it as low as possible so that the differential between this amount & the actual value of the car is nice & big so that you have a bigger deposit, or if the scheme works really well, you can pay a deposit, get a new car & walk away with cash in your pocket.

[tagheuer]

Quote: Originally Posted by Hat

The GFV isn't a set amount - you can set it as low or as high as you like. you should aim to set it as low as possible so that the differential between this amount & the actual value of the car is nice & big so that you have a bigger deposit, or if the scheme works really well, you can pay a deposit, get a new car & walk away with cash in your pocket.

THE GFV IS A SET AMOUNT IT WILL NOT CHANGE!

MINI SET THE GFV, ASK YOUR DEALER!!!!!

The only way it changes is if you change your period. And nobody would have one for longer or less than 3 years.

[Hat]

calm down mate, no need to get all defensive its just a discussion

i still stand by my original comment that PCP is probably the most expensive way of buying a new car & there are risks involved. Don't be tempted by low monthly payments - you'll just end up paying later.

Just my opinion, don't shoot me

[tagheuer]

Your handing out advise that has not be researched properly.

[Hat]

even if in your opinion my 'advise' has not been researched, when in fact it's based on personal experience, there is still no need to resort to rudeness to get your point across. As i said this is supposed to be an open discussion - if you can't manage to have a reasoned exchange of information without resorting to this kind of response then i suggest you don't bother in the future.