Personal Contract Purchase

If you intend to regularily change your car, ie. every three years, then it can be a good way to use a car for minimum monthly outlay. Do not use the scheme tho' if you want to keep for 5 yrs but buy car for the GFV at the end. There are pitfalls, but don't worry about setting mileage too accurately at the start. There are many ways around that.

How? I am seriously thinking about getting a mini on a pcp deal but my mileage is quite high & is pushing up the monthly price

I've had my last couple of cars on a pcp deal, I find them pretty good. The mileage is onyl really an issue if you decide to hand back the car at the end and it's grossly over what you said it would be e.g. if you said you'd do 14,000 miles and you end up doing 20,000 miles. It puts the value that the garage can sell your car at down. However, if you hand the car back at the end of the 3 years and get another car on a pcp deal, they tend to overlook the mileage...

does maintenance costs fall on me or are they included?

in other words, a breakdown in the 3 years?

im liable for scratches aint i?

Servicing is down to you yes, but most new cars are now 2 years/20k service intervals so you probably only need one service in the time you own the car.

breakdown cover is normally provided for the term of the PCP

Scratches - up to you. The only issue you will have with scratches is if you want to hand the car back. The finance company will be looking for it back in A+ condition and will charge through the nose for putting things right. If you trade the car in, then the scratches will affect the PX value

If the agreement ends 1 month early, then no mileage penalty is payable. As said before, the mileage only comes into play when you are using the option of "return to finance company". If it's PX'd or else, then no mileage penalty, however the value of the car at say 40k is less than a car of 30k, but this will still work out cheaper than paying excess mileage charges. Try putting it to 6k mpa and see what that does to the monthlies.

cheers for help guys

dunno what ill do to be honest

im thinking pcp beats a loan tho?

It depends on what you want out of it at the end of the day. A PCP gets you a brand new car every three years, but you never actually own the car outright, it's more like you're leasing it, and you don't get any money back for a p/x when you move on to another car.

Depends on whether you're bothered about ownership, or usership.

I was previously an underwriter for Bank of Scotland for motor finance and PCP can be a good idea as mentioned above.

Pro's
- Can change the vehicle more often
- Can potentially have a higher spec car due to monthly payments being lower than a conventional HP agreement.
- The GFV (Guaranteed Future Value) figure you need to pay at the end of the initial period is just that, guaranteed. So if the backside falls out the market and the car is only worth £1k and you owe say £3k, you can simply give the vehicle back.
- The GFV is calculated usually on 85% of the predicted price. This protects the finance company from having to sell the car at a loss if they get it back. So potentially if you owe £2550 on the car at the GFV stage, it should be worth around £3k, giving you a deposit on the next car you buy.
- You NEVER have negative equity on the vehicle (when you owe more than what the car is worth)
- The excess mileage charge (the cost for number of miles you go over the agreed amount) is only paid if you go over the agreed mileage and hand the car back. If you keep it, then you don't pay it.

Cons
- You are constantly looking to stay under the agreed mileage which spoils the enjoyment of holding the car.
- At the end of the agreement you have to pay your GFV if you want to keep the car, so it's either saving the balloon payment amount or taking out another loan to pay for it (prolonging the overall agreement length)
- If you decide to hand the car back you have to pay for any mileage over the agreed amount (usually between 6p and 15p per mile depending on engine size.

With regards to someone else's comment about handing the car back in A1 condition, at Bank of Scotland the rule we employed was that if you were handing a 3 year old car back to us, then we expect the car to look 3 years old. So if there were a couple of minor scuff's we weren't that concerned, however if there was a huge dent we would look to you to pay for the repairs.

Overall, PCP is a decent way to go, I have done it in the past because I know a lot about HP, PCP, Lease Purchase etc and find it the best one.

For example I bought a 307 using PCP. I paid my balloon (GFV) of £2100, however it was valued at £3500 meaning I had £1200 equity on a new car.

PCP means you should never have negative equity, and with the way car valuations are dropping nowadays that's a bonus.

If you're keen on getting a mini, you're picking an excellent car equity wise as they very rarely lose a lot of money in value.

Hope this information helps, and if you need any other help drop me a PM. I can help with the legal requirements from the dealers side before you sign, and give advice on flat rates, APR's that you should be charged. Also, any tricks of the trade the dealers employ I can help with combatting them.

Cheers

However if you know you have to pay your final payment for example in December, you can take the car to a dealer in November and get them to value it. If they offer you more than what the car is worth you can part ex it and use the profit as a deposit. PCP gives you the same legal rights as a HP, it's just set up differently.

can you give some examples of the sort of monthly costs you might have to pay on some sort of more popular cars say audi/bmw/vw etc

I wouldn't be able to as I don't work for the bank anymore so don't have any access to the systems that generate the future values.

It all depends on the finance company as well. For example if you went direct to a BMW/Audi/VW they would probably put it through their own finance house, and they would give you a higher GFV as they are confident in their product being worth more than what a bank would value it at.

Additionally, it would depend on the APR you are being charged. There's plenty of room for negotiation when it comes to this, and the big thing everyone should remember is that it's the dealer who sets the APR, not the finance house. The finance house will ask for a minimum APR to cover their own costs/profit etc, but it is very low (usually about 6-7% depending on the vehicle). The dealer will put something on top of it which is their profit (the garages and the salesmans commission) and they will 99% of the time say their hands are tied by the finance house. It's rubbish, the more they charge the more they earn in commission. So if you get them to lower it you get a better deal, they make less commission. It's harsh but if you see what some dealers make per sale it can be ludicrous. I've seen salesmen ask for £2000 commission on £7000 cars in the past, which we rejected hands down.

on http://www.newcar4me.com/

im thinking HP is better?

ok yes you NEED to purchase it but no mile limits no mile surcharge.

I think im right in saying they maintain it while under warrenty? thats what HP is aint it?