tempest501 said:
Has anyone here done PCP before what happens at the end if you trade for the same car but new, do you have to put a big lump sum deposit down again?
I've never done one but can explain it as thus;
The Guaranteed Minimum Future Value (GMFV) is approximately 80% of the Glasses guide price for the car given the mileage/ spec you are looking at, so at the end of the term you have the following options, some of which are not described in the bumf;
1) Give the car back and walk away - nobody ever really does this as the dealer will mark down every dink, mark, scratch and mile over the agreed amount and hit you for it.
2) Buy the car for the GMFV and keep it.
3) Trade it against another from the same manufacturer - they will offer you the Glasses valuation so you have approximately 20% 'equity' in the car - so imaging the GMFV you agreed to was £4,800 they'd expect to be able to offer you £6,000 so that's £1,200 to put into the next car as the deposit - they are keen to do this as it creates a pipeline of revenue for the rest of your driving career and people I know who use PCP's like this; the fact you've been building that up and paying interest on it for three years doesn't seem to bother people. Also, in this case so long as all four wheels point in the same direction the dealer won't care much about the condition.
4) Trade it against another car from a different manufacturer - they will, in order to get your busienss, offer you the Glasses price pay off the finance (GMFV) and use the equity in the same way as described above; people don't always think of this as an option though.
5) Buy it and sell private - this is the best way to get money back and can pay real dividends; the GMFV is £4,800 but you could sell private for £2,000+ more, a bit of work but worth it.
What most people don't realise is the equity being built-up gives them a chunk towards the deposit; most people could find an extra £1,000 to get on the merry-go-around again but nearly £2,500 feels sharp.
Personally, I can't get my head around paying for something I'll never own which is why I've always done cash or a bank loan (based on circumstances at the time) but somebody cleverer than me once said 'own assets, lease liabilities' and cars are not assets but depreciating lumps of metal so fall into the latter catagory. My wife's cousin gets a new Audi before the service is due on each car (the last car he serviced was a 2005 '05 Passat 2.0TDI which he kept for three years...), he just budgets £450 per month and then does a deal every 12-18 months, the 'equity' he has in the car defines what car he moves into (currently he is in an A4), it doesn't bother him that he doesn't own it as he can drive a car that he otherwise couldn't afford but I'd hate to think of the money he's spent over the years, but then the depreciation I've wasted is fairly large too. I just prefer saving and paying cash.
