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    What is the benefit if you want to own the car long term as you need to pay the lump sum in the end.

    I don't understand the advantage of buying a car over PCP. Can someone explain this?
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    (Original post by Student10000)
    What is the benefit if you want to own the car long term as you need to pay the lump sum in the end.

    I don't understand the advantage of buying a car over PCP. Can someone explain this?
    Why would you want to take out PCP?
    Depending on the policy, with some PCP deals, you don't get to buy the car at the end- you never own the car. And some have things such as mileage limits etc.
    And no matter what finance deal you have, you end up paying more for the car than if you buy it outright.
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    (Original post by Student10000)
    What is the benefit if you want to own the car long term as you need to pay the lump sum in the end.

    I don't understand the advantage of buying a car over PCP. Can someone explain this?
    Low to no upfront cost, with monthly repayments - the drawback being an increased cost over the term.
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    As others have said, the monthly cost while you have the car is lower than "normal" hire purchase.

    Hire purchase and PCP are actually the same type of credit agreement, the difference between them is the way in which the cost of the car is spread.

    Hire Purchase = higher monthly repayments but (generally) no balloon payment at the end if you want to buy the car. By the time you've finished the agreement you've finished paying for the car. So it makes sense to go for normal hire purchase if you want to own the car at the end.

    PCP = lower monthly repayments but there will be a balloon payment based on the estimated value of the car at the end of the agreement. It makes sense to go for this if you want to change car at the end of the agreement. This is what most people seem to do.

    So basically there isn't much benefit to going for PCP if you want to own the car at the end, because unless you've saved up you're not going to be able to afford the balloon payment. However, some car finance companies will refinance your agreement at the end if you want to keep the car and you can't afford the balloon payment. What this means is you take out a loan to cover the balloon payment, and you then have another loan to pay off.
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    PCP is advantageous (apart from the mileage limit) if you don't want to save to buy the car upfront, and frankly I wouldn't pay upfront anyways nowadays because by the time you drive the car out of the dealer, you've lost a large sum of money. With PCP you can pay an initial deposit, as well as part exchange and any deposit contribution the dealer may give to you, then pay monthly payments for a number of months (24. 36, 48 months) and at the end of the agreement there is a GMFV (basically a Guaranteed Minimum Future Value) that is the final lump sum.

    With PCP there are normally 3 options, keep in mind during the contract agreement, you will not own the car.
    - First option at the end of the agreement is to hand the car back, no faffing around, hand it back and walk out to another dealer.
    - The second option is to part exchange the vehicle on PCP for a new one (aka replacement). The dealer will recalculate the value of the vehicle and if the value is above the GMFV, you can use that as a deposit towards the new vehicle. (e.g. so your GMFV is 6000, and when they recalc the value, it comes to 7500. You'd have 1500 as a deposit on the new vehicle) This is probably the most used option as it keeps you in a new vehicle every few years.
    - The final option is to pay the lump 'GMFV' value. I believe that some dealers will refinance the car if you are struggling to afford the GMFV value.

    The main question is do you want to keep your new car or replace it every so often (like a lease) without having to deal with the depreciation.

    Hope this helps


    (ps someone hire me as a sales executive lol i do this well)
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    In theory - and if you get a decent deal - you only pay what you would lose in depreciation if you bought the car instead. The difference is you don't need to save the money first.

    For people who just need *a* car, they're an easy option. Often servicing will be included so a set monthly payment means they get to drive a new car and replace it every 2-3 years.

    It's very expensive though and I'm not sure it'll ever be for me. Buying a 1-2 year old car outright and keeping that for 2-3 years would get you similar experience but for a lot less money.

    Luckily with so many PCP agreements the used car market is absolutely flooded with new-ish low mileage cars. Most are pretty poorly specced but at least their histories tend to be solid - they will all need to be serviced correctly and generally at main dealers.
 
 
 
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