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WeR4

PCP a new finance approach for caravans

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Hi 

 

my first post so Hello everyone and thanks in advance for your replies

 

im very familiar with PCP’s having funded at least one of our cars every 3 years this way for as long as I can remember.

 

it seems that this option is now available for vans and I wondered if anyone had information regarding the RV’s (residual valuations} being calculated.

 

im thinking of buying in early 2019 and don’t need finance but may consider it as this is our first van and we may want to flip it in 2/3 years as we learn about the realities of the layouts etc

 

any insights welcome

 

cheers

 

andy

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Something like this is great if, like me, your new caravan ends up being the lemon to end all lemons. Then you can simply leave it to the finance company to sort out.

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Don't quite understand the value of PCP to non business users.

As I understand it, it's just a long term hire arrangement without owning an asset. The "Money Men" just love this set up.

I know of several people caught out by huge over mileage charges on PCP and in fact a guy with a Jag has it lying, unused, on his driveway.

His mileage was up well before the end of his contract and he can't afford the excess mileage charges.

Buying on straight HP gives the protection Briars refers too, but at least you own the goods at the end of the contract.

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Have been looking into PCP and cannot see any benefits from it! Plan to replace, or at least order our new caravan in about 12 months time! Will probably pay for it with trade in, cash ( credit card) and an element from a finance company . Should cover my back if it is a lemon!

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5 minutes ago, blondchaser said:

Don't quite understand the value of PCP to non business users.

As I understand it, it's just a long term hire arrangement without owning an asset. The "Money Men" just love this set up.

I know of several people caught out by huge over mileage charges on PCP and in fact a guy with a Jag has it lying, unused, on his driveway.

His mileage was up well before the end of his contract and he can't afford the excess mileage charges.

Buying on straight HP gives the protection Briars refers too, but at least you own the goods at the end of the contract.

 

Anyone who enters a PCP or any other leasing type deal with a silly mileage allowance is shooting themselves in the foot, just to get a lower monthly payment. If you set up the deal to cover your real mileage then there shouldn't be a problem. We've just handed back Mrs SDA's Twingo which had a 6000 mile a year contract over two years. It had 10,000 miles on the odometer when we handed back, so we were 2,000 miles under the allowance.

 

The problems come if you aren't sensible about mileage and pay a big upfront deposit as there's a probability that you won't see that sort of money available at the end of the deal for a further PCP into the future.

 

As caravans don't have mileage recorders I can only think that the condition inspections at the end of a PCP are quite strict.

  

 

 

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22 minutes ago, Steamdrivenandy said:

As caravans don't have mileage recorders I can only think that the condition inspections at the end of a PCP are quite strict.

  

 

 


This may be of help Black Horse Caravan Good Condition Guide

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The millage on PCP only comes into play if you hand the car back. If you trade it then the mileage reflects the trade in price. What difference this gives in lower residual value because of the extra miles verse the excess mileage charges I dont know.  

 

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11 hours ago, WeR4 said:

Hi 

 

my first post so Hello everyone and thanks in advance for your replies

 

im very familiar with PCP’s having funded at least one of our cars every 3 years this way for as long as I can remember.

 

it seems that this option is now available for vans and I wondered if anyone had information regarding the RV’s (residual valuations} being calculated.

 

im thinking of buying in early 2019 and don’t need finance but may consider it as this is our first van and we may want to flip it in 2/3 years as we learn about the realities of the layouts etc

 

any insights welcome

 

cheers

 

andy

I do not know all the niceties of PCP but would think that after 2 -3 years on PCP you have nothing or very little as a trade in on a later model caravan so a lot of money down the drain.   Plus the fact that you will be paying for something that you will only be using some weekends and maybe for one long holiday.   In essence out of a year you may only have 2 - 3 months actual use.   On HP after 3 years you will have a certain amount of equity in the caravan that can be used as a deposit on another caravan.  

However why don't you do like most of us did when we first started with caravans?  Buy an oldish second hand caravan with a layout that you like, use it for a about a year and then trade it in for something that you really like.   You will probably get back most of your money.

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The theory behind PCP is that the finance house sets a residual value that is lower than the expected value at the end of the contract. This means that if you return the van to them at the end it will have a margin between it's set residual and it's actual residual, which can become your next PCP's deposit. It also means that if you wish to keep the van you only pay them the set residual and that's a lower price than current market value. The finance house usually offers HP to finance that purchase, if you wish to use it.

 

If they get the estimated RV wrong and the actual value drops lower then you can hand back at the end but you won't have much for a further deposit. If the actual RV drops below the estimate you can hand back with no penalty and the finance house takes the hit when the  van is sold. 

 

Interest rates tend to be similar to HP, but you pay interest on less, so the monthly payments are lower than HP where you pay interest on the whole purchase price minus your deposit.     

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1 hour ago, Steamdrivenandy said:

Interest rates tend to be similar to HP, but you pay interest on less, so the monthly payments are lower than HP where you pay interest on the whole purchase price minus your deposit.      

I thought you paid interest on the whole amount borrowed including the FVP, but the monthly amounts are lower because the FVP is still to be payed at the end?

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2 hours ago, Steamdrivenandy said:

The theory behind PCP is that the finance house sets a residual value that is lower than the expected value at the end of the contract. This means that if you return the van to them at the end it will have a margin between it's set residual and it's actual residual, which can become your next PCP's deposit. It also means that if you wish to keep the van you only pay them the set residual and that's a lower price than current market value. The finance house usually offers HP to finance that purchase, if you wish to use it.

 

If they get the estimated RV wrong and the actual value drops lower then you can hand back at the end but you won't have much for a further deposit. If the actual RV drops below the estimate you can hand back with no penalty and the finance house takes the hit when the  van is sold.  

 

Interest rates tend to be similar to HP, but you pay interest on less, so the monthly payments are lower than HP where you pay interest on the whole purchase price minus your deposit.      

Taking into account the quality of some caravans the RV will drop like a lead balloon.   I wonder what would happen if you have to reject a caravan as surely that will throw a spanner in the works?

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11 minutes ago, Durbanite said:

Taking into account the quality of some caravans the RV will drop like a lead balloon.   I wonder what would happen if you have to reject a caravan as surely that will throw a spanner in the works?

 

The RV is based on the normal market value of a van, though slightly lower than they predict market value to actually be, to allow a deposit cushion. So the lead balloon (depreciation) is really almost the same as if you'd purchased it cash or HP. If you rejected the van you'd be in the same place as if it was on HP.

 

Payments are lower than HP because whilst you're paying interest on the whole amount borrowed, you're only pay the principal back on the amount minus RV/GFV. So if a van costs £20k after your deposit and has an RV of, say, £13k after 3 years,  the payments would be interest on £20k plus £7k depreciation, all added together  and divided by 36 for the monthly payment. After the three years you can choose to pay the £13k or return the van and walk away, or roll over to another new PCP, using any difference between £13k and the actual value of the van as part of a new deposit. With HP you'd pay interest on £20k plus £20k, all added together and divided by 36 and at the end you'd own the van. In the example the £13k equates to £361 per month which is the extra an HP deal would cost.

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1 hour ago, Durbanite said:

Taking into account the quality of some caravans the RV will drop like a lead balloon.   I wonder what would happen if you have to reject a caravan as surely that will throw a spanner in the works?

 

The finance companies are fully aware of the condition of caravans, after all they are the ones that have to deal with merchandise complaints, and sell on the ones that are voluntarily terminated.

 

If you successfully reject the caravan that is on HP or PCP, the finance company and dealer have to put you back in to a financial position as if the transaction hadn't taken place.

 

So unwinding of the finance deal and a refund of the deposit paid as shown on the invoice, that is why it is important that you are aware if the dealer has "rolled the figures back" on the invoice to show your PX at its trade value and reduced the selling price of the caravan, if the invoice shows the reduced trade value then that is all the dealer has to pay you as a returned deposit..

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15 minutes ago, Grandpa Steve said:

So unwinding of the finance deal and a refund of the deposit paid as shown on the invoice, that is why it is important that you are aware if the dealer has "rolled the figures back" on the invoice to show your PX at its trade value and reduced the selling price of the caravan, if the invoice shows the reduced trade value then that is all the dealer has to pay you as a returned deposit. .

You cannot stress that part enough as we got caught that way.   Luckily I still had copies of the original quote but it was still a very steep uphill battle.

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Next time you go for a vehicle ask the dealer the total price and he will be stumped and he is now conditioned to say "how much can you afford a month" rather than this will cost you a total of X amount over the next X years.

 

PCP is hugely popular with everyone as it not only allows consumers to have a regular new Vehicle at a lower monthly cost, provides Dealers with a new market of people who couldn't have afforded it beforehand and the finance companies with a profitable stream of income.   PCP market is worth more than the HP and Leasing market combined.   It will however collapse at some point and with the rise in Used cars on the market will drive down the Guaranteed Future Value further raising the amount you pay.  

 

Personally as a logical basis (and yes I have had PCP so its experience too)  PCP as a consumer is only useful for those people who have the money to waste on a new vehicle every few years.    was brought up in the age where credit was readily available but parents always tried to install the cant afford it cant get it attitude.   Now a days id rather get a Loan at a good rate and buy what I want than take out a PCP.

 

cautionary tale here:   We went to look at a Vauxhall car and the dealer was more interested in selling us a PCP on a used car than the Vauxhall advertised 0% interest on a new car.     wonder what commission he gets on PCP that drives him that way.  

 

 

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1 hour ago, BGB said:

cautionary tale here:   We went to look at a Vauxhall car and the dealer was more interested in selling us a PCP on a used car than the Vauxhall advertised 0% interest on a new car.     wonder what commission he gets on PCP that drives him that way.  

 

Sorry to burst your bubble but under the CONC Rulebook that sets out in a more plain language the various pieces of legislation they are responsible for regulating, it is against the rules for a salesperson or dealership to be incentivised to sell one product over another.

The rules state that in the interests of treating customers fairly, they should be offered a selection of products appropriate to their needs and for them to make an informed choice.

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And no one ever breaks the rules. ......

 

 

im sure the last prison I drove past was derelict. .....

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18 minutes ago, BGB said:

And no one ever breaks the rules. ......

 

 

im sure the last prison I drove past was derelict. .....

 

You can't paint everyone with the same brush, you have a limited understanding of this, finance and FCA is part  of my everyday job.

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Posted (edited)
5 minutes ago, Grandpa Steve said:

 

You can't paint everyone with the same brush, you have a limited understanding of this, finance and FCA is part  of my everyday job.

With all due respect.

You don’t know me and you don’t know my understanding of consumer finance.  

And you don’t know every one of the salesmen within the dealer network and what they think.

 

I had just conveyed a PERSONAL Experiance that happened last weekend at a dealership I was in and my assesment of that experiance.

 

but please take the high road and I’ll go back to putting on my tin foil hat and continue to take my salary from the industry you assume I know nothing about.  

Edited by BGB
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