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Confused about end of PCP options

Last post Thu, Jul 16 2009, 11:16 AM by jjnaughalty. 3 replies.
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  •  Thu, Jul 16 2009, 11:16 AM

    Re: Confused about end of PCP options

    No probs ;-)
    • Post Points: 5
  •  Wed, Jul 15 2009, 11:56 PM

    Re: Confused about end of PCP options

    Thanks JJ - this really clarified for me. I thought his story was too good to be true!

    SH

    • Post Points: 20
  •  Wed, Jul 15 2009, 9:59 AM

    Re: Confused about end of PCP options

    No, he's either incorrect or you have misunderstood what he was saying.

    Nobody knows what the car's value is going to be at the 3 year point and this is the beauty of a PCP agreement. The MGFV is a predicted value at that point.

    When you get to the 3 year point, you still owe £10000. If your car is worth £9000, you would need to fork out a grand to buy your way out of the negative equity under normal circumstances. Under a PCP agreement, the Minimum Guaranteed Future Value takes car of this leaving you with either

    a) A nil equity balance if your car is truly worth less than the MGFV or

    b) A positive equity balance if your car is worth more than the MGFV.

    Guaranteeing against negative equity providing the condition and mileage is as set out in the agreement.

    So, if, in 3 years you buy a car for £30000 and your car is worth £8000, you finance £30000

    Alternatively, if the car is worth £13000, you finance £27000 because you have positive equity balance.

    PCP is there as an alternative to 5 year HP for those who need to be able to change the car at 3 years but cant afford payments to own the car outright over 3 years.

    It is difficult to explain this face-to-face, never mind on a forum but I hope I have cleared this up for you.

    Remember that all of these values are trade values. If you can afford to and, if the car is worth a good deal more and you can be bothered with the hassle, pay the MGFV and sell the car privately - achieving the retail value. Risky, yes but this is something you will have to assess at the time dependant on market trends then.

    JJ

    • Post Points: 20
  •  Sun, Jul 12 2009, 3:14 PM

    Confused about end of PCP options

    Please forgive my ignorance on the PCP front - I'm a little confused by the advice out their on the net.

    I am planning on trading my current car in for a new one and am looking to finance it on PCP terms. The dealer has offered me £10k as a MGFV after 3 years. On the internet, everywhere states I have 3 options:

    1. Pay the money, make the car mine.

    2. Hand the car back.

    3. Trade in for a new car; if the car is worth more than the MGFV, then that can be put towards deposit.

    Point 3 causing me some confusion. The Audi car dealer I saw today explained that after 3 years, my car would be worth at least £10k and that would be the value of my car should i want to go ahead and part exchange. In other words, if my next car is £30000, I would only have to finance £20000 as I have put my current car down as a deposit for the part exchange.

    In addition, he mentined that if my car is worth more than £10000 in 3 years time (say, 13000) - I would get a cheque for £3000 in addition.

    Is this correct?

    I would be very grateful if someone can clarify this for me. Thanks!

    • Post Points: 20