PCP ends in Spring, Stick ( buy ) or twist?

[Keith666]

Our Reims edition is coming up to three years old in early spring next year. It’s on a PCP plan.We have had a fabulous time in her, only 14500 miles and in good shape.
This is the rub, pay the ballon payment, buy out right
OR use the ballon payment funds, with some equity in the car to buy a newer ( not new) F type…..
The pros & cons
1) The interest rates are horrendous.
2) paying of the finance, no monthly outlay
3) car needs mot and out of warranty
4) no previous owner, so we know it’s good
5) The specification on this model is good
6) chance to upgrade to a P450 V8
Any thoughts you have, most appreciated .

[scm]

If you know the car, and still like it, you'd be a bit daft to swap it for a newer unknown one. But an upgrade to a V8 ... mmm.
Good luck with your choice, whatever you decide!

[jagseven]

First thought is what is the balloon payment vs value of the car - given the recent fall in car values you don’t want to be paying more than the car is really worth (not necessarily what the dealer might tell you it is worth!)

[cj10jeeper]

Well if you want an upgrade to a V8 then that’s very different to swapping to a newer similar model and a good reason to do it at the end of the PCP.
Aside that I cannot see any reason to swap. It’s a barely run in known from new car. All you’d be doing is taking on another raft of credit and related interest, more depreciation and a second hand unknown car. I’d stick with the car you know and clearly like.

IMHO, as having been in aspects of consumer finance all my life, PCP’s are the crack cocaine of car purchasing. Interest on the decreasing balance and the balloon for the full term. Limited exit options for most people and at some point, to escape they need refinancing for several years or pay off the PCP from savings (which few have) and keep the existing car. For many people they are a way to get into cars they cannot afford and then struggle to get off the treadmill. They are a delight for dealers though..

[MikeM]

Agree with other comments, first what’s the buy out versus a trade in value. If the car is good, you like it and the numbers work for you keep it and take out extended warranty cover for peace of mind. Also agree re PCP, the Devil’s finance solution.

[scm]

For many people they are a way to get into cars they cannot afford ....

I've long held the view that a lot of people buy the cheapest car they can't afford.

[cj10jeeper]

For many people they are a way to get into cars they cannot afford ....

I've long held the view that a lot of people buy the cheapest car they can't afford.

Yes, very true. Even in my early days in finance we would convert anything to monthly or in some cases weekly payment as few people really cared or understood about total costs, interest, etc.
Listen to any car dealer and they just want to know your monthly budget and the PCP is how they can give a nice low number.

Real issue is the balloon payment makes the repayment during the initial term so much less, so to your point you can stretch even further into the unaffordable..

[simpleR]

Although I agree with the comments about PCP it does depend how you think of it.

I PCP'ed cars throughout the late 2000's and 2010's because I had a car allowance and just considered that money for a car. 1x month upfront to start with and considered it as money I never had and swapped cars every 2-3 years (as soon as there was equity because we had to PCP them over 10k miles for work but we never did that many miles). So never paid a balloon payment at the end or any deposits, just picked up a new car. These tended to be pre-registered cars with no mileage as well.

My Golf R was 18 months old which paid for the deposit on the F-Type in 2017 but I chose to buy the F-Type at the end mainly because it was £21k left in 2021 and they were going for £40k+ on autotrader at the time and still are £35k ish now. I kept it because I don't know what I would replace it with!

[scm]

I kept it because I don't know what I would replace it with!

That's the dilemma - we're trapped!

[Keith666]

Thanks for all your thoughts, we have decided to pay the ballon payment and keep it a few more years, and enjoy it. We will have no regular monthly outlay
We can put a bit by for maintenance, so happy days….. but having had a day in a V8, it’s an itch I’ll have to scratch in the future