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I've just seen an advert for a new car on 3 years 0% interest finance, which sounded good until I saw that there was an annual mileage limit of 6000 and an excess mileage charge of 14.9p. Is this sort of thing common? Why is there a mileage limit when, after 3 years, the car will be yours?
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>> Why is
>> there a mileage limit when, after 3 years, the car will be yours?
>>
Because it won't be.
HP vs PCP vs LP - they all say P="purchase" but mean different things.
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A few weeks ago, just out of interest, I clicked on an advert here that appeared to offer a Bentley Continental for £2000 a month over three years. A bargain I thought.
The details required a £36,000 trade in or deposit and another £60,000 at the end of three years. Suddenly not such a bargain.
And they wanted 60p a mile over 5000 miles a year.
All of course subject to status!
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what car was this on ?
I am wondering if its a main dealer thing.
if it is then there is no point in buying brand new.
a limit of 6000 miles per year is a joke.
everyone but the OAP doing a weekly shop run would go over that allowance.
I think a few owners will be fuming in a few years time.
reading between the lines makes me think the motor manufacturer has no faith in their products.
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It's a technique to shift brand-new stock while trying to disguise the fact that 60+% of the value is gone after 3 years.
If you can count it doesn't work.
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>> I think a few owners will be fuming in a few years time.
>> reading between the lines makes me think the motor manufacturer has no faith in their
>> products.
>>
Nothing to do with the quality of the product - its all to do with residual values. Lower the mileage the more retained value, the more attractive the finance deal
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Someone in the family has bought a BMW X3 2.0d auto, right nice top of the range job, with God knows how many extras...nice bit of kit.
However, it's on a PCP with an 8k mileage limit....so every now and then, they have to take the family hack on long journeys instead, to keep the mileage down?
Why not do it properly and have a 12k limit in the first place. If you've got something decent in the driveway, wouldn't you want to take that on a long trip?
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People still have strange attitudes to mileage, so by some standards the X3 family are acting almost rationally. There was a discussion, here or elsewhere - got quite emotional as I recall - started by someone who'd got something respectable but unspectacular - a Golf, I think - and wanted suggestions for something old and ratty he could drive to work to 'avoid putting miles' on the driveway ornament.
Years ago I regretfully told my brother that some kitchen utensil he'd given me had at last expired after years of use. His answer was not to be so silly - he'd have minded far more if the thing had never been touched. A car may cost more but the principle is just the same: why own (or lease) something you can't - or won't - use?
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My experience with leasing is that the difference between 10K and 15K PA is quite small.
On a VW up is £11 a month, X3 about £25, Mondeo £14
Would imagine that PCP's are similar.
The excess charge for the C5 was 4p per mile, so even at 5K over it would have only been £200
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>> what car was this on ?
Volvo V40 tinyurl.com/bmfj4ld
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>> >> what car was this on ?
>>
>> Volvo V40 tinyurl.com/bmfj4ld
I've just had my calculator out and 36 payments of £191.25 comes to £6885, yet the amount to be financed is £14,700. What does GVF £7811.50 mean?
It appears I know nothing whatsoever about buying cars on finance. I've only ever bought one on finance ~ it was 0% over 12 months and there were no other charges.
Last edited by: L'escargot on Wed 22 Aug 12 at 10:49
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Guaranteed Final Value - ie the amount you can buy the car for at the end of 36 months or if you don't want it walk away and you owe nothing
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>> Guaranteed Final Value -
>>
Future, not final.
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>> the amount to be financed is £14,700. What does GVF £7811.50 mean?
>> It appears I know nothing whatsoever about buying cars on finance.
>>
types of car finance - click on menu on left for the variations
www.stratstone.com/finance.aspx
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Assuming this is a so called PCP (it's not a lease or rental unless there is VAT on the payments) then it's either like a normal unsecured loan or more likely HP but with the regular payments reduced and a large final payment.
In addition there is a guaranteed buy back equal to the final payment so for people who change every three years they can just hand it back and start again.
If you are planning to keep the car then you would have to make the final payment yourself, and the mileage charges, damage adjustments etc would be irrelevant to you.
It could therefore be a good deal as with no interest you are only spreading the payments at no cost to yourself - provided, that is, that you are not missing out on a better px or discount to get it, which you might well be. The only way to find out is to negotiate a cash deal first then ask for the PCP. It would actually be illegal for them to put the price up at that point but that doesn't always stop dealers trying especially when they have to "contribute" to the 0% offer as is often the case.
I used to do this stuff inter alia in my job once upon a time so if you ever want me to deconstruct a PCP type offer then ask the mods for my email and send me the details.
Standard PCPs are just a way if making yourself poorer than you otherwise would be IMO but a genuinely interest free one is a good deal if you don't mind the commitment, and have the money in the bank and/or a secure income.
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>> In addition there is a guaranteed buy back equal to the final payment so for
>> people who change every three years they can just hand it back and start again.
>>
Except for the small detail of finding thousands for another deposit. Something many folk willingly overlook, or so it seems.
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>>
>> >> In addition there is a guaranteed buy back equal to the final payment so
>> for
>> >> people who change every three years they can just hand it back and start
>> again.
>> >>
>>
>> Except for the small detail of finding thousands for another deposit. Something many folk willingly
>> overlook, or so it seems.
i.e. "...they can just hand it back and start again."
The dealer will help them of course, with a generous part exchange funded by the discount on the new one and possibly a nice commission on the next PCP...
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Maybe I'm confused, but how can you part-ex something you don't own? Or is it just the dealer playing with imaginary numbers?
The GFV is deducted from the loan at the start, it doesn't go towards the next car, which will have it's own GFV. Isn't that how it works?
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>> Maybe I'm confused, but how can you part-ex something you don't own? Or is it
>> just the dealer playing with imaginary numbers?
>>
>> The GFV is deducted from the loan at the start, it doesn't go towards the
>> next car, which will have it's own GFV. Isn't that how it works?
The GFV is just a buy back guarantee that covers what will still be outstanding at the end of term. It's more a case of the GFV being part of the loan and therefore increasing the total interest charge, unless the APR is 0% of course.
As to what happens - L'es turns up in three years with his pristine V40 with 18,000 miles on. The dealer says "your GFV/final payment is £7500, I'll give you £9,000 so you'll have enough left for an initial payment on the next one, and it works out at £xxx a month and away you go in a new one - OK?
In practice it may be even less transparent. I had a meeting with somebody last week who was driving a 61 plate 3 series BMW. He was swapping his car that day for an X5. As long as he is paying something in the £800 a month region he is happy and he changes cars early - the settlement figure is rolled in to the new deal and off he goes again. He probably negotiates on monthly payments, not on discount, part ex, GFV etc. More people do this than you might imagine, especially if they get some sort of car allowance that they can hypothecate to it.
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>>As long as he is paying something in the £800 a month region he is happy
A smart man.
What monthly cost you choose depends on many things, not least of which is what you can afford.
But all cars, any form of finance, rental, leasing, ownership and all the costs associated can be rolled into a monthly figure - its what lease companies do.
So, buy a car for £1000, service it once for £200 and sell it 1 year later for £400 means that car has cost you £800.
Lease a car for £50 per month and give it back at the end of the year for nothing and that car has cost you £600.
Ridiculous figures of course, but you get the idea. When you start thinking about financing, opportunity cost, depreciation, running costs it can be surprising how such a monthly payment approach can work.
Its emotionally a jump though.
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year for nothing and that car has cost you £600.
>>
>> Ridiculous figures of course, but you get the idea. When you start thinking about financing,
>> opportunity cost, depreciation, running costs it can be surprising how such a monthly payment approach
>> can work.
I'm not sure I buy it.
Volvo V40 D2 ES with solid paint and leather "faced" upholstery = £21,270, for example.
Customer deposit = £6,753.50 that you'll never see again.
36 payments of £199 = £7,164.00. (at 0% APR)
Add the two together = £13, 917.50.
GFV = £7,352.50. Actual trade-in value at 3 years likely to be about £7,500 if kept to 18k miles.
If they give you more than GFV, it's only as a discount on the next car which you could have had anyway, so it's meaningless.
Buy it yourself for maybe £18k new on one of deals floating about and it'll still be worth £7,500 in 3 years, after which you will have lost £10,000 or thereabouts. That's nearly £4k cheaper. If you get the £7164 on a 6.1% personal loan, the interest on that would be less than £700.
Is the asking price negotiable on these deals? The advert on Volvocars.co.uk suggests not, as the figures are based on list price.
It seems as if instead of paying interest on the finance, they just fleece you on the list price instead?
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Oh I wasn't saying that a PCP or whatever is a good deal. Or indeeed that it wasn't.
I was simply saying that quantifying your car expenditure on a monthly basis, yet still accounting for the whole cost of ownership, is an excellent way of comparing the different approaches from buying it outright with cash all the way through the variations to rental.
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That's a good point. If there was a tool to directly compare the estimated costs through different ownership schemes, and maybe on second-hand purchases too, that would be great.
Now there's an idea for a website!
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I'd be very careful looking at these deals. The last one I saw from Peugeot required a deposit and had a mileage restriction. So far, so normal. Then at the end of the three years, you had to pay thousands more to keep the car. Also normal.
Not normal was the fact that even then, you still didn't own the car(!!!!), and were required to pay an amount equal to one months worth of the finance deal annually to retain the car. If you didn't, you had to give the car back, even after paying thousands to "buy" it.
I worked out that if you paid the fee, and then kept the car until it was four years old and _then_ handed it back, you will have paid more in deposit + finance payments + final "fee" than the car's original list price, and have nothing to show for it. You might even have to pay a mileage penalty, although it wasn't clear if that still applied after three years. At that point that car would have still been worth £3-4k too. And you wouldn't see a penny of it!
Much better to arrange your own finance IMHO.
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>> Not normal was the fact that even then, you still didn't own the car(!!!!), and
>> were required to pay an amount equal to one months worth of the finance deal
>> annually to retain the car. If you didn't, you had to give the car back,
>> even after paying thousands to "buy" it.
>>
I think that because the deal (this is their "just Add Fuel" deal?) is a lease and you can't buy a lease car directly at the end. I forget why, something to do with the VAT, I think.
>> Much better to arrange your own finance IMHO.
>>
There aren't any right and wrong answers with car finance. It depends on what you want and what your circumstances are. They're generally never the best financial sense but some people have no spare cash but want a new car.
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>>I think that because the deal (this is their "just Add Fuel" deal?) is a lease and you can't buy >>a lease car directly at the end. I forget why, something to do with the VAT, I think.
It's a tax thing - Peugeot rent you a car for 3 years - as such they offset VAT on the carwhen they charge you VAT in the payments you make and they also claim Capital Allowances in the value of their asset (the car).........so between VAT & Capital allowances they are restricted on what they can do at the end of the contract - and selling to you is not one of them.
Donkeys years ago i used to sell capital items - often LEASED over say 5 yrs - say £1,000 per month ...........at the end of the lease this would become £1,000 per year for as long as they wanted the item but they could never buy it.
Lease Purchase (Business) / Hire Purchase (Private) is different ........you are buying the item over say 3 years (36 x Capital & Interest in monthly payments) and it is yours to keep or sell after the last payment is made.
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Where's the advantage for the punter in these rental deals which are sold very much like regular finance deals? Unless I misunderstood, the tax bonus is for Peugeot?
The Pug one was advertised very much like a normal PCP deal on the glossy pages, only in the very small print did I discover that you can never own the car. That seems dodgy business practice to me.
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>> Where's the advantage for the punter in these rental deals which are sold very much
>> like regular finance deals?
The point of these deals, PCP or private lease/contract hire is that you'll change the car every 3yrs for a new one. Some dealer staff will be honest and will say that if you intend to keep the car then they're not the best way of doing things.
So the advantage for the punter is they get a new car every 3yrs without having to think about anything. All they have to do is hand over a chunky amount of money. That suits some people, while leaving other aghast.
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Without being too uncharitable, I'd suggest it suits people who a) can't do sums and b) don't think ahead.
I'd hate to be in the position of having one of these deals, thinking smugly that in 3 years, for just a small (*cough*) deposit, I could get another one, only to find that your circumstances change and you have to give the car back, with not a penny to show for it.
Do Halfords still do £100 mountain bikes?
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How safe is that GFV? Eg. do you have to meticulously get any scratch touched up, refurbish your alloys etc.?
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It's all a bit of a game really. Whichever way you cut it, £xxx still has to be financed over xxx years, whether it's a small bit up front, medium bit in the middle, and a large bit at the end, or any combination of the three. Add in some fancy names and plenty of small print, and the dealer promises you the deal of the century for only £xx/month.
The one name for all of it that everyone can understand is Bull Poo.
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Much debate on the Mercedes owners' fora about just this point. PCPs are big over there - it's safe to say hardly anyone buys a new MB for cash - and not many seem keen on making that final payment. Some seem to think the dealers are unreasonably strict about cosmetic condition and keen to chip away at the GFV.
I suspect much depends on how conservatively that GFV is set. There's much discussion among those who have used MBUK's hefty subsidy to take on a C63, and have set the GFV high to keep the monthly payments down. The consequent glut of unsaleable 15mpg cars after three years will give MB every incentive to pick nits and pare cheese.
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Really, running a car is a costly business no matter how you do it. There seem to be three effective ways to minimise the cost of running a car, judging by the car-buying habits of any self-made wealthy people I know (I put no faith in the buying methods of punters who are up to their eyeballs in debt!):
1. Lease the new car that does the job you need it to (size, running cost, mileage allowance etc) at the lowest total montly cost you can get. Hand it back at the end of the lease and then lease another one.
2. Buy nearly new, preferably for cash (provided the loss of interest on your savings costs less than the interest on car finance). Choose based on lowest cost to do the job you need vs. expected reliability. Maintain it properly and run it until it is no longer economically viable to keep on the road.
3. Bangernomics, but be hard-nosed about minimising maintenance cost and chopping the car in if its about to cost you to keep it going.
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4. Look for enormous discounts on new cars that aren't French (generally from internet brokers) - in my experience when trading in dealers dont give a toot what the provenance of the car is.
Last edited by: Lygonos on Wed 22 Aug 12 at 19:49
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Some interesting points raised here.
I have leased my last and current car. I like to think that I'm a fairly smart chap :-)
I have found that you really need to look for the deal rather than a specific car as manufacturers will push certain models at certain times, for example the C5 was far cheaper to lease than any other finance method plus it was always going to be a high depreciator, so no sense in buying. As it happens they offered it to me at the end of the lease, and the buy price plus the lease payments came to less than I could have bought it for with a good discount up front.
Leasing costs frequently appear to be less than the equivalent PCP schemes, for example, the V40 linked to above would cost £9649 to lease for 3 years at 30000 total miles, but the cost for the offer linked above would be £11885 at 18,000 total miles.
If you ran the PCP car to 30,000 to give a direct comparison it would cost you an additional £1788, making it £4024 more expensive than a lease. Factor in the fact that the lease is only £750 up front against having to find £5K and it really is a no brainer in this example.
I'm not sure what the rules are on buying a lease car at the end, but PSA were happy to sell me the C5 at somewhere around trade price, although I had to buy it from their authorised agent, so perhaps that's a work around?
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Leasing can be used by dealers/manufacturers to 'sell off' their stocks of cars at huge discounts without it being obvious that they are doing so - it helps them charge a premium to those who are wanting to be 'owners' while shifting all that they build.
As you say - be smart, check all the deals on offer and every so often a model will be noted to be very cheap.
Noseying on HJ's deals section - new base spec Pug 107 - £5700.
Note the rapacious APR for finance deals, however.
www.pentagon-peugeot.co.uk/new-cars/peugeot/107/1.0%20access%203dr/54714
Last edited by: Lygonos on Wed 22 Aug 12 at 21:20
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I know it's a bit different but the lease costs for company cars can vary a lot. When I was looking at cars early 2011 (before I could order) the new shape BMW 520d SE was a very good price. I'd have had to pay about £10 towards the monthly cost. Then a few months later, the same car was a payup of about £90. BMW had good deals at the time.
When I ordered my car the dealer missed off the heated windscreen. Instead of reordering another for me and having to wait months I took it as is but the lease company recalculated the monthly cost to me. It dropped by more than the heated windscreen cost because they'd since reevaluated end of lease costs and so made it cheaper to us.
No idea what a 3 year old Passat CC with known history would cost at the end of the lease. They are sure to offer it at a premium. But it will be very low mileage.
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>> I have found that you really need to look for the deal rather than a
>> specific car as manufacturers will push certain models at certain times, for example the C5
>> was far cheaper to lease than any other finance method plus it was always going
>> to be a high depreciator, so no sense in buying.
The exception that proves the rule! Obviously there's going to be some cars already in stock they want to get rid of from time to time, but then who's to say you wouldn't have got a stonking deal without the lease agreement too?
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>>
>> >> I have found that you really need to look for the deal rather than
>> a
>> >> specific car as manufacturers will push certain models at certain times, for example the
>> C5
>> >> was far cheaper to lease than any other finance method plus it was always
>> going
>> >> to be a high depreciator, so no sense in buying.
>>
>> The exception that proves the rule! Obviously there's going to be some cars already in
>> stock they want to get rid of from time to time, but then who's to
>> say you wouldn't have got a stonking deal without the lease agreement too?
>>
Not sure it was the exception though. The car was not from stock, it was a factory build that I had to wait 8 weeks for. I did look at the cost to buy a C5 and at the time the discounts through brokers were small. Mine listed at 21 something new, and brokers could shave around 2K off that to make it 19 ish. Leasing costs over 3 years plus the price to buy at the end came in at 17,200. I suspect that the car depreciated more than PSA had calculated it would over the term, and subsequently the monthly rates for C5's are now far higher.
The Volvo is being subsidised by Volvo - my contract shows a manufacturer contribution of 30 odd quid each month.
In essence it comes back to my original point that leasing can sometimes be the cheapest way to get certain models, but like anything in life, its not a given, and works for some models at some points in time.
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Excess mileage charge - John H
