Hi Alex
Thanks for the reply
For some people a PCP can be the right way to fund a car purchase. But in a very large number of cases when they understand the true costs and implacations of such an agreement they realise it is not for them. However it is always best to assess every case on a it's own merits and offer advice accordingly.
Some of the main issues with PCP's per se are as follows (and apologies if this seems desperately dull guys!!);
i) A higher rate of interest/commission for the entire deal i.e. costs you more than a lease purchase agreement
ii) Excess mileage penalties. You will be charged for exceeding any agreed mileage parameters which can work out expensive if you started the agreement thing you would cover 5k a year and then (perhaps for a move or job change) you then cover 20k a year
iii) Front loading of interest. This is one of the worst aspects of the PCP agreements-especially on expensive cars that proportionally depreciate more than "cheap" cars and if one is likely to end the agreement at anything before 50%-75% of the original term for the loan
iv) Contract rental status - with a PCP you are, in essence, just renting the car from the manufacturer who provides the car/finance and they are aimed to draw you back to that same source so that car can realise any guaranteed future value and/or to aviod early settlement penalties.
You also go on to compare the merits of borrowing via a car loan (PCP/Lease purchase) vs a Bank loan/Mortgage add on and then comparing that the net effect of savings accounts. There are certainly some valid points there, but my main thrust here was to compare the specifics of the car loan routes available to people-which is not to say that they shouldn't compare some of the points you've raised
At the end of the day if you are not paying cash (and therefore locking up your capital in a depreciating asset) it pays to have the best finance advice and agreement for your own specific case.
Gareth
........Note only done it on the track and once on the road!!
