PCP vs. 0% purchase card.

[PaulCa]

It has occurred to me as my new bike on order is less than £10k, £8k actually.  PCP might not be the best way to finance it.

 

Honda want something like 4.9% which results in £850 cost of credit or something over 3 years with a 2.5k deposit!

 

A £3k deposit however, the rest could just go on a 0% credit card 2 year intro offer.  Then I basically have the same options as PCP.  As long as I stay in positive equity I can sell it and walk away, I can trade it in, settle the card and so it again. 

 

The only risk that isn't covered here is the guaranteed future value from PCP.  However I have heard some horror stories about what actually happens when your car is not worth the GFV at the dealers.  They start deducting for minor scratches, wheel scuffs, every little nick in the book to bring the offer price back down to the actual value.  So you can and probably will having to settle the negative equity anyway.  Granted a few people have successfully threated legal action and walked away without paying.

 

I don't see the value of an NC750X 2021 dropping massively in 2 years.  Besides it's an £8k bike not a £30k car!  If it all falls down on top of me and fees and interest come thick and fast, I have got the cash reserves to just buy myself out if I needed to.

 

Anyone done this?  I mean not just for bikes/cars, but for large purchases.

[NM_OLD]

Sounds like a no-brainer to me. you haven't stated how much the PCP deal would cost you but I'm assuming a lot more even if the GFV is realised?

[PaulCa]

31 minutes ago, NM_OLD said:

Sounds like a no-brainer to me. you haven't stated how much the PCP deal would cost you but I'm assuming a lot more even if the GFV is realised?

 

I "think" it was £750 or £850 Total cost of credit.  Much more than £0.

 

It also allows me to be just as much of a prick as the dealer was to me, regarding deals.  Not only do they make a lot of commission the finance, but I am now in a position to deal with the lesser dealers with the pitch, "Cash price, today, on the road?"  and probably get better offers than I got from Honda main stealer.

 

"We don't make any money on these bikes.  Maybe £400 tops.  So we can only give you £100 off the list.", I even responded on the day with, oh come on, that's BS.  Retail markup is ALWAYS, AT LEAST 50%, usually more likely 100%.

But he knew I wanted the bike, so he had the upper hand.  Going on the 0% self finance, removes that upper hand.... except maybe on the delivery date - as I specced it.

[PaulCa]

Sorry, I am going off Total cost of credit.  Total deal cost was around £8.4k sale, much nearer to £10 after credit costs.  They even have the gall to charge you a £10 purchase fee if you want to keep the bike.  They can f**k right off and I told them as much.  Don't charge me to buy from you, if you must, hide it somewhere so I don't see it.

 

[NM_OLD]

10 minutes ago, PaulCa said:

 

I "think" it was £750 or £850 Total cost of credit.  Much more than £0.

 

It also allows me to be just as much of a prick as the dealer was to me, regarding deals.  Not only do they make a lot of commission the finance, but I am now in a position to deal with the lesser dealers with the pitch, "Cash price, today, on the road?"  and probably get better offers than I got from Honda main stealer.

 

"We don't make any money on these bikes.  Maybe £400 tops.  So we can only give you £100 off the list.", I even responded on the day with, oh come on, that's BS.  Retail markup is ALWAYS, AT LEAST 50%, usually more likely 100%.

But he knew I wanted the bike, so he had the upper hand.  Going on the 0% self finance, removes that upper hand.... except maybe on the delivery date - as I specced it.

I'm pretty sure they don't make anywhere near 50% but as you say if you buy it cash then you're quids in - PCP only exists as a way to sell new bikes to people who can't really afford them and can't see past the monthly cost !MHO. 

[PaulCa]

10 minutes ago, NM_OLD said:

I'm pretty sure they don't make anywhere near 50% but as you say if you buy it cash then you're quids in - PCP only exists as a way to sell new bikes to people who can't really afford them and can't see past the monthly cost !MHO. 

 

 I think it's a little more complex as it's a BIG company like Honda.  I would believe the factory to kerb profit is around 100%.  As to how much goes to Honda, the distributors and the dealers we can't really know.  I highly doubt the dealership is only taking 2% though.

[Liveware Problem]

I wanted to do this with a scooter I bought a few years ago, however I noticed a clause that would mean I would have pay a percentage fee of the final value if I were to purchase with a credit card, which made it not worthwhile.

 

Worth checking, if you haven't already that is.

[PaulCa]

7 minutes ago, Liveware Problem said:

I wanted to do this with a scooter I bought a few years ago, however I noticed a clause that would mean I would have pay a percentage fee of the final value if I were to purchase with a credit card, which made it not worthwhile.

 

Worth checking, if you haven't already that is.

 

Hmm.  That sounds like what could happen if you did purchase it on PCP and then try to buy the bike outright with a credit card to close the deal completely.

 

Not sure how long ago this was, but there were changes around 2010 meaning that lenders cannot charge you to exit early... within reasonable admin fees, if you settle the permium balance, they cannot issue you with any "penalty" contract clauses and over charge you.  I'm sure there are loop holes though that finance companies will have all their little hooked fingers in.

I know my mortgage has a fee for advanced settlement, within the 3yr agreement, but it was reasonable IIRC.

Edited October 8, 2021 by PaulCa

[PaulCa]

The plot thickens.  Phoned the only other Honda dealer in range and they actually have 2 in stock.  Black or Red.  Previous dealer was October, possibly November with trucker shortages.

 

Let's see what they can do on a price, this time.

 

[NM_OLD]

Good luck !

[Gerontious]

I did consider pcp when I decided to get the Africa Twin. But what I didn’t like was the fact the bike was never really mine. Plus all the little rules you have to follow. In the end I got a bank loan at 3% and from day one have made overpayments, so the interest cost is further reduced and the 5 year loan is now on course to be paid off in a little under 4 years. I’ve also saved extra £100s by not being obliged to follow all those little rules. Like the servicing schedule using the dealership - I’ve done much of it myself.

[PaulCa]

I think I will lose the Honda intro offer going "cash".  It mentions something similar on the website about that package being funded by the finance.

 

But, it's 3 services.  That's basically nothing more than oil/filter/inspect and the major service that a dealer would be best doing for warranty is 8k miles.  As long as I keep reciepts showing genuine honda parts used in the service, I should be okay on warranty?

 

Just called the credit card folks and confirmed my use case is compatible and it is 0% for 2years.  If I am late on payments, that ends that month and interest at 20%APR starts to get added.  No back dating and if I immediately settle the balance at that point there would be no charges.

 

 

[Six30]

card.. no brainer

[Gerontious]

When I bought my bike I did discuss the service package you can buy, but in my case it was pointless. as I don't commute and so there was little chance of me doing the miles to get the major done under the scheme. Thats 16,000 miles. The service package would have expired next month and im currently on 11,000.  The major is only expensive due to a pointless check of the valves. I will wait until the 24K to have that done as the expensive bit is the labour to get to the valves and its the same amount of labour to get to the spark plugs which aren't due to be swapped out until 24K. So, that's another expense saved that I might have been forced to pay for under pcp. circa £600

Edited October 8, 2021 by Gerontious

[PaulCa]

2 minutes ago, Gerontious said:

When I bought my bike I did discuss the service package you can buy, but in my case it was pointless. as I don't commute and so there was little chance of me doing the miles to get the major done under the scheme. Thats 16,000 miles. The service package would have expired next month and im currently on 11,000.  The major is only expensive due to a pointless check of the valves. I will wait until the 24K to have that done as the expensive bit is the labour to get to the valves and its the same amount of labour to get to the spark plugs which aren't due to be swapped out until 24K.

 

Exactly the same position for me.  8k is the first 'real' service you can't do yourself in a garage and even though the valves are easy on the NC, the headbearings etc.  Might not be.  Honda do list the difficulty, particularly around specialist tools and safety.  Until 8000 miles the most complicated thing is checking the tyres and brakes which they mark as a high safety issue.... duh!

An an aside.  I bought my first brand new car from Toyota.  They gave me "3 years free servicing".  Of course when I came back less than 3 years later for my third service they started with the T&C and excuses.  "Oh that plan only includes 2 filter and oil basic services", You'll have to pay for the 3rd.

So...  I phoned Toyota UK and explained what the dealer had told me.  Every car in the show room still had the "3 YEARS FREE SERVICING" sticker across the window.

30 mins later I was called by the dealer.  They said the car has actually been due an intermediate service at year 2 and only recieved a minor.  They wanted to book the car in to do a major service to correct this on year 3 to maintain the warranty.  Free of charge.

They hate me now. 

[PaulCa]

Still an asides.  The car dealer phoned me to come in a discuss trade in options at the end of my PCP.  There was GFV + 4k in the car.

Their deal was shite.  I walked away.

 

They phoned me again with a barely better deal and I said, no.  They then said, "Oh, but you PCP ends this month, you have to choose."

I replied, "No, I don't.  I already refinanced the final payment.  I own the car outright.  I have time.  Your deal is rubbish.  I want 10% off list or I will continue waiting."

 

Long story short, but I walked away 3 times, until suspiciously towards the end of the sales quarter, they gave me the full 10% off list and the only sweetener I gave into for them was taknig their overpriced gap insurance.

I got £2800 discount on the list price.  Compared with £1000 + all the extra tat they push which is usually twice the going rate.

[PaulCa]

If you are in a comfortable and unrushed place with flexibility as to how you pay/finance a vehicle.  The best way to deal with them is present them with what you want.  Reject what they offer in return.  Walk away.  Stand your ground and as long as your wants are not ridiculous they will come down much further towards you then you expect.

The down side of me right now, is... I want the bike, NOW!  I want to get some decent miles on it, before I have to garage it for winter.  If I have to wait till mod november, that ain't happening.  As soon as they salt the roads it's not longer a daily driver.

[NM_OLD]

18 minutes ago, PaulCa said:

If you are in a comfortable and unrushed place with flexibility as to how you pay/finance a vehicle.  The best way to deal with them is present them with what you want.  Reject what they offer in return.  Walk away.  Stand your ground and as long as your wants are not ridiculous they will come down much further towards you then you expect.

The down side of me right now, is... I want the bike, NOW!  I want to get some decent miles on it, before I have to garage it for winter.  If I have to wait till mod november, that ain't happening.  As soon as they salt the roads it's not longer a daily driver.

So the choice is black or red then  

[SometimesSansEngine]

2 hours ago, Liveware Problem said:

I wanted to do this with a scooter I bought a few years ago, however I noticed a clause that would mean I would have pay a percentage fee of the final value if I were to purchase with a credit card, which made it not worthwhile.

 

Worth checking, if you haven't already that is.

 

The rules do have get outs, but since 2018 you can't charge 'more' to pay by card - not sure if that would prevent this nowadays. Simplistically speaking, any fee to pay should apply to other forms of payment too

 

1 hour ago, PaulCa said:

Just called the credit card folks and confirmed my use case is compatible and it is 0% for 2years.  If I am late on payments, that ends that month and interest at 20%APR starts to get added.  No back dating and if I immediately settle the balance at that point there would be no charges.

 

 

 

Just to clarify - they meant they don't backdate the 20% interest not added in other months, BUT you do pay 20% interest on the original transaction value? (which needless to say, would be a lot in this case)

[PaulCa]

25 minutes ago, SometimesSansEngine said:

Just to clarify - they meant they don't backdate the 20% interest not added in other months, BUT you do pay 20% interest on the original transaction value? (which needless to say, would be a lot in this case)

 

I believe you start paying interest on the balance from that point on  + the late payment fees of course.

 

I will manage the payments carefully.  DD for the minimum from a specific account topped up from my current account.  So I even have a reserve of payments.  I also have the reluctant position of settling up cash.  I just don't want to buy the bike cash outright as it lessens my ISA saving reserves more than I would like.  If I loose my job for some reason and end up permenantly unemployed I have a plan for reducing my monthly outlay over 6 months, which would involve selling the bike and the car, but I need the cash reserves to buy time for that.

Edited October 8, 2021 by PaulCa

[Mississippi Bullfrog]

I have no clue about any of this. It all seems an expensive way to be at the mercy of dealers. I just save up and pay cash. Go to several dealers who have what I want and see who wants the deal I'm offering. 

[PaulCa]

29 minutes ago, Mississippi Bullfrog said:

I have no clue about any of this. It all seems an expensive way to be at the mercy of dealers. I just save up and pay cash. Go to several dealers who have what I want and see who wants the deal I'm offering. 

 

Cash is always king, however, there are parts of the normal deals which are provided as part of the finance deal.  Such as the servicing and extended warranty + sweateners.  If you buy cash, they come off the table.  It comes down to asking, does the cost of credit cover the cost of those extras?  Surprise, surprise, the answer is no, they don't. 

The advantage of PCP deals is they are hassle free.  It's literally like a full lease bike for 3 years.  Dealership pays for everything a but fuel, tyres, brakes and damage.  So you pay your monthly payment and everything else is included for the 3 year lease.

 

The disadvantage is that PCP deals are still fairly high interest.  Loans are also fairly high interest.

 

The 0% purchase credit cards are a currently working offer.  It can't be denied they are delibrately preying on people's wants versus needs, versus affordability.  People who can't afford the thing they are buying will flock to 0% cards and end up with it maxed out and no hope then the interest kicks in.  My bank's premium card they gave me has a 5k limit, but it has 14% APR on it.  Compared to a 0% card with 21% APR.  You see what they are really doing.  I however am not in a need for debt and not buying beyond my means.  It's just a cashflow / reserves /spreading the cost the cheapest way thing.

Edited October 8, 2021 by PaulCa

[PaulCa]

A few notes with PCP.

You can settle the premium for the depreciation in advance with the finance company and save interest.  If you have PCP for £4000 depreciation paying £100 a month, but phone them and pay £1000 off the premium, you MUST state that is what you want and NOT a payment reserve.  Then your interest will fall and your future payments will fall.  You can pay the whole PCP finance in one go, but there may be early settlement charges.  These should be reasonable though.  Like £100.  A few people I know did this with the GT86.  Took it on PCP, then pre-paid half the PCP over the phone and dropped their total cost of credit significantly.  It's similar to paying off a chunk of your mortgage to reduce interest.

 

Also most PCP finance companies will convert your final payment to a loan with a 5 minute phone call, usually resulting in the same interest rate and the same month payments.   If you can through a bit of money cash during this, it obviously reduces the payments or time.

I bought my car outright at the end of the PCP and increased the payments slightly to settle in 3 years.  It's interesting, because when I went to the "My Toyota" page, it now shows a "date of ownership" as June 2020, as opposed to 2017 when I bought it.  This is simply because until the PCP ends, you don't own it, the finance company do.  So date of true ownership started when I took the final payment as a loan.

 

One thing you get with PCP over cash is that you don't own it yet.  This is a bit of a sadener, but consider that the finance company own the car.  So if the dealership is not adhering to their service deal and is underservicing the car, you can let the finance company know and they will have a word with the dealer as it could lower the value of the asset they are tracking against your finance.  Just keep that in your back pocket.

This breaks you free from the dealership's sales pitch around the PCP settlement date.  They will NOT tell you this option.

 

EDIT:  Clarifier.  I am NOT aware if the loan on the final payment is secured against the car or not.  I believe it is.  Thus legally you MUST declare the finance when selling and the finance must be settled as part of that sale.  If you doing it privately, you MUST speak with the finance company personally.  Usually this amounts to the seller handing you the phone to confirm there will be no obligations regarding this finance transfered with the car.

Edited October 8, 2021 by PaulCa

[Bender]

I never got pcp, always just bought, never using the finance offers pushed by dealers, I used to sell finance, bigger commission from that than the sale. 

[PaulCa]

6 minutes ago, Bender said:

I never got pcp, always just bought, never using the finance offers pushed by dealers, I used to sell finance, bigger commission from that than the sale. 

 

When compared to HP it has advantages.  Instead of financing the total cost of the bike/car, you are only financing the depreciation.   So at the end of the term you "should" be able to return the bike/car and walk away.  You have paid for the depreciation )with front loaded stacked interest!) with the monthly.

With HP you are financing the whole total cost, so you pay interest on more principle.

 

The downside with both is you don't own the car until the agreement is settled, but as mentioned this has pros and cons.

Edited October 8, 2021 by PaulCa