PCP Versus 'Cash' purchase - Advantages & Disadvantages

[NE150N80]

Hi All.

 

I'm looking to buy a new bike and am weighing up in my head whether to fund it through finance (PCP) or a personal loan so that I can buy it as 'cash'.

This is my 2nd bike and my first was funded through PCP. 

 

I wanted to get people's thoughts on what they feel are the advantages/disadvantages of both generally, but especially when negotiating price with the salesperson. i.e. it used to be that you could walk into a dealership and dig for deals based on the fact that you're going to buy the car/bike outright there and then. However, now I hear that dealerships value finance deals over a cash buy as they're getting more money in the long run.

 

As this is only my 2nd bike purchase, I wanted to get the views of others, most of which will be more experienced than myself in buying bikes.

 

Thanks all

[Bender]

Don't know how it works now but when I did sales I made more money from finance commission than I did from sales commission, it was the incentive to talk anyone out of buying with their own cash, prices were never any different between the 2, everything depended on how desperate dealership was to meet targets or get shot of something  

[Yorky]

Watch this YouTube clip, she explains everything

 

 

[Bender]

Lease on my van didn't work like that, over the 3yrs deal quoted I would have basically bought the van for them, yes it cost me servicing and tyres but it's mine  

 

Everyone has different factors that lure them one way or another.,but I would always buy outright. 

[Gerontious]

I was faced with this exact same choice in 2018.

there was a third choice, Hire purchase but I ignored that as it was by far the most expensive option.

 

At basic cost PCP was cheaper over the 3 years than a bank loan over the same period. and at the end of the 3 years, you have a choice. let the bike go or take out a loan to pay off the balance. another 2 or 3 years? Let the Bike go and start up another PCP agreement perhaps.

 

Then there are the constraints the PCP agreement puts you under. servicing strictly to the book. Rules about mileage.

 

In the end I went for a 5 year loan. The amount I paid was about £40 more than the PCP deal over that period. I didn't have to worry about servicing, which was handy during Covid. I didn't have to worry about the miles I was doing. During "good" months I made extra payments. So at the end I actually paid the loan off in January, instead of later this year, in December when it was due to end. £10 one month. £30 another. and so on.. it soon added up and I saved 10 months.

 

The difference with me is I tend to hold on to bikes for a long time. only 'second' bikes have come and gone. So, a 5 year commitment didn't mean much. Its gone by quickly enough. And unlike PCP, when the deal ended I owned the bike outright. (I did from day 1 - but you get what I mean) I wasn't faced with a dillemma: do I set up another PCP deal? for a new bike. or do I go to my bank to borrow £5000 to buy the bike outright.

 

I also kept at the back of my mind... what if a disaster strikes? I have this asset that I can easily sell. pay off the balance of the loan. maybe have some cash left over.. but at least no repayments. And when things improve.. try again. This thought made it all much easier.

 

When I was a kid. debt was seen as a bad thing, aside from a mortgage. it was called the "never never' - because you Never stopped paying. and you Never owned the item. PCP is the never never gone mad. its the never never in its truest form. You might go from bike to bike for years and never actually own any of them. 3 years and its returned and your next debt starts all over again.

 

I can understand why people go for it, the lower monthly payments seem on the face of it very attractive, and we don't live in a vacuum, we all have bills to pay.  but to me.. PCP is a revolting idea. but then.. im known to be a bit weird. with ideas that don't normally fit it. PCP doesnt suit me.. I would rather go for a second hand bike using the credit I can get from my bank than ever use PCP.

 

One final thought, which may not be relevant today. but, when I decided on the bike and took out the loan. The RRP was £12,000. I took out a £12,000 loan and when the money appeared in my account went to the dealership. Paying cash meant I was an appropriate candidate for the end of season discount. (This all happened in November) Almost £2000 knocked off the price!! This allowed me to buy an upgrade to the bike that I could never have considered otherwise. I changed the wheels. A major upgrade.

 

Edited March 16, 2023 by Gerontious

[S-Westerly]

Agree with Gerontious- PCP is just not for me. I'll pay cash on the nail every time, either from a flexible bank loan or more likely from earnings saved up.

[KiwiBob]

I can't really see the appeal of PCP as you never really own the bike until you pay the big lump at the end.

 

It's either a bank loan or savings for me!

[bonio]

Best thing about a PCP is that it's a way you can get a bike or a car that you wouldn't otherwise be able to afford. Worst thing is that it will very likely end up costing you more than any other way of paying, even though the monthly payments are not so steep. This is because you either have to stump up the balloon payment when the deal runs out, or else take out a new PCP and keep on paying out.

If you can afford to pay cash or take out a bank loan, its almost certainly the better option.

 

Edited March 16, 2023 by bonio

[Mississippi Bullfrog]

I've always paid cash from savings. Most of the time it's meant buying a used bike but that's fine with me. 

 

I know a couple of mates who went for PCP deals and regretted it in the end. 

[Gerontious]

It must be easy to regret buying something and never actually owning it and not being able to use it as you want. You pay for its upkeep to maintain its value and all that does is mean that buying it at the end is as expensive as possible!!

 

A con made in heaven.

[Fozzie]

I can see the point of PCP for cars that are often used a lot, particularly for work. As in effect you're paying for a hire car, and if you get a service plan included then it can save on the big up front cost. And it cuts hassle, as newer stuff tends to be more reliable, and if it isn't there's warranty. But it still feels wrong to many as ultimately, you pay a lot of money and have no asset. And many can't afford the lump sum payment at the end. You tend to at best pay at least 10-20% over the original cost of the car, so it's a very profitable business. 

 

I considered it for a new car recently, but have just decided to save a few years and buy a car out right. Bloody things are expensive these days, the "Covid tax" that got added on due to global shortages. 

[onesea]

For me it's cash only for cars, bikes, boats yes that means they are old. 

 

They are also used regularly and probably cost me less to maintain than servicing and depreciation on a newer models.

[Nute]

I have friends who have things on various lease deals. It seems everyone you speak to who leases something says “I got a good deal on XXX” but if you compare it to cash is never a good deal, you always pay more and normally substantially more on PCP. 
 

Given the choice I can’t see why you’d ever lease something, assuming you have the cash to just buy something. 

[Davidtav]

Well I think I did genuinely get a good deal. When I returned to biking four years ago I planned to spend £2k on a second hand bike. … and then I found a place offering pre registered Kawasaki Z650 for £5500 with 0% interest on HP … so I put down the £2k as a deposit. And paid £100 a month for three years. And for the last twelve months it has all been paid off … now if I had done PCP the monthly payments would have been similar. But I wouldn’t now have a “free” motorbike … I keep looking out for another deal as good but they don’t seem to be around now

[Tiggie]

On 17/03/2023 at 08:28, onesea said:

For me it's cash only for cars, bikes, boats yes that means they are old. 

 

They are also used regularly and probably cost me less to maintain than servicing and depreciation on a newer models.

 

 

Completely agree with this for myself. Would be a waste of money for me to be paying out monthly for what I need my car for.

 

My Wife leases her cars through a NHS scheme. For her it makes a lot more sense, maintenance package pays for any issues, including tyres, brakes, oil etc etc. And she can get a new car every 3 years which is good as she isn't the best at keeping them looking nice. The interior usually looks like a teenagers bedroom 

[Fish]

Have to admit I've not read the full topic, but I found the below link interesting when I watched if.

 

 

[Gerontious]

Im not surprised that she found that HP was the best deal... given that she didn't run a comparison between HP and a bank loan. she only looked at buying outright from the perspective of having cash in hand rather than the source of the cash.

 

I can't remember whether HP was over a 3 or 4 year term. my loan was over 5 years and the interest was 3% - I do remember that HP interest was a lot more and the repayments were quite high. too high for my comfort anyway.

 

And, obviously as she points out. you don't own the bike until the final payment is made. with a bank loan you own the bike from day 1.

 

I was also puzzled by what she said about maintenance, this was unclear. is it the case that maintenance is paid for by the dealership as a part of the deal? or maybe she was referring to out of warranty repairs.

 

Anyway, all that aside, it doesn't surprise me in the slightest that PCP can be the best deal of all.. for the dealership.

Edited March 18, 2023 by Gerontious

[Joe85]

Ask the dealer what the’re prepared to throw in if you go PCP. 
 

Ask another dealer what they’re prepared to throw in if you pay cash that day. 

Compare what both are prepared to offer you to get you to sign on the line and pick the one that offers the best interest rate to extras ratio.

Edited March 23, 2023 by Joe85

[MikeHorton]

22 minutes ago, Joe85 said:

Ask the dealer what the’re prepared to throw in if you go PCP. 
 

Ask another dealer what they’re prepared to throw in if you pay cash that day. 

Compare what both are prepared to offer you to get you to sign on the line and pick the one that offers the best interest rate to extras ratio.

Yep got quite a few extras and reductions on some bits which made the pcp deal a better one. I'll be hanging onto mine after and paying off with a loan and cash