PCP Car Finance is DESTROYING your wealth

Not sure what those monthly payments offered in PCP agreements really mean?

This video explains how you can use finance to your advantage and upgrade your car every year.

The key word is 'equity', for every monthly payment you make, you want to get as much of that money back when it comes to selling the car.

With PCP, you gain very little equity in the car with each payment and therefore when you come to sell the car you receive nothing back and are forced in to another PCP agreement with higher monthly payments just to stay in the same standard of car which you have driven for the last 3-4 years.

[DodgeViperAS]

I think it’s pretty simple. If you haven’t got much in savings, don’t get a juicy PCP because then you won’t be able to save much and you’ll be in a perpetual cycle as described in the video. If you do have decent savings then go for it. Cars are meant to be enjoyed and at the end of the day they are a depreciating asset so whether you get PCP, HP or a loan, you’re losing money. Life is too short to worry about how much money you’re gonna lose on a PCP. If you can manage your savings such that you either already own a house or are able to as well as saving extra above the PCP monthly payment then who cares.

[Mugtree]

I bought my Mini Cooper S in 2003. I saved up for it and bought it for cash. 18 years on it is still running like a dream it has 250k miles and i go to Norway and France every year. And now I’ve been told it may become a modern classic so who knows it may end up being worth what i paid for it 🤞

[billtuckwell]

Great explanation. I was at my servicing dealer and while having a coffee, waiting for my car, their rep wanted to sell a new car to me. His opener was we can do it on PCP and save you money. I have always been a cash buyer, and always look for the best deal with a high trade in plus a good discount. After 3 minutes listening to this clown, I told him to stop wasting his time with PCP, and, I would be finding a dealer who did business the way I wanted. I recognised very early on they were at it. Avoid PCP at all costs and hold the dealers to ransom. When you walk in a showroom for a car, you hold ALL the cards. If you do not like what they are offering, move on the the next car on your list. I always have a list of 6 cars if possible. Amazing how many dealers then phone you back with a dramatically increased offer to buy from them the next morning. Always remember you are doing them the favour buying from them, and you owe them nothing.

[jpshawn]

Great video.The golden rules is “If you can’t afford it..don’t get it”.

[TheRoadScratch]

So many people do not understand this. I did exactly what you said, got a loan instead of going into other finance routes as I feel you get stuck in a cycle of constantly having to finance. I also suggested the same to my wife so hopefully in 3/4 years time we'll be in a better financial position for the future. More people need to watch this!

[xlyfpck]

It all depends on the PCP rate versus the Bank finance rate and type of car. PCP definitely works in some circumstances. Did for me anyway. Also if you’re in a position to buy the car outright at the end of PCP term and sell privately, that also really helps, garage will never give market price

[LewF]

Couldn’t agree more, over the past few years I started out doing bank loans and have steadily built up more and more equity, and now I have just been able to afford a dream BMW M135i which is nearly new! Never though it would be affordable, but because I have never done PCP I’m not in the position of constantly loosing money 😃

[jonscoupe]

Very good advice. Never used PCP myself. Always managed to buy decent used cars with cash topped up with a bank loan now and again, but I'm sure there are times when people need PCP to get transport. Cheers, Jon.

[leemason]

Nice video. I have a PCP finance agreement with Peugeot over 4 years and have a year left on it. If I wish to keep my car I have to pay a balloon of 10K. I’ve had enough of paying out every month now for vehicles as this is the second vehicle that I’ve done this with and feels like it is never ending.

[vincent]

This is good advice, But I have to say it only works for people who don't make long-term financial plans and determine their monthly spending ONLY based on how much disposable income they have in that particular month. Using the example given in the video, if you go with HP or get a loan from the bank, the monthly payment would be over £650. If you go with PCP, the monthly payment would be reduced to £480. Hence the owner of the video has made the following point: Although PCP is a few hundred pounds cheaper every month, you don't get to invest in the equity of the car so at the end of the contract, you wouldn't have any capital to go towards the deposit for the next car. This is a valid point, but it is based on the assumption that the people would use all the money they saved on PCP on CONSUMPTION alone, which to be fair is what most people do. However, if you use the saved money on INVESTMENT - buying any thing that could potentially appreciate in value, it would be a complete different story. So it's not the PCP which destroys people's wealth - it's just a financial instrument like any other - It is some people's spending habit that put themselves in a difficult situation.

[jamsxr]

Don’t go PCP if you’re buying used. You don’t get the manufacturers discount and the interests rates are much higher. Personally I always buy 2-3 years old with a mix of cash and bank loan. People need to work this stuff out though, I wasted a ton of cash in my younger years 😬

[rufdymond]

I’m 58 and never had a car loan, PCP or any other nonsense, I’ve always paid cash for every car I’ve owned. I honestly know quite a few people my age who drive nice cars and don’t even have 10 grand savings in the made any sense to me. Car finance is a major reason why some people are forever broke.

[xadasol]

Most dealerships/salesman are disliking this video as this video is gonna get them jobless sooner or later!
Absolutely useful..

[anthonyhull]

I’ve got a Range Rover velar on pcp. £58k brand new . I put £425 down and £425 a month for 48 months . 3.9% apr . The final GFV payment is £33k ... the car is 30 months old and the value is £35k . It’s just not viable to buy these cars outright . It’s lost nearly half’s its value after 2 years

[amzzaa]

Excellent video with and excellent explanation, I was planning to get hire purchase in the first place but a day before I started to tilt toward pcp, you saved me man!! Subscribed !!

[adriangreaves]

This is wrong. It's not keeping you from jumping up a level. It's encouraging you to buy at a level you can't afford.

[garys]

I tend to spend 2500 cash on a car and if I get two to three years out of it, with maintenance of course, I’m happy😎

[johnboyle]

A great principle in life to follow is if you can't buy anything cash don't buy it. You may think its great having a lovely car on the drive but the ongoing costs etc and how much you lose out takes away the pleasure. This recent pandemic has taught us better to save for a rainy day

[monsieurbakare]

Arguably the smartest video I’ve seen on YouTube. You explained this so well and made it so easy. Thank you.

[akmc]

Don’t put big deposits on PCPs

the whole point is keeping your cash liquid, so you can use your money to make money - if you’re barely making ends meet, that’s your own problem

Nobody in their right might is gonna part with a quarter mil in savings, when they can get a Bentley for £2000 a month. That’s smart business