PCP Car Finance is DESTROYING your wealth 

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.

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 🤞

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.

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

Absolutely smashed it bro, I get asked this question all the time but you've explained it super clear and demonstrated the hidden cost that people miss

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!

the monthly amounts we have here are more like my mortgage payments ill stick with my e46 thats paid for and still makes me smile ,

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 !!

Thanks for posting this, the video is as relevant today as the day you posted it. I have always been one to only purchase what I can afford. I have an allergy to monthly payments, primarily since I grew up with the mentality of "dont buy what you cant afford". At the moment I am driving around in a very cheap car that I bought in cash. I have never done PCP or HP and will explore more avenues to attain a slightly better car without parting with cash.

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

Thanks for the video mate very helpful

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.

I have watched a few videos on this, and I have to say. You make it seem very clear... nice video well done .. I'm subscribing

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

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 😃

By far the best video on this subject I’ve seen. Great video bud 👍🏽

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.

I just currently went through this with a st200, in my last year they kept calling me to upgrade and to give the car back. I luckily had a change of circumstances and was able to get the money to pay it off and keep the car. I will not ever ever do pcp again.

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.

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

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

Very good advice. Also, don't risk falling into a debt trap.

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 bank.....never made any sense to me. Car finance is a major reason why some people are forever broke.

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.

Great video! Thanks for posting this, more people need to be aware of how much of a waste of money PCP is....

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

Great advice mate. keep it up and thanks!

Thank you so much for this mate!

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 😬

Great advice. Thank you

Best PCP explanation. Well done mate!!!

Thanks very good looking forward to the depreciation video

A brilliant explanation which has really opened my eyes.

Great explanation and timely!

Fantastic video, has helped make up my mind on PCP.

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😎

I am currently on pcp and won't ever do it again. I knew all the bad points but did it because I had to borrow a much greater value to the car because of a change in circumstances that resulted in me having to swap cars multiple times quite quickly screwing me over with deficits. The pros with my pcp is at the end I hand the car back...thanks to covid I have driven 6k in 1 year and a half and have a 25k per year limit. So should also hopefully have a little deposit to start again deficit free on a normal HP. Then I will never do it again. The anxiety of the limit to miles would be too much for me.

German brands for you. Mazda, where I have been working for 2 years, people move up all the time. We always have equity in our cars. If PCP is sold (advised) correctly and the companies don't lie about their GFV's then it's good! :)

Yes and For PCP I hadn’t realised if you go over the mileage (for the term you signed up for ) then they reduce the GMFV which could be thousands even if your excess mileage charge was only a couple of Hundred pounds. Got you both ways!

Found this very useful and would like the follow up video on cars that dont depreciate as much.

Great video, really informative. I have opted to go PCP on a BMW 2 series gran coupe which I’m expecting delivery of in 2 weeks time. As a 22 year old I found it far easier for me to go this route for now but in future would like to go personal loan as you discussed. Reason for me choosing this was BMW APR being only 2.9% and having built up very little credit rating personal loans were all the way up at 24.9%. I have part exed my car as part of the deal worth £4000 in deposit. As I am now actively building my credit rating up, do you believe it would be worthwhile near the end of my PCP deal taking out a personal loan to cover the optional buy fee or is that then far too many years of payments with interest in a car?

I’ve leased my last few cars cause I like having new cars. I just got a brand new a3 over 3 years it’s going to cost me £12,000 in to total. Audi for a 3 year pcp in total for the same car quoted £23,000

Solid advice cheers mate!

hey man, make more videos! this is informative stuff!!

Superbly explained been trying to explain this to people for ages👍

Great info, very useful . Never brought a car using pcp ! Always bank loan guy. Never thought about 30k bank loan though. 😍 Looking forward to the next video

Hey man, nice vid. Can you please explain the method of building equity in your cars and taking each next car to the next level? Currently wondering whether to HP a 16/17 plate or PCP a 20/21 plate. Bigger deposit on the HP to own and no deposit on PCP. Hope you see this - Thanks.

Thanks you I have learnt something from this really informative video

great video mate, just discovered your channel... you've got a new subscriber :)

Great video - I always say work from the purchase price not the monthly payments! Excellent.

Some good points raised for sure, but realistically the unsecured loan option works best for loans up to £25k for the most part. Picking on new BMW M cars or Merc AMGs as examples of expensive new cars that typically bomb in value... how many people are going to easily get unsecured loans of £55k-£80k to pay for them up front? Not many would be my guess but BMW Finance or Mercedes Finance will sort them out no problem!

When I got my Civic Type R they tried to talk me out of putting a larger deposit down. I'll be buying out of the finance loop at the end of it. This video just confirmed what I suspected. Crafty folk!

He’s very good, good listening stuff, thanks.

The key is to get a good price on the car and buy something that holds value pretty well. If you can get hold of an audi s4 b9 that is one of the best cars holding value especially in the UK pre diesel version.

Very helpful thank you

Great informative video, I literally went to look at a car today on pcp and this has placed a seed of doubt. You’ve raised a few points that I hadn’t thought about 👍 I know it’s financially not the smartest approach but for me it’s about cash flow, even though in the long term I may lose out I’m able to manage whatever gets thrown at me financially due to having lower outgoings. The monthly outlay of a personal loan is significantly higher than pcp plus I’d have to get a much older car. What is the situation with an individual selling the car towards the end of the term to pay the finance off?

Amazing video, really helpful

Great video, you have a similar approach to me. I bought a very similar Spec m4 comp last year from BMW. Owned it for 9 months did 5k miles then sold it to a dealer for a profit. I always just make sure I buy the right car at the right price and never take finance. Big deposits and low interest bank loans are the way to go!

thank you so much i was about to pull the trigger on 17k pcp deal you saved me a fortune in the long run i got a bank loan off my phone app at hugely cheaper rate and for only just over a 100 pm more

Great video. This is the financial trap people be doing. I’d rather save the monthly payments for a year then go buy a car cash.

PCP has worked for me, just sold a car with £5500 more than the balloon payment

I like to change my cars often, it's an expensive hobby. I cannot get my head around depreciation, as in who says what a car is worth , yes a car is only worth what someone is prepared to pay but the whole trade relies on what the 'book' says. It's like a cartel and mugs like me keep falling for it. My better half drives a Suzuki Swift that has never missed a beat and has had it for years, I need my head read.

Nice video mate. With the ban on new internal combustion engine cars around the corner, do you think their value will increase eventually as they become more rare?

Cars are a wealth killer for nearly everyone, especially new ones.

Agree fully with the sentiment of the video, the difference in cost PCP to bank loan is purely in the difference in interest rate. PCPs usually sky high circa 10% Bank loans much cheaper - if you have a good credit rating otherwise the bank is going to slap more on as well. Quite simply the monthly payment is about what the car loses per month on average over the 4 years (scary when you think you are just paying the cars loss of value each month) The other trap of PCP is the car loses more per month at the start and then it levels off, ie if your payment is 500 a month the car is probably losing 600 a month for the first 2 years and 400 (very rough figures) for the last two years. So if you want to get out of it after a shorter amount of time, you are usually in a position of negative equity ie- you have a car worth 25k and a loan of 30k still so are basically -5k at that point. (Also bad in an accident and insurance low ball pay out) so you need GAP insurance to cover you. Quite simply PCP allows people to have cars they can’t really afford, it’s really down to simple personal money management, how much you earn to how much you spend your car monthly payment shouldn’t be much more than 10% of you top line monthly wage. They should teach this stuff in school alongside other money life skills, mortgages/insurance and tax things. Great work on the informative video hope I have added at least something of use to people 🤣

Here's an old fashioned idea, save money, buy car, the end...

Spot on video. Its convenience that people like about PCP (including myself) but a little more effort can save a lot of money. As a basic alternative you can find more competitive PCP providers out there who are independent of the dealership and give much more attractive rates.

Well explained. Thanks 👍

Very good points

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

Great explanation Thanks for sharing 👍

Really useful video. Question - 9:08 - 'and then you just get another car'. If you get a reduced value on the car then won't you need another loan to upgrade to a new car?

Very useful video. I PCP my city car daily driver as it costs peanuts and spend real money on classic cars as they do that rarest of things, they appreciate!

I really needed this information, can’t thank you enough. Funny how you used an M4 as an example

Really an enlightening reality check. You are 100% correct. However having said that I've just ordered a new Toyota Rav4 hybrid. Fortunately I'm in a position to pay cash but Toyota at the moment are offering 24months interest free loan. My PCP is £107 a month then I pay the balance and don't incur a penny of interest. Fortunately I got nearly £3000 off dealer price so I'm pleased. I've heard horror stories of PCP's and people returning cars etc. You summed it up brilliantly.

If you have 1000s in the bank and can afford to take a hit for maintenance bills now and again, then buy a car outright. However if you don’t have 1000s, then PCP makes a lot of sense if you have a reliable income and can happily budget monthly payments and also if you don’t plan on buying the car at the end of the 3/4 year deal. You get to drive a nice new car. Most come will come with warranty. And you have to do is drive it and put in fuel it. Hassle free motoring almost.

Same for cash transfer from a credit card over 18 moths/two years - small upfront charge and more to pay but it's interest-free and the car is yours.

Done exactly this over the last 15 years. Typically 5 year loan at 2.8 to 3%. Change after 3-4 years. Sell old car privately. Now have over £20k equity in my current car and gone from 320d through 335D to an x3 M40i currently.... yes I like my BMWs. 😃 I still struggle at the amount of people that actually take out these PCPs ...... look at the total cost!

Great vid. Just came across your channel. So I got a £85k Tesla Model S on pcp from Tesla- put £8k down via the company books- would a bank give an unsecured loan of £75k? Via the company I get tax benefits and a beautiful car to drive. Yes I may not own it at the end but I get to give it back,(at year 4) and go again on another EV. What’s your thought on this? Is it still better to do HP?

can you do one on leasing and compare with HP etc.. thanks great vid!

Some pcp deals have 0% apr. Can take advantage of that period then take out a loan for the guaranteed future value amount🤷‍♂️

Excellent advice

Very good advice 👍

This is one of the best videos I’ve ever seen and should help people a lot. I’ve just subscribed and look forward to more. Cheers.

Thankyou. You have saved me alot of headache

Brilliant Video

Good video and gave me a few things to think about. For me personally, I don't have a very good credit score, (current at FAIR), and whenver I compared loans, I always get better rate for PCP than personal loan. It makes sense to me beause personal loan is usually unsecure loan and PCP, the loan company owns the car. So I wonder if it's better for me to just go for PCP because of the loan rate is cheaper. (of course I will need to also save up for the final lump sum)

Other pvp channels didnt explain it as good as him,thanks

I've always paid cash for my cars, always bought between 1 and 2 years old, and had a good few Fiestas. Time came to get a replacement and we looked around. Our local Ford dealer offered 0% finance on a 3 year PCP, plus a free service at 2 years. So we decided to give it a try. We traded in our old Fiesta and put a good whack of it as a deposit and put a few thousand in our pocket. Now after 2 years we're looking to try something new. Unfortunately there's no 0% finance deals anymore. So we're going to have to handover extra money every month. Plus obviously the car has depreciated and therefore the deposit, or equity, we invested has also depreciated. We have to top up that equity, as you would do if you pay cash for a new car. Also if you want to come ahead and get a bigger, flashier or nicer car then you will have to put in even more cash to pay that bigger difference. Finance, any kind of finance, is fine if it's 0% or as near to that as possible. However if the object you're buying depreciates, and some times at an alarming rate, then it doubles the pain! The only good thing with a PCP deal is in theory I think you're only paying off the amount of depreciation the car generates in the time you have it. You don't own it and with these high tech cars nowadays you never want to own it and certainly not when the warranty runs out. Personally I'm going to look at leasing our next car, then hand it back at the end of the agreed period, I never want to own it! Or I could just use the 12 year old Ford Fusion I've just bought for £995 cash and run it until it can't pass another mot then get another!

PCP can work for some it depends on the car some cars increase in value especially Ltd edition models focus rs being a good example, so buying on pcp can make it affordable and you just get a loan to pay ballon payment at end it's never as simple as suggested it depends on the car and your particular circumstances

If you’re buying a car using PCP and looking to keep it I would recommend refinance the balloon (only on new cars) or split the balloon across the years of the agreement and make that over payment once a year so when you get to the end of the agreement you would’ve paid off the balloon and also wouldn’t have paid any interest on the overpayments. It’s perspective really and depends what you want to do with the car. If you want peace of mind and looking to keep the car just buy on HP but monthly payments would be more of course as you are paying off the whole car or as you said get a loan.

Excellent video

Fully agree with the advice. The most misunderstood aspect of PCPs is that people think that they are only borrowing the amount between their deposit and the GFV. Not the case. They are only repaying capital on that amount but they are borrowing the cost of the car minus the deposit. Interest (usually a higher rate than a personal loan but some manufacturers do 0%) is charged on that amount - in this example on £28,990! That’s where the dealer is making the big money and that’s why you should in most cases, go the P/L route. PCP works for some to get on the new car ladder, but always ask where you are going to find the GFV from. A P/L in 4 years time possibly? That means you need to keep the car for perhaps 6,7 or 8 years, not the 4 years of the PCP deal!

Whichever you cut it - buying, PCP or whatever else - cars are shitty investments. £483 per month? Imagine how much you can make in the stock market with all that cash. Buy a good 3-5 year old car in cash and keep it 10+ years. Put your money in assets (stocks, property, bitcoin etc). Live BELOW your means for a happy life, and always pay yourself first before expenses.

Am a bit late but I’ve subbed great content 👍

Thankyou was looking at Skoda koraq on pcp not no more thankyou again.

Hi, thanks for the vid. I’m still not sure what my options are. My PCP comes to an end in a few months. I did have a new car on order, but have cancelled this as i have decided to keep my existing vehicle. The balloon payment is about £18k & the resale is around £30k. I don’t want to sell the car so what are my best options to refinance? Thanks

You forgot the obvious great choice, get your existing 10k car valeted and keep it for another 3 years! Seriously, that great feeling you will get from picking up an new car will wear off quickly and be replaced by depression the first time you get a ding in a car park or a scratch. You know your existing car is fine right ?

Very interesting, I bought my Maserati with small deposit and 25k bank loan and worked out great. I can pay extra when I can and helps build up my credit score. I'm looking to upgrade to a 80k Mclaren, what would you advise here? Maserati is now worth 35-37k, but 13k left on loan. Not sure if I can get a bank loan over 25-30k.

I am in this mess - got 9 months to go on 2 pcp cars and I want out - which means I have to find nearly 15k in 9 months to own the cars outright on top of the existing monthly payments. Luckily I have a well paid job so probably will get near the 15k however for me going forward it's either save up and buy or HP.