| Motoring Discussion > PCP calculation | Miscellaneous |
| Thread Author: Bobby | Replies: 36 |
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New Sun 3 Jun 18 18:53
PCP calculation - Bobby
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It's Sunday and my brain is not in gear - can someone explain PCP finance to me? If you look at this as an example (on the 3.49% offer) www.nissan.co.uk/vehicles/new-vehicles/qashqai/offers/personal.html How is the finance calculated? Do you only pay on the amount minus the optional final payment? So after deposits, the car is £17829.59. The optional final payment is £10743.69 so is finance just based on the difference ie £7100 odds? Or are you charged more ? I just can't get these figures to add up? On the road cash price £24,260.00 Nissan Deposit Contribution £750.00 Total Customer deposit £5,680.41 Total deposit (including any available Nissan Deposit Contribution) £6,430.41 36 monthly payments of £239.00 Total amount of credit £17,829.59 Optional final payment £10,743.69 Total amount payable £25,778.10 APR Representative 3.49% APR Representative Fixed Rate of Interest (P.A.) 3.49% Duration 37months Annual mileage 10,000 Total amount of credit £17,829.59 Optional final payment £10,743.69 |
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New Sun 3 Jun 18 20:30
PCP calculation - rtj70
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| Compare it to an lease - so you have back after 2 years. Can be cheaper. Especially the contribution. |
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New Sun 3 Jun 18 20:36
PCP calculation - Bobby
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| Cheers but needing assistance on the actual calculation of this |
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New Sun 3 Jun 18 20:37
PCP calculation - Bobby
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| So if you were back at school doing Maths, and you still got marks for showing the working, how is the monthly payment on the above arrived at? |
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New Sun 3 Jun 18 21:22
PCP calculation - Falkirk Bairn
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Easy Peasy Your Deposit+36 x £239 & divide by 36 = £396.77 per month assuming you complete the contract. £14,284 in total That is expensive for a Nissan. The Nissan Contribution is miserly & the interest rate is not that low. There are better dealer offers - bigger contributions from manufacturer+better dealer discounts & often very low/interest free credit Select the car you want & then trek around for different dealers who can sweeten the manufacturer deal especially near the month end, cars they have instock & have been paid for. A neighbour 2.5 years ago was quoted £450/ month & some £3000 down x 48 mths- he ended up paying £400 with £400 down for 48 mths - he had the car made to his spec & waited some 10 weeks for it. |
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New Sun 3 Jun 18 21:41
PCP calculation - RichardW
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On PCP the monthly payment is: 1. the 'depreciation' (.i.e. the difference between the price paid, and the GFV - in this case starting price for finance is 24260 (OTR) - 6430.41 (Deposit)= 17829.59; GFV is 10743.69 (optional final payment) = 7085.49); and 2. the interest on the whole amount financed (the 17829.59 @3.49% pa = 622.55 a year or 1866.75 over three years) So amount to pay = 7085.49+1866.75 = 8952.66 = 241.96 / month Which doesn't quite match the figure above, but it's close enough! This is why PCP appears cheaper on a monthly basis, as you are only paying for 40% of the car in the finance. |
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New Sun 3 Jun 18 21:54
PCP calculation - Manatee
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The easiest way to check that is to put all the cash flows into a list in Excel (1 row per month, loan balance negative, payments positive) then let excel calculate the IRR. APR = (1+IRR)^12-1. e.g. if IRR =0.286% then (1+IRR) = 1.00286 - 1.00286^12-1=0.0349 or 3.49%. If you have a rate and you want to work out the payment, the easiest way for you to do it is probably to iterate using the spreadsheet - put the known cashflows in (the loan value and the final payment) and guess the monthly payment and see what the rate is. Adjust the monthly payment until the rate is what you are aiming for. I wrote a spreadsheet many years ago that did this - it doesn't quite match your example because the residual is due on the same day as the final payment, so it misses a month's interest on the final payment. this is what it threw out as a monthly payment: Periods P 36 Residual value RV £10,743.69 Amount owing (positive) or overpaid (negative) at final payment date. Loan Balance B -£17,829.59 Negative Period rate R 0.286% Instalment I £238.19 I = (R*(RV+(B*(1+R)^D)*(1+R)^P))/((1+R*T)*(1-(1+R)^P)) EAR 3.490% (period=calendar month) They've included their deposit contribution in the TAP I think, although it isn't payable as far as you're concerned TAP 6430 8574.704716 £10,743.69 25748.39472 As you can see my payment and TAP are a bit less than yours because of that extra £30 interest included in the final payment. The interest rate is fair. Whether it is good value depends on what you think of £750 discount and how much you think it will be worth at the end (i.e. if less than the guaranteed payment that will add value for you - if it's worth more, then the guarantee is of no value). I can do the cash flow spreadsheet for you if you want. Last edited by: Manatee on Sun 3 Jun 18 at 21:56
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New Sun 3 Jun 18 22:26
PCP calculation - Bill Payer
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>> How is the finance calculated? Do you only pay on the amount minus the optional >> final payment? So after deposits, the car is £17829.59. The optional final payment is £10743.69 >> so is finance just based on the difference ie £7100 odds? Or are you charged >> more ? You pay interest on the optional final payment. You owe that for 3 yrs, so you pay 3yrs interest on that amount. The interest charge on the optional final payment will be quite significant - in the region of £1000 in your example. Last edited by: Bill Payer on Sun 3 Jun 18 at 22:27
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New Sun 3 Jun 18 22:39
PCP calculation - Manatee
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Another way to look at that is that the bigger the final payment the higher the total cost will be, other things being equal. For the same rate of interest, the £££ interest will be lower the sooner/faster you pay the principal back. The money that you pay on the last day, from the sale proceeds of the car, you have owed for the whole period - of course it's priced into the APR calculation too. It's a sooty way of financing things that don't earn you any money, unless you can make it work for you by getting a bigger discount. Manufacturers cynically bribe customers to use PCP so they get hooked. They deserve to be shafted by the smarter ones who settle early and snaffle the discount. Nothing to trouble the conscience there. Last edited by: VxFan on Mon 4 Jun 18 at 01:52
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New Sun 3 Jun 18 23:35
PCP calculation - Bobby
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Thanks guys for the explanation - it all makes sense to me now - the bit I had been missing was paying the interest on the optional final payment - of course it makes sense that this is the case until you actually settle that. This is just one example of a qashqai - the dealer up near you FB I have been exchanging emails with. believe it or not due to the interest rates and deposits, it works out cheaper to buy the car new rather than six months old with 100 miles on the clock! The rates they charge on the used car are very high, if you go on the theory that you would want to buy the car at the end of the deal and would probably need to take a loan for that, then this particular pcp deal is much cheaper if you just went for a straight loan from outset. Thanks again, I know I could get more out the dealer if I went in and looked more committed but at this stage I am just playing with figures and doing some man maths. |
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New Mon 4 Jun 18 01:07
PCP calculation - rtj70
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| How does this compare to actual leasing Bobby? |
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New Mon 4 Jun 18 07:05
PCP calculation - PeterS
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>> How does this compare to actual leasing Bobby? >> Leasing looks much cheaper... www.contracthireandleasing.com/independent-brokers/smart-leasing-solutions-ltd/nissan/qashqai/311189635/ I reckon that the above works out to about £250 a month all-in, compared to almost £400 for the PCP Last edited by: PeterS on Mon 4 Jun 18 at 07:08
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New Mon 4 Jun 18 08:22
PCP calculation - Runfer D'Hills
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| I recognise that I'm the statistical outlier in all of this, but I really don't ever want to buy personal cars on any kind of deferred finance arrangement. I buy them with money I've earned and saved. I like knowing that I own them outright from day one. I accept that there are strong arguments and cases for not doing that, but it's my strong preference. Old fashioned maybe, but I just don't care, I only buy things I can afford and have worked hard to do so. |
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New Mon 4 Jun 18 08:45
PCP calculation - Bobby
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>>I only buy things I can afford and have worked hard to do so I totally get that Humph, but its all a matter of degrees of the same thing. Folk don't wait till they have enough money to buy a house outright ? Folk buy items on credit card knowing that they can clear the balance as it comes in? Using ballpark figures I would need to save £350pm for five years to then afford a £22k car. So in that five years I also could not afford to be paying another loan. But I can afford the £350 so why wait 5 years to getthe car (I appreciate depreciation etc all kick in) Especially when there are very low interest rates available just now if you look around. I normally take loans out for cars, in fact I have probably being paying a monthly car loan every month since I was about 20 , apart from when I kept my Altea for two years after the loan had cleared. I have bought via PCP once when I got a brand new Scenic but other than that I tend to buy ex dealer demonstrator type cars, maybe up to 1 years old. I am just doing a bit of man maths calculations just now but there is an argument that says if you are paying a monthly amount, then it makes sense to get the best car you can for that amount. Maybe as I get older I would look to ultimately own the car outright and keep for a while. I am also in a job that I am currently seeing too many people younger than me passing away and I think there is a bit of truth to the live life for now and not for the future. |
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New Mon 4 Jun 18 08:46
PCP calculation - Bobby
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| Actually I had my first loan at 18 from my dad to buy a Mark 2 Escort for £650. He didn't charge me interest though!! |
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New Mon 4 Jun 18 09:07
PCP calculation - smokie
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I've never had a major loan (except taking advantage of interest free for appliances) for anything other than the house. With cars, I had a company car for quite a few years then decided to purchase a car (actually eventually I bought the lease car) because I thought my job was in jeopardy and I wouldn't have wanted to be forking out on a car (loan or purchase) if I had no income. I've now stopped work and, although I'm not badly off, I'm glad I own my car rather than have an ongoing monthly cost, or the need to find enough to outright buy a half decent car, despite the depreciation which is expected (minimal on my car at the moment). I suppose it all depends on what stage you are at in life and how your finances look, both now and in the future. A mate of the same age as me had a couple of Audi TTs on lease over the last few years and he has just swapped it for a Q7. They made him an offer it would have been rude to refuse, but he's still working, and I expect the lease car will probably go once he stops (and for all I know he may be effectively tied to work until the end of the lease!) |
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New Mon 4 Jun 18 08:59
PCP calculation - DP
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My car allowance is paid monthly, so the car it funds is also. I'm pretty comfortable with that, especially as it's also saving me £200+ a month in BIK, putting me in a car I actually want to drive, and I just had a nice bank transfer of £1500 from HMRC for last years MAR on the fuel. That's the upcoming service and tyres, and next year's insurance covered. If I wasn't on a car allowance, I'd drive something cheaper and bought outright. Last edited by: DP on Mon 4 Jun 18 at 09:01
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New Mon 4 Jun 18 11:32
PCP calculation - Manatee
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>> I recognise that I'm the statistical outlier in all of this...I >> only buy things I can afford and have worked hard to do so. Ironically I spent much of my working life developing and selling financing products but I have never felt comfortable borrowing. Yes I had a mortgage, and that made me uncomfortable too. I have always felt like a man with a bucketful of water swinging it round his head by the handle. As long as you can keep everything spinning, it's fine. Unlike Humph I usually had a regular wage but I never wanted to be a hostage (or make my family hostages) to fortune any more than was absolutely necessary. Even when I had a car allowance I treated it as wages that would stop if my job did, or my health gave way. That said - a car for many people is now necessary for them to earn money, as so many need to commute long distances. For them at least a basic car is an investment with a payback, and saving up might not be an option. |
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New Mon 4 Jun 18 11:50
PCP calculation - Runfer D'Hills
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Totally get that Manatee. It's just my way of dealing with things, not necessarily right for everyone. I suppose I've always had this feeling that if ever I had to ride off into the sunset in my poncho while chewing on a cheroot, that I'd want to do so without anyone wanting the horse back. Different with company cars though oddly enough, I manage to regard them as office equipment and feel no "ownership" of them. |
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New Mon 4 Jun 18 12:12
PCP calculation - DP
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>> That said - a car for many people is now necessary for them to earn >> money, as so many need to commute long distances. For them at least a basic >> car is an investment with a payback, and saving up might not be an option. The explosion in car finance in recent years has a lot to do with government taxation on company cars, in my view. PCP offers relatively small monthly payments at a time when the monthly tax bill on the company car is spiralling by more than 10% every year. If you opt out you go to a nice, simple, "normal" tax code, get an allowance paid on top, and if you do it right, and can put the whole ownership piece to one side, you can have a car that pretty much funds itself. Or if you aren't into cars, you can run a cheapie, and trouser a tidy sum every month. I'm not quite that sensible :-) To put it into context, with the allowance, and all finance, maintenance, tyres and insurance factored in, my M140i actually "costs" me about £20 a month. My old company diesel Passat was costing me £250 a month in BIK, and would have cost £295 a month from next year. Things are obviously a lot simpler if you don't need to drive for work, but the nature of my job requires that my employer has an interest in my car, whether they provide it directly or not. Last edited by: DP on Mon 4 Jun 18 at 12:13
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New Mon 4 Jun 18 08:47
PCP calculation - Bobby
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Cheers for that Peter - must have a wee nosey at lease costs. The actual model I want is the Tekna and need it for 12k miles per year which that site doesn't seem to allow! But food for thought! |
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New Mon 4 Jun 18 09:22
PCP calculation - Runfer D'Hills
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If you have a predictable/fixed regular income then I can see how it makes some sort of sense. I've never had that situation. I've always worked in a feast/famine sort of environment with huge swings in income levels dependent upon how things are going. To commit to a fixed monthly payment on a car wouldn't ever have felt comfortable. But, it's not just that, I, irrationally perhaps, just like to know they are mine. My father gave me a tip when I first started work which I've always stuck to. He suggested that whatever I earned, no matter how tight things were, that I always put 10% of it into a "rainy day" savings account. Never touch it until a major purchase is required, a quite separate savings account to any "normal" one that you just quietly forget about, for years if necessary. Then, lo and behold, when you want something expensive, yippee, you can afford it. ;-) |
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New Mon 4 Jun 18 10:03
PCP calculation - PeterS
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>> Cheers for that Peter - must have a wee nosey at lease costs. The actual >> model I want is the Tekna and need it for 12k miles per year which >> that site doesn't seem to allow! >> >> But food for thought! >> I think you just need to go back to the beginning and search; the company I linked to doesn’t offer that model / term, but others do... www.contracthireandleasing.com/independent-brokers/uk-cars-and-vans-ltd/nissan/qashqai/309851563/ |
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New Mon 4 Jun 18 12:00
PCP calculation - Fenlander
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With two successful private lease agreements under our belts I would be very tempted to lease rather than PCP. It seems Bobby would be paying out £14,284 over the 3yr PCP agreement before it ends and the rather substantial £10,743 balloon payment looms. A huge proportion of PCP folks (I think the stats put it at 80%) when faced with the balloon either hand the car back or more likely take out a further PCP with the dealer "creating" figures where an inflated final value exceeds the balloon so claiming you already have a contribution to the deposit on the next 3yr PCP. If you hand the car back you are no better off in ownership stakes than leasing (i.e you start from scratch again)... and similarly if you take 3 more years PCP you are perpetuating not owning the car so no greater status than leasing. If you look at lease costs I think £260/mth would get you the car you want on a 3+35 contract (up to 15k mls) so the total cost over the 3yrs would be £9,880. That is £4,404 cheaper than PCP! More importantly the lease initial deposit being just £780 compared to £5,680 for PCP means the savings start immediately in quite a substantial way. Last edited by: Fenlander on Mon 4 Jun 18 at 12:01
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New Mon 4 Jun 18 12:05
PCP calculation - Manatee
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>> >> If you look at lease costs I think £260/mth would get you the car you >> want on a 3+35 contract (up to 15k mls) so the total cost over the >> 3yrs would be £9,880. That is £4,404 cheaper than PCP! >> >> More importantly the lease initial deposit being just £780 compared to £5,680 for PCP means >> the savings start immediately in quite a substantial way. QED I would say. |
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New Mon 4 Jun 18 12:12
PCP calculation - Fenlander
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Re the ethics... >>> I really don't ever want to buy personal cars on any kind of deferred finance arrangement. I buy them with money I've earned and saved. >>>I've now stopped work and, although I'm not badly off, I'm glad I own my car rather than have an ongoing monthly cost, Consider the situation though Runfer where you can easily afford the car new outright with cash. Then you look at it and say actually the best use of family funds overall is not to deplete savings by £16k buying but to leave savings intact and pay £7258 over 3yrs from income in monthly lease charges... costing no more than you might have done in depreciation alone. You have the same thoughts re retirement Smokie. We would not wish to carry lease or other financing payments into the reduced income pensions period. |
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New Tue 5 Jun 18 12:31
PCP calculation - RichardW
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| The Extrovert Chinese Lady has got Teknas on 3+35 / 15k for £260 upwards, depending on engine selected.... |
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New Mon 4 Jun 18 12:03
PCP calculation - Roger.
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I reckon I'm too old for both PCP and loans. I have, according to Money Saving Expert's Credit Club, a perfect credit score of 999. My likelihood of a loan is "poor" , as my income is considered not enough to have a reasonable amount "spare" even though I am a homeowner with no mortgage. OTH, I've just obtained a Virgin Money credit card with a 30 month interest free balance transfer, which I've used to pay off my interest free M & S credit card which was carrying the cost of our new boiler and only had a short time left to run with no interest. A limit of £4200, far more than I needed for that purpose. I will never purchase anything.on the VM card. which is safely sitting in our safe, as it blurs the interest free thing. I like interest free, especially as our modest savings (well enough to clear all this debt) are sitting in a 1% , added monthly, instant access savings account. Just to test the water, I tried ASDA Money to do a soft search application for a loan of £7500 over 4 years and the only one it came back with was with Amigo loans, a shark-like lender , with an astronomical APR and a requirement for a guarantor with every loan granted. No way José. During my many years in the credit industry I've seen enough of guarantors being suckered into guaranteeing HP & loans, often to family and then being gob-smacked when payment is demanded on behalf of a defaulting borrower. I would NEVER, NEVER, guarantee anyone else's financial obligations. |
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New Mon 4 Jun 18 12:07
PCP calculation - No FM2R
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>>guarantors being suckered into guaranteeing It seems that guarantors often fail to understand that they are being asked to accept a risk that the finance company will not. That ought to be a clue. Last edited by: No FM2R on Mon 4 Jun 18 at 12:10
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New Mon 4 Jun 18 12:20
PCP calculation - Fenlander
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>>>guarantors often fail to understand that they are being asked to accept a risk that the finance company will not. That ought to be a clue. Quite true. We were asked to be joint rent guarantors with three other parents on a house share while daughter was at uni. The three other parents (one set living abroad, one set mostly abroad and the other on benefits) and the students inc our daughter were quite upset we wouldn't sign. We pointed out the agreement was worded such that they could come to any one guarantor for the total sum meaning signing that paper put a £15k liability on us. No thanks. |
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New Mon 4 Jun 18 12:08
PCP calculation - Manatee
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"Guarantor loans" could be the next scandal. The definition of a guarantor is an idiot with a pen. Guarantors never expect to have to pay and there will be some hard cases. |
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New Mon 4 Jun 18 16:17
PCP calculation - Roger.
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I am disturbed by the sheer number of high APR loans, including Payday loans, being advertised on the TV. As I have said, I had many years in the vehicle HP, personal loan and commercial leasing/lending business, which makes me hyper sensitive about interest rates and a shiver runs up my spine when I see vulnerable people being targetted by lenders with APRs over 1000%. It will end in tears, as did the time, many years ago, when HP was around on used and new cars with 5% deposit, 5% (flat rate, so APRs of roughly 11-12%) interest and 5 years to pay. Buyers had no equity in the cars until the end was approaching of the 60 month slog: there was little incentive for many borrowers to continue paying, especially as a car, especially those bought second-hand, in those days could be approaching serious repair time after 4 or 5 years. Arrears and repossessions were rife. In the end, Government stepped in and enforced minimum deposits and maximum repayment periods. That cured it, at the expense of commercial freedom and individual choice, but was needed. That time may come again, I fear. Last edited by: Roger. on Mon 4 Jun 18 at 16:19
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New Tue 5 Jun 18 10:59
PCP calculation - Bill Payer
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>> believe it or not due to the interest rates and deposits, it works out cheaper >> to buy the car new rather than six months old with 100 miles on the >> clock! >> Was the same getting wife's Tiguan – one of the last of the old models – looked at nearly new as needed a car quickly but had to go back 12mths+ before they were cheaper than new, and that’s just allowing for discounts and deposit contribution. The interest rate on used was 2x new (although we were paying it off straight away so that wouldn’t have mattered. The older cars were non-EU6 engine and didn’t have sat-nav, but dealers wouldn’t budge on the price of the used models. I found it all very strange. |
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New Tue 5 Jun 18 11:10
PCP calculation - commerdriver
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>> The older cars were non-EU6 engine and didn’t have sat-nav, but dealers wouldn’t budge on >> the price of the used models. I found it all very strange. >> The used models have no manufacturers or finance support on them. |
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New Tue 5 Jun 18 12:18
PCP calculation - martin aston
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As for guarantors there is a current TV ad which cheerily advises that the guarantor is there to pay if you can't. Thats OK then......if you are not the guarantor! |
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New Tue 5 Jun 18 12:48
PCP calculation - Bill Payer
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>> The used models have no manufacturers or finance support on them. >> I know - but how on earth do they sell when they end up dearer than new? I asked the salesman we bought the new one off, and he said some people just don't even look at new - they come in determined to buy a nearly-new car. Plus many dealers have different sales people for new and used, so the used guys aren't exactly going to point out that the customer might want to consider new. |
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New Tue 5 Jun 18 13:17
PCP calculation - commerdriver
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>> I know - but how on earth do they sell when they end up dearer >> than new? >> Because the majority of punters out there, despite the volume of advice available online, do not try to haggle, do not realise there are other options available, or want a warm feeling of having a "friendly" relationship with the dealer if there are any problems. It's the same reasoning that keeps high numbers of people with the same bank, broadband supplier, etc for years. And because the lowest price does not always add up to the best value in the long term. |
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