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Six Cylinders Motoring Notes


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21 minutes ago, wuvvum said:

For a 1.0 Essential on a 4-year PCP with £500 deposit, the monthly payments are roughly what I'm paying in VED every month for my fleet at the moment...

No wonder so many people drive modern cars.

What's the final value fee though?  You'll get to 4yrs old and then either have to pay an amount far greater than the value of the car at that point, or hand it back and get suckered into another deal.

Also, woe betide if you drive more than their pathetically small allowance of miles.  You'll get bumraped to the tune of about 50p/mile for anything more than popping to the shops on a weekly basis.

The headline figures are all well and good, but dig a bit deeper and you'll find the real cost.

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33 minutes ago, Talbot said:

Also, woe betide if you drive more than their pathetically small allowance of miles.  You'll get bumraped to the tune of about 50p/mile for anything more than popping to the shops on a weekly basis.

The finance calculator doobery has a slider to select the annual mileage you want.  I set it to 10K a year, which is pretty much what I do on average.

I'm not about to click the button to buy one, but I do sometimes see the appeal when I'm spending my weekends crawling around under old chod trying to fix the brakes for the MOT instead of chilling in the back garden with a beer and a good book.

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I didn’t know you’d got a Beetle convertible - that looks quite fun. New Beetles have grown on me now that they are just as old as Old Beetles were when I started driving!

They did a weird spec model with the much rarer second generation one (New New Beetle?) - only ever seen one or two - it was kind of like a Polo Dune with raised ride height and the usual plastic bits and pieces.

Those crazy Germans eh? 🤪
 

Re Carltons, I am a bit surprised there are only 173 or so left (I assume there are more if you count Sorned ones?). 

There’s probably 10 times as many Granadas of the equivalent era (I guess that’s the Mk2 and Mk3) still about.

I guess if they are that rare then you have to make the best of what’s available, so good luck with the head gasket! 

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18 hours ago, wuvvum said:

The finance calculator doobery has a slider to select the annual mileage you want.  I set it to 10K a year, which is pretty much what I do on average.

I'm not about to click the button to buy one, but I do sometimes see the appeal when I'm spending my weekends crawling around under old chod trying to fix the brakes for the MOT instead of chilling in the back garden with a beer and a good book.

I can very much see your point.  When I've been scrabbling about in the wet to change a corroded brake pipe to be able to get an MOT because I need the car to get me to work on Monday, I often question my sanity.

Interesting that you've set it to 10k a year and still got a reasonable* montly cost..  I've heard of some of the PCP options being limited to 8k or sometimes just 6k miles a year.  25k/year is more like average for me.  I suspect the monthly payments would be rather higher if that was chosen.  And you'd still have a massive final value fee at the end of it.

What I do wonder is if you bought the same car outright on finance, did the same miles per annum, paid the same amount as a PCP amount back against the finance each month, how much finance would be left at the end of 4 years?  I suspect nowhere near as much as the final value fee.

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11 hours ago, Mr Livered said:

Is that the Merc I gave you hiding shyly behind the Beetle there? Nice to see it still going, if so :)

Yes! :-)

We twiddle its acupuncture pins in the driver's door card every now and then, which seems to keep it good health and it continues to proceed in its steady, solid, three-pointed-star kind of way and do whatever is asked of it.

 

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8 hours ago, Mrs6C said:

Yes! :-)

We twiddle its acupuncture pins in the driver's door card every now and then, which seems to keep it good health and it continues to proceed in its steady, solid, three-pointed-star kind of way and do whatever is asked of it.

 

Splendid :)

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On 4/5/2021 at 1:29 PM, Talbot said:

What's the final value fee though?  You'll get to 4yrs old and then either have to pay an amount far greater than the value of the car at that point, or hand it back and get suckered into another deal.

Also, woe betide if you drive more than their pathetically small allowance of miles.  You'll get bumraped to the tune of about 50p/mile for anything more than popping to the shops on a weekly basis.

The headline figures are all well and good, but dig a bit deeper and you'll find the real cost.

The thing is, APR is APR. If you finance a £10,000 car on 4.9% APR it's not suddenly going to have a REAL cost because the balloon payment is due, it always had a real cost.

And on the flipside, yes, if you think that a £38,000 Mercedes C-Class is £299/month for three years and that's the price and somehow the PCP is ripping you off, then you really need to go back to school for a while. If you finance a car on 0% you've still got to pay for the damn thing?

And most excess mileage charges are between 4.9ppm and 15ppm unless you've signed a really vicious deal.

Every PCP deal I have been involved with the car has been worth more than the final value fee. Even a Citroen C3.

IME if you can spend less than £3Kpa on a car, excluding fuel, including tax and maintenance, then you're doing okay. £2K per year is a more sensible level if you can do it, but that's surprisingly limiting.

By all means, avoid finance if you want to and can do so, but be realistic. A Golf with some fancy bits is £35,000 these days. Want a nice Skoda Scala? Up to £29K. That white amorphous blob of a CLA Shooting Brake I've been testing  is £38,000 list price. Even at 0% APR that would take 100 months at £380/month to pay off.  I am sure this will spark a rant about the number of people driving fancy cars they haven't earned or don't deserve, but fundamentally new cars are a thing you subscribe to, lease, treat as a monthly payment; they're not a status symbol or an asset, they're a device.

People spend more to get fancy ones, but you could lease an Audi A3 e-Tron for £237/month inc. VAT and the value of a 12 year old Focus - there are always deals like that. The real cost is of course the number of cars that get thrown away rather than maintained - the lack of servicing, the state of these not at 3 years old, but at 7 to 12 years old; how many 56-plate cars do you see that still look great? Manufacturers have to encourage them off the road to stay in business...

The Dacia is unusually good for a car you could realistically buy with savings though - I am looking forward to talking about it properly elsewhere :D

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So the monthly payments must be more than the depreciation value of the car.

They have to make their money somewhere.

I simply cannot believe that the initial buy-in price + all montly payments + final payment can be less than the cash price of the car.

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Without getting into the PCP argument, I've always thought that if you manipulate the list price, so that the depreciation looks even worse, and the monthly payments look reasonable, the second hand value of the car after 3 years might actually be what the price should have been.  Given that lease companies buy in bulk, or are tied into the manufacturer, or are the manufacturer, we really don't know how much they paid for the car.  

My daughter is actually prime target for PCP.  

The reason she doesn't? She wants to buy a house and having anything on finance would screw up the figures on how much she could borrow.  

 

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1 hour ago, Talbot said:

So the monthly payments must be more than the depreciation value of the car.

They have to make their money somewhere.

I simply cannot believe that the initial buy-in price + all montly payments + final payment can be less than the cash price of the car.

It quite often can be. Usually there are incentives and discounts.

We do a whole load of research on this at Parkers - and trust me, you're not talking to someone who likes or WANTS to support new cars, I learned this a long time ago that leasing/PCP cars is often cheaper than running or financing old cars, particularly that awkward 5 to 7 year old window where the car is still worth enough to finance, but the repairs are coming in thick and fast.

APR wraps it all up. They make the money on the car itself. It has a profit margin. Old-school thought; IIRC the material cost difference between an Audi 100 or 200 (or 80 and 90) in the '80s was 100DM, but they could charge 1500DM more; this applies even more now as people will choose a GLA over an A-Class, an XC over a V, etc. and yes, monthly payments, but it's still MORE.

Also the car manufacturers are finance companies.

You will often (if you have good credit) get a lower APR on a PCP - and a cash discount on the car via incentives - and if you want to push that further you can always sell your car at the end and pay the PCP off.  But it has to run all the way through. Depreciation isn't linear - sell after a year and yes, you will owe more than the car is worth. That's why two year lease deals are often worse unless the cars are troublesome stock.

Depreciation is always measured against list price. My C6 was £38,000 list. What I actually paid was £28,000 for 15 mile pre-reg, minus £4,000 dealer incentive, minus £2,800 trade-in offer for a 2004 Ignis that I'd paid £800 for. These sorts of deals are quite common - hence all the brokers. £9,000 off a C-Class or E-Class isn't unusual. They were bashing out Renault Zoes for £9K a couple of years back,

But ultimately no, there is no trap, no trick, no 'making their money somewhere' - they sold a £40,000 asset with a profit margin on a finance deal that in up-front payment, monthly cost and residual value calculated to be less than the value of the car at the end of the finance term, adds up to the value of the asset plus interest payments :)

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13 minutes ago, New POD said:

Without getting into the PCP argument, I've always thought that if you manipulate the list price, so that the depreciation looks even worse, and the monthly payments look reasonable, the second hand value of the car after 3 years might actually be what the price should have been.  Given that lease companies buy in bulk, or are tied into the manufacturer, or are the manufacturer, we really don't know how much they paid for the car.  

My daughter is actually prime target for PCP.  

The reason she doesn't? She wants to buy a house and having anything on finance would screw up the figures on how much she could borrow.  

 

Depends on the finance. If she wanted a new car and leased it, it doesn't show as a debt in the same way - the payments are ticked off, but there's no liability shown for the full value of the car, unlike a PCP where everything (including the balloon) is a finance liability. And as always, well-managed credit = more creditworthiness.

Brokers give a hint as to the cost price of the car. £14,000 for a £21,000 Nissan Qashqai or Juke type thing isn't uncommon. Most things you manufacture you want a 30-40% margin on and the car industry is no different; Nissan are actually operating on tighter margins for greater volume. Ferrari recently discussed their profit margins and you can bet they're running a MUCH higher level of profit to COGs, probably 70-80%, but then they sell relatively few cars.

But loss leaders exist - JLR are particularly 'good' at it, when the £50K (in any spec you'd want) Velar launched they were on lease from brokers for £350/month - now they're more like £600/month with heavier deposits (most leasing is still 3, 6 or 9 months up front as first payment depending on the deal, though some brokers are now just using a flat number unrelated to monthly cost). Some could say this disparity is down to depreciation calculation, but by that reckoning Evoques should be one of the cheapest cars to lease; it's dumping stock onto the roads to get the cars seen.

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1 hour ago, RichardK said:

Depends on the finance. If she wanted a new car and leased it, it doesn't show as a debt in the same way - the payments are ticked off, but there's no liability shown for the full value of the car, unlike a PCP where everything (including the balloon) is a finance liability. And as always, well-managed credit = more creditworthiness.

While that is true, what I think newpod is referring to is the affordability calculation. Car finance, like any other major outgoing, is dug out of your earnings and that's is a major factor on the calculated max you can borrow (4 to 5 times combined earnings). They also stress test finances to see if you can still afford the monthly repayments on a mortgage if interest rates went up to a high percentage (calc around 5% iirc) after a deal ends. Thus the amount you can borrow is reduced if you have a lot of outgoings. 

But of course this is only really a problem if you're borrowing nearly max what the bank will offer. Which is likely a risky personal situation if they did, given the amount banks will still potentially lend. 

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1 hour ago, RichardK said:

Depends on the finance. If she wanted a new car and leased it, it doesn't show as a debt in the same way - the payments are ticked off, but there's no liability shown for the full value of the car, unlike a PCP where everything (including the balloon) is a finance liability. And as always, well-managed credit = more creditworthiness.

Brokers give a hint as to the cost price of the car. £14,000 for a £21,000 Nissan Qashqai or Juke type thing isn't uncommon. Most things you manufacture you want a 30-40% margin on and the car industry is no different; Nissan are actually operating on tighter margins for greater volume. Ferrari recently discussed their profit margins and you can bet they're running a MUCH higher level of profit to COGs, probably 70-80%, but then they sell relatively few cars.

But loss leaders exist - JLR are particularly 'good' at it, when the £50K (in any spec you'd want) Velar launched they were on lease from brokers for £350/month - now they're more like £600/month with heavier deposits (most leasing is still 3, 6 or 9 months up front as first payment depending on the deal, though some brokers are now just using a flat number unrelated to monthly cost). Some could say this disparity is down to depreciation calculation, but by that reckoning Evoques should be one of the cheapest cars to lease; it's dumping stock onto the roads to get the cars seen.

Nothing has really changed from the 1990's when I sold new cars on PCP. We would be able to offer manufacture incentivised specific cars from time to time with special rates.

When no new deal PCP and business lease vehicles were returned we had to inspect them for damage. We were give a book with pictures of what was acceptable for different age and mileage cars. It was not very often that a car came back without some sort of charge, does that still happen? Is it more usual minor damage is taken into account in the p/x price for a new deal, be it with the same manufacture or a different one.

On PCP if you go over mileage is that always a charge to be paid or does it get taken into account in the p/x price if a new deal is being signed? 

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47 minutes ago, Six-cylinder said:

Nothing has really changed from the 1990's when I sold new cars on PCP. We would be able to offer manufacture incentivised specific cars from time to time with special rates.

When no new deal PCP and business lease vehicles were returned we had to inspect them for damage. We were give a book with pictures of what was acceptable for different age and mileage cars. It was not very often that a car came back without some sort of charge, does that still happen? Is it more usual minor damage is taken into account in the p/x price for a new deal, be it with the same manufacture or a different one.

On PCP if you go over mileage is that always a charge to be paid or does it get taken into account in the p/x price if a new deal is being signed? 

You still get charged for damage if handing the car back, but excess mileage and damage are all taken into account in a new deal, same as negative equity if you change early (as I did with my C6 to the C3).

If you've any sense, you won't get burned. If you hand a car back at three years old with the seats trashed, panels dented and a cracked windscreen because you CBA getting it replaced on insurance, then you're going to pay - but then again,  the car would also be worth less to a buyer anyway. People seem to have a disconnect between value/condition/time where cars are concerned... and its understandable, but a lot of what seems to be negativity towards PCP is what most of us would call 'consequences of actions' and not an inherent flaw in the model of PCPs.

Most leases will allow a few stonechips (per panel it's usually a couple) and even a small stonechip on the windscreen, but damage is damage. You wouldn't pay top whack for a three year old car with a dent on the door, after all.

I've never had a charge for damage on a lease or PCP car, and my RX8 had two MASSIVE stonechips including one on the roof with a dent in it, my Beetle was leaking and had had a sill repaired, and my Fullback had been reversed into and had an insurance repair (amazing job - I couldn't tell) on the rear 1/4.

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2 hours ago, SiC said:

While that is true, what I think newpod is referring to is the affordability calculation. Car finance, like any other major outgoing, is dug out of your earnings and that's is a major factor on the calculated max you can borrow (4 to 5 times combined earnings). 

Applying for a residential mortgage is interesting, these days.  Your spending habits are interrogated, and they look at all your fixed commitments and your "lifestyle" expenses.   And so similar people doing the same job on the same salary might find their mortgage borrowing  limits are different. 

She studied in Wales but as she's from England she has a bigger student loan than most of the people on her course. But they all have to pay it back at 9% of any salary above £26750.  This costs her £30 a month. 

Think about that.

£6000 at say 6% (assume for the purposes of a stress test that interest rates could rise by 3%) costs £30 a month. 

That £45k student loan should reduce the amount she can finance by approximately £6000 

If you have a £500 phone on contract that costs £30, there's another £6000 less, you can borrow. 

If you have a £10k car on a PCP contract costing £200 a month, that should limit your ability to borrow £40k 

But if you paid £10k cash, you have just spent your 10% deposit on a £100k loan. 

Hence her spending £3000 on a KA.

As an aside: When we took out a second mortgage in 2019, we downloaded all our spending from all our accounts and credit cards and it was shocking how much we spent on luxuries and presents and meals out.  And worse was the visits to the cash point with no record of what we'd spent or why.  It shocked my wife more than me.  It changed our spending habits. Mine. I try not to use cash. Then at least I know where I spent it. 

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6 hours ago, RichardK said:

Some could say this disparity is down to depreciation calculation, but by that reckoning Evoques should be one of the cheapest cars to lease; it's dumping stock onto the hard shoulders to get the cars seen.

EFLand Rover.

The company I work for offers a lease scheme (via a third party provider) which is all inclusive (insurance, servicing etc) and the lease payments are taken from your pre-tax salary.  Some of the offers are quite attractive, but my concern is that it would have a similar effect on my ability to borrow should I ever be in a position to buy a place - although the lease payments won't be counted as a debt, the payments being taken "at source" will effectively reduce my salary by 300 quid a month or whatever, and thus reduce the amount I am able to borrow - which as it is will only buy a 2-bed flat in Norwich, or a 4-bed mansion in Yarmouth between a Lithuanian brothel and an Albanian drug den.

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I got my MX5 back yesterday with a fresh MOT and serviced.

Last year in storage had killed the battery and after a 20 mile drive it was still flat so I had to ask for a new one to be fitted. Unfortunately a bit of welding was necessary at the back of the nearside sill. They also welded the exhaust but tell me I really needs a new one. Changing the oil has not cured the tick from the engine on cold start up. My favourite garage tell me the old oil looked like new anyway and while it has been in there 2 years has only done 1,000 miles.

I took it shopping yesterday and as ever is great fun to drive even if I am a whim and did not lower the roof.

IMG_20210408_130308 broad.jpg

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  • Six-cylinder changed the title to Six Cylinders Motoring Notes

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