PCP and depreciation

[Amarillo]

Yes I agree, however for many, there is little hope of ever paying the mortgage off.

I suppose the key is being able to control your debts and not the debts control you.

 

[bigmac77]

Trouble is all those salesman watch The Apprentice as part of their training.

No, those are the people on the front desk who wear sharp suits and fake Rolex’s and can’t even take your phone number correctly when you call.

 

[soulstyledevon]

PCP is a mugs game.
Ive done the sums again and again. Its a very expensive way to own a new vehicle.

When we recently bought our Skoda Citigo, the dealer wouldn't sell us one unless we bought it PCP (well he would, but it would have cost us £2000 (~20%) more if we paid cash!) We succumbed and bought PCP, then cancelled the contract and paid off the loan as soon as the paperwork was all in our hands.

PCP is a legal scam. There is no way that becoming indebted to a car finance company should be cheaper than paying cash - in fact, I see PCP as a form of enslavement. So many people and up having to work for substantial periods of their lives to repay the capital and interest to the finance company.

When we bought our last Cali.
I told the dealer I was paying via 1debit card and two credit cards.
The dealer said no. Which ended in a heated discussion with the branch manager until he finally agreed.
Why...

1 Got lots of points on our Tesco credit card, which we then paid off on receiving the statement.

2 Borrow free money on a credit card, I think it was about £12k which we are paying back over 24months and thus cost us nothing to borrow £12k

3 the debit card to pay the outstanding balance and therefore we had no transfer fees etc.

So between savings and a 0% CC we bought our Cali and the cost to borrow will cost us zero...

 

[Euge]

PCP is a mugs game.
Ive done the sums again and again. Its a very expensive way to own a new vehicle.




When we bought our last Cali.
I told the dealer I was paying via 1debit card and two credit cards.
The dealer said no. Which ended in a heated discussion with the branch manager until he finally agreed.
Why...

1 Got lots of points on our Tesco credit card, which we then paid off on receiving the statement.

2 Borrow free money on a credit card, I think it was about £12k which we are paying back over 24months and thus cost us nothing to borrow £12k

3 the debit card to pay the outstanding balance and therefore we had no transfer fees etc.

So between savings and a 0% CC we bought our Cali and the cost to borrow will cost us zero...

Fair play.
My situation was this. 2 years ago I decided I wanted to buy a Cali. I could have paid for it up front through the sale of a but to let property I’d owned for 10 years. However, rather than sell the flat in its existing condition, in a buyers market, i scrimped and borrowed where I could to renovate the flat before putting it on the market. After spending around £25k on the property it eventually sold for a decent price, easily doubling the money I’d spent on renovation costs. Using the PCP route helped me do that by freeing up the money I would have had to lay down for bog standard hp or cash purchase.
Don’t get me wrong, plenty of people get lumbered with PCP, but that’s generally because they’ve been attracted to something with enables them to buy something they couldn’t otherwise afford. And therein lies the problem, they couldn’t afford to pay for the goods at the outset and generally can’t afford to pay for the goods outright when required at the end of the contract.

 

[Amarillo]

2 Borrow free money on a credit card, I think it was about £12k which we are paying back over 24months and thus cost us nothing to borrow £12k

We borrowed £7,500 over 15 months interest free on our credit card for the Skoda, but it cost 3% balance transfer, so a total of £7,725 which we are repaying at £515 per month (almost exactly the same as the monthly interest we pay on £260,000 of mortgages).

I’ve never worked out the APR equivalent of the 3% balance transfer and the way we choose to repay, but I wouldn’t be surprised if it is a smidgen over 4% APR.

 

[pjm-84]

My credit card pays me! We receive about £225 to £275 a year in John Lewis Vouchers

 

[Johnboy]

I don't have a problem with the PCP in principle - its a way of customer retention. However I do if it involves the flat rate and also high interest rates. My first quote for a Cali was using 5.9% "flat rate", my skoda was 2.8% fixed. My sons car was 7% "flat rate".

My ISA earns more than the 2.8% so I went with the PCP for the Skoda - no brainer.

 

[Amarillo]

My credit card pays me! We receive about £225 to £275 a year in John Lewis Vouchers

For a cash advance?

 

[pjm-84]

No... we get 1% back via a Waitrose or John Lewis purchase and 0.5% back on all other transactions.

Yep we put a lot through on our JL credit cards, but as we pay it off in full each month so we don't pay interest. I think I've had the credit card 13years + now and see no reason to change.

 

[Amarillo]

No... we get 1% back via a Waitrose or John Lewis purchase and 0.5% back on all other transactions.

Similarly, we have a Sainsburys card for Sainsburys purchases and a JL card for JL purchases.

 

[soulstyledevon]

No... we get 1% back via a Waitrose or John Lewis purchase and 0.5% back on all other transactions.

Yep we put a lot through on our JL credit cards, but as we pay it off in full each month so we don't pay interest. I think I've had the credit card 13years + now and see no reason to change.

We do the same to collect Tesco points. We then change the points for Eurotunnel crossings.
@Amarillo why did you get a 3% transfer fee...?
Most CC offer 0% on purchases, so proving you bought the car with the CC, should have cost nothing...?

 

[Elmo3]

No... we get 1% back via a Waitrose or John Lewis purchase and 0.5% back on all other transactions.

Yep we put a lot through on our JL credit cards, but as we pay it off in full each month so we don't pay interest. I think I've had the credit card 13years + now and see no reason to change.

For that level of spending, look at the Amex cashback cards and give yourself a pay rise (also have the JL one).

 

[Amarillo]

Trouble is all those salesman watch The Apprentice as part of their training.

They have training!?

 

[pjm-84]

Had an AMEX card once. Never again.

 

[Amarillo]

We do the same to collect Tesco points. We then change the points for Eurotunnel crossings.
@Amarillo why did you get a 3% transfer fee...?
Most CC offer 0% on purchases, so proving you bought the car with the CC, should have cost nothing...?

Sorry, perhaps I hadn't explained properly.

We bought the Skoda on PCP with a tiny credit card deposit because they paid most of the deposit. As soon as we had all the paperwork, we took out a £7,500 cash advance on our credit card at 0% interest for 15 months but with a 3% (£225) balance transfer fee. I.e to avoid paying interest we have to repay £7,725 for the £7,500 cash advance over 15 months. Instead of paying off just the minimum 3% each month we are paying for the car in 15 equal payments of £515. Our way of repayment is equivalent to an APR of about 4.4%, cheaper than the PCP rate of 4.8%, and with a shorter repayment period and no high final payment to keep the car.

We could have avoided finance altogether for the car, but I always like to keep a stash of cash for unexpected expenses.

 

[Amarillo]

The dealership companies have persuaded their sales teams that it is an FSA compliance issue and they MUST get you (the prospective buyer) to sign to say that they've fully explained the 'benefits' of GAP insurance but that you are evidently financially reckless enough to put your new (or even used) shiny tin box onto the road without it.

Yes - FSA "regulations" were "quoted" to me in an attempt to strong arm me into paying for Gap insurance. And they tried throwing in a pair of footwell mats.

At the gullible age of 23 I fell for a mortgage advisor's charms and took out an endowment mortgage, but at least he gave the plausible explanation that I would progressively over time lose the advantage of MIRAS if I was repaying capital. (He also promised me that in 25 years time I would have enough change after repaying the mortgage to buy a new car. In fact the endowment policy only repaid 57.5% of the original loan.)

 

[WelshGas]

Yes - FSA "regulations" were "quoted" to me in an attempt to strong arm me into paying for Gap insurance. And they tried throwing in a pair of footwell mats.

At the gullible age of 23 I fell for a mortgage advisor's charms and took out an endowment mortgage, but at least he gave the plausible explanation that I would progressively over time lose the advantage of MIRAS if I was repaying capital. (He also promised me that in 25 years time I would have enough change after repaying the mortgage to buy a new car. In fact the endowment policy only repaid 57.5% of the original loan.)

I must have been lucky then . Our first Endowment Mortgage was taken out at age 30 and 3 subsequent Top Up Endowment Morgages all designed to finish by age 65, all with a guaranteed minimum payout to cover the capital borrowed and all with a “ possible” variable excess bonus. 3 paid out with a few £1000s excess, far below that promised but as the capital was covered 100% they were a true bonus.
We purchased a Smart car on PCP with a final payment of £5350 due in December 2019. We Buy any Car offered £5500. As Mercedes told us the E Smart was delayed for 12 months due to battery problems it was a no brainier to pay the final payment. I keep getting emails from We Buy any Car offering more for the Smart. Now upto £6000.

 

[ArunAlec]

Yes - FSA "regulations" were "quoted" to me in an attempt to strong arm me into paying for Gap insurance. And they tried throwing in a pair of footwell mats.

At the gullible age of 23 I fell for a mortgage advisor's charms and took out an endowment mortgage, but at least he gave the plausible explanation that I would progressively over time lose the advantage of MIRAS if I was repaying capital. (He also promised me that in 25 years time I would have enough change after repaying the mortgage to buy a new car. In fact the endowment policy only repaid 57.5% of the original loan.)

If the mats were Brandrup it might not have been a bad deal!

 

[2into1]

At the gullible age of 23 I fell for a mortgage advisor's charms and took out an endowment mortgage, but at least he gave

So did I, but it was because 'he' was a very pretty 'she'.

 

[Amarillo]

I must have been lucky then . Our first Endowment Mortgage was taken out at age 30 and 3 subsequent Top Up Endowment Morgages all designed to finish by age 65

Heaven only knows how the endowment failed so miserably. It was a low start endowment, so I wasn’t contributing to if fully until 1995.

I remember being shown six illustrations, 6%, 8% and 10%. Only the 6% one missed the target maturity value, and that by only a little. But it was cheap, £29.70 per month for the final 20 years if I recall correctly.

In contrast, each month I put a little money into stocks and shares Junior ISAs. It goes into tracker funds of various major stock markets. Over the past four years the boys have had an annualised growth of ~10%.

 

[Velma's Dad]

Heaven only knows how the endowment failed so miserably.

It probably failed so miserably for the same reasons that most investment 'products' like that, sold from the 1980s onwards, performed so badly. Because they were investments in actively-managed funds which failed on average to beat 'beta' (the underlying market returns that you'd have got from a decently diversified pack of trackers) with entry and annual fees that provided nice lifestyles for fund managers while eroding the returns substantially to the usually clueless punter.

In contrast, each month I put a little money into stocks and shares Junior ISAs. It goes into tracker funds of various major stock markets. Over the past four years the boys have had an annualised growth of ~10%.

Looking at returns over a four year horizon is pretty meaningless (unless you happen to have gone in and out at those points). MSCI World index went up by 28 percent last year, after an 8 percent drop in 2018. Very lumpy. Equity market returns should be considered over the whole market cycle, typically ten years or more. And anyone who thinks they can 'time the market' successfully in the shorter term other than by dumb luck, is fooling themselves.

 

[flying banana]

That may be. What about buses, coaches,HGVs and... Campervan’s?

Also jcbs. Dump trucks. Combine harvesters. Tractors. Shipping. Haulage. Trains. All of these will never make sense to go electric so diesel will be here to stay. Even electric trains are now being built bimode because its too expensive to electrify all the routes. Manchester to Sheffield a prime example of electrification scrapped due to cost

 

[Amarillo]

Equity market returns should be considered over the whole market cycle, typically ten years or more. And anyone who thinks they can 'time the market' successfully in the shorter term other than by dumb luck, is fooling themselves.

I get everything you say. The boys’ ISAs are for at least 16 years unless one falls terminally sick. The point is saying what I said was that I learnt from my mistake in 1990 and avoid managed funds for the reason you gave. After all, managed funds, on average, track the market less commission.

 

[pjm-84]

Looking at my SIPS I have growth of 78% on some funds with Mr Woodford in last place at -30.35% .

Percentage returns are slightly diluted due to reinvestment

 

[Velma's Dad]

I get everything you say. The boys’ ISAs are for at least 16 years unless one falls terminally sick. The point is saying what I said was that I learnt from my mistake in 1990 and avoid managed funds for the reason you gave. After all, managed funds, on average, track the market less commission.

Your last statement is correct for practical purposes but the industry will quibble on the specifics so here goes: on some datasets, actively-managed funds excluding fees tend to do very slightly better than trackers, especially in emerging markets. But (and it's a big But) after fees are deducted, on average and in the long run they still under-perform the trackers.

Unfortunately a lot of people in the investment industry will debate this, sincerely. Because, as someone said, it's hard to get a man to understand something when his monthly salary depends on him not understanding it. (Same applies to why GAP insurance opt-out forms are 'regulatory requirements'.)