[Captain Scarlet]

To me, PCP is just the modern phrase for leasing. You don't so much agree a future value, as agree a residual which will only just about pay off the remaining debt.


Payments are low, because in affect you're only paying the interest and capital on half the value of the vehicle (plus a 'little' on top), with the future residual value taking care of the balance.


Effectively leaving you with little to no deposit on a future bike and all that money paid out to effectively own nothing. That's called leasing in my book, or an interest only mortgage.


You're paying to enjoy the asset while it's in your possession, but you can never actually own it, unless you pay the balloon payment at the end.


Add up what you pay in PCP payments and the balloon payment at the end to actually own the bike, and you probably could have negotiated a better straight finance deal with any lender.


Buying a house with a big balloon payment was never the best idea and the same goes with bikes too IMPO. But each to their own, if the cells on the spreadsheet make sense to you and you go into it eyes wide open, if might be the right thing for you and your personal circumstances.


Personally I never pay more than the MSRP or accept any revised deal from a dealer. If the costs change from time of order, I expect them to consume them if they want my business. When I did the deal for the AT my dealer couldn't clearly explain why the shops preparation and admin fees were so high when I quizzed him for more details. So I told him I felt I was being taken advantage of, and told him what I was prepared to pay, which was significantly less than I was quoted. He pulled a face and then said okay then. The amount was well worthwhile being a bit candid with him about.


There's only so much money in a deal, but the dealer can dress that money up any which way they like - over-allow on a trade-in; give a discount on the new machine; subsidize the finance; consume admin and workshop fees; there's simply a multitude of ways. IMPO I would tell them that if prices were subject to change, then that should have been explained up front and clearly documented on any purchase order. If they didn't do that, then you expect them to consume those costs. And it looks like that's exactly what they've done, backed down. Well done to you Dibbs - they don't like it up 'em!

 

[Captain Scarlet]

Thanks Gasman, I don't think they have them in the U.S. where I'm based nowadays and I've neve rhad one myself, but know they are a fare pandemic in the UK from what I hear.


"the whole point of PCP is that there IS enough difference at the end of the policy to use as a deposit for another new bike."
... but how much deposit? Call me old fashioned, but when I've paid out for a bike for years I want more skin in the game than to just own a nominal deposit against a new one - that's not a win for me personally.


"paying a monthly amount that you can afford"
... I get that. Leasing or hiring for an agreed term will always be cheaper than actually buying a machine outright. All the purchaser is buying on top of their lease is a deposit on a new bike. Assuming they don't have any additional outlays, like extra mileage or vehicle condition penalties to come out of that deposit before they start.


"Finance companies are making their money on the interest, the dealer will make his profit on the sale"
... oh they're quids in, no argument from me on that front! :-D


"customer is paying an affordable amount for a new bike that will need little maintenance. Everyone's a winner. "
... great for those that want a loaner, or to impress friends by pretending they own a vehicle of perhaps greate rvalue than they can afford to buy. Not such a winner for those who want to eventually own their machine and progress onto getting out of the loan / debt cycle which in some people's view won't be seen as a 'great thing' to be iteratively caught up in cycle wise.


Just me two pence / cents and don't want to go too off topic, especially as I don't speak from a place of personal experience of having signed a PCP. Just glad the dealer made it right with Dibbs, which is what any decent dealer should do.

 

[Captain Scarlet]

...... I guess what's bothering me is that the PCP deal COULD seemingly create something out of nothing by piling up some liabilities somewhere in the chain which may come home to roost like the sub-prime or mis-selling of financial products did.
Mike

... this is what I meant by there's only so much money in any deal and the seller can dress it up any which way they want to. And that's nothing new. If I get all stubborn about my trade in being worth x-amount and not a penny less, then the dealer can write off profit of the new purchase (at full MSRP) to over-allow on the exchange. Same thing with the finance rate, they can reduce their mark-up to subsidize the rate. Alternatively they can offer a private sale price for my bike and discount the one I'm buying, 'if' I'm willing to stomach a high(er than I would have been paying) interest rate. How often are you asked what your repayments are on a current loan, or what can you afford each month? A good salesman will just manipulate and massage the figures around the page to suit your personal needs (read: feedback of what they hear you say). If you pay less up front or on an ongoing basis, it stands to reason that come the end of the term you are going to end up with a smaller slice of the pie. That's basic economics. If that suits the buyer, shelling out a set amount and having a small amount of the pie come the end of the term, then PCP may be an acceptable option to the one signing on the dotted line. Only they can judge that for themselves. But 'some' (not all) of those willing to sign a PCP should perhaps ask themselves what type of mortgage they have. I dare say 95% of them will be straight capital and interest repayment mortgage. And why do they have that? Because ultimately they want to own the asset outright, while one day be debt free too. Why should buying a bike be so different? Unless you like leasing a loaner...
:wink2:

 

[Captain Scarlet]

"Houses are expected to appreciate whereas vehicles will always depreciate."
... it's not a guarantee, as I've lost and made money buying multiple properties in the U.K. But in the main I agree with you, that bricks and morter usually represent an investment, and quite often the wisest I would say over other investment engines (pensions, ISA, 401k, futures, etc), because you get to enjoy the asset and people will always need a roof over their heads so returns tend to be decent if you adhere to the three basic rules of location, location and location. But lest we forget, you are 'still' paying' for the depreciation aspect of a vehicle obtained via a PCP agreement, because you haven't bought half the vehicle, like you would in a straight loan (with high repayments). I.e. You don't own the first half of the vehicle, all you've done is pay suffice to cover the depreciation and a nominal deposit on top. The other half of the vehicle (the actual remaining equity) effectively zero's itself out against it's agreed future (used / pre-enjoyed) value. Like the X Files, the truth is out there!

"I think I have found one part of the chain that loses out - HM government it loses a substantial chunk of VAT. So I can't see them being too happy about that."
... wow, that's interesting to hear! So the Chancellor doesn't get his 20%? How does that work, then? Usually Brits are stealth taxed left, right and centre? Ah, I see, from your explanation. However, on face value, that's still all smoke and mirrors I'm afraid. You see the loaner company says it's a company vehicle and so can reclaim the VAT. And their marketing people then say and we pass that discount on to you, isn't that good? And they're not lying either, they've supplied a $20k (GBP) bike for just $17k of your bright shiny English shackles, and all is good in the world right? Well, no, not remotely. Because that burden of paying that taxation is then firmly placed on you, the lessee, because you will be paying 20% VAT in your repayments. Will you repay $3k in VAT? Of course not, with a PCP agreement you'll only be paying for half the vehicle, so for simplicity sake $1.5k. But if you want to own the vehicle and pay the balloon balance at the end of the term (which lets face it, unless Auntie Hilda dies and leaves you something in her will, you'll have to probably get a straight bank loan capital and repayment loan to pay for that), then you'll be paying the remainder of the VAT ($1.5k) as part of the balloon payment settlement. Either way, the tax man gets his cut.

There's three things you can rely on in this life - they're: death, taxes and finance companies trying to pull the wool over our eyes!

Caveat: all the above is just IMPO. I'm in no way a financial advisor or offering advice here, just personal views, two-chords and the truth.