GolfGTIforum.co.uk
Model specific boards => Golf mk7 => Topic started by: Crunch on 03 February 2019, 17:29
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Hi
I'm new to the forum and looking at getting a brand new gti performance dsg. I've got a test drive on Tuesday and know the inevitable will happen and I will want to buy one there and then! I've currently got a company car, but am seriously thinking of opting out and taking the car allowance to get a GTI on PCP. The car allowance will cover the car and insurance and with the money saved in tax at about £150 a month I will put aside for maintenance and help with the final payment if I decide to do it. Now on the PCP deal I have stated 15,000 miles per year but it's really hard to judge as my work place changes every 18 months/2 years. It could be 20,000 miles a year or could potentially be as low as 5000 miles. Should I worry too much about the miles I opt for on the PCP? I think 15000 it's in the ball park. I get paid 12p a mile from my house to place of work from the company i work for so that will help on the fuel bill.
Thanks
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Mileage on a PCP has two considerations:
1. If you plan to not pay the balloon at the end of the term and hand the car back, then on the Golf the milage overage is charged at 9.6pence per mile over the agreed amount. So if you take a PCP over 4 years and your stated milage is 15k a year but you do 20k a year, then you will be liable for 20k(4x5k) 'overage' at the end of the term.
2. If you don't plan to keep the car at the end of the term AND you don't plan to hand it back to VW (but instead sell privately or traded in before the end of the PCP, then most will say the milage is irrelevant. I however will say that you should whack your milage up to the maximum you can. A higher milage on the PCP will lower your balloon and increase your monthly payment, which on the face of it seems a bad thing... but what you will be doing is significantly reducing the interest you are paying on the balloon (and the over the term), and you'll be paying more equity in your monthly payment.
IIWY I would put it down as 20k per year, it'll work out better in the long run whatever your situation might be. :smiley:
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Mileage on a PCP only matters if you hand it back at the end and have gone over. It doesn't matter if you buy at the end of the PCP or trade it in. If you trade it in its only worth what it's worth and if you buy from the balloon payment you pay the amount of the balloon. I've never heard anyone be charged on top of the balloon for having excess mileage.
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Thanks for the reply. So say I do put down 20k miles a year but do under the projected 80k miles in total the balloon payment will be less if I decide to buy it at the end?
I dont see how they can charge you the excess mileage at the end if you are opting to buy it as in theory you could be paying over the market value if you do more miles then first quoted.
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Mileage on a PCP only matters if you hand it back at the end and have gone over. It doesn't matter if you buy at the end of the PCP or trade it in. If you trade it in its only worth what it's worth and if you buy from the balloon payment you pay the amount of the balloon. I've never heard anyone be charged on top of the balloon for having excess mileage.
This is right, I've reworded my reply which was a bit confusing.
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Mileage on a PCP only matters if you hand it back at the end and have gone over. It doesn't matter if you buy at the end of the PCP or trade it in. If you trade it in its only worth what it's worth and if you buy from the balloon payment you pay the amount of the balloon. I've never heard anyone be charged on top of the balloon for having excess mileage.
All this is correct. 👍🏻
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Mileage on a PCP only matters if you hand it back at the end and have gone over. It doesn't matter if you buy at the end of the PCP or trade it in. If you trade it in its only worth what it's worth and if you buy from the balloon payment you pay the amount of the balloon. I've never heard anyone be charged on top of the balloon for having excess mileage.
This is right, I've reworded my reply which was a bit confusing.
👍👍
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Thanks for the reply. So say I do put down 20k miles a year but do under the projected 80k miles in total the balloon payment will be less if I decide to buy it at the end?
Yes, the balloon is fixed, and worked out based on the length of the term you opt for and the milage you state you will do within the term.
A lot of people get sucked in by the monthly cost, but the true figure you should base it on is the total cost over the term.
On a 5DR DSG Performance:
The balloon after 4yrs are currently stated as:
5k miles a year = £12,921.30
10k miles a year =£12,269.70
15k miles a year = £10,872.90
20k miles a year = £9,576.00
25k miles a year = £8,545.50
30k miles a year = £7,515.00
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Those GFVs are interesting. Can’t believe the difference.
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Yes I always look at the total amount payable, atm I've had a quote back as £32k total amount after 4 years and 15k a year. I need to get at least 3 more to get a good indication.
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Correct. Total amount payable is what matters. That’s why I’m not going pcp next time tbf.
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Those GFVs are interesting. Can’t believe the difference.
It's also worth noting that unlike Audi do with some of their models (A1, TT, Q7, Q5), VW don't adjust balloons for their models when options are ticked, so even if you chuck £5k at the options list, the balloon remains the same. they are in effect a worst case scenario, which is also a good mental head-marker that when you come to sell if you car is well loaded then you will probably get a bit more than the balloon.
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Maybe consider an Asset Finance scheme - basically an HP agreement with a balloon. Been using for car purchases for nearly 20 years over 8 cars for myself and family. Make sure you choose a sensible balloon balance on the residual value and it works (for me anyway) - over the years the value of the residual over the balance of the balloon and deposit for a new car increases - no mileage limits, not tied to a brand.
Speak to your bank manager and see if they offer it.
Used on a BMW, Mercedes, Disco 3 and 4, Golf for the Mrs, Polo for the Mrs and Aygo for the eldest and finally GTI for me. Opted out of the company car scheme in 1999.
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Maybe consider an Asset Finance scheme - basically an HP agreement with a balloon. Been using for car purchases for nearly 20 years over 8 cars for myself and family. Make sure you choose a sensible balloon balance on the residual value and it works (for me anyway) - over the years the value of the residual over the balance of the balloon and deposit for a new car increases - no mileage limits, not tied to a brand.
Speak to your bank manager and see if they offer it.
Used on a BMW, Mercedes, Disco 3 and 4, Golf for the Mrs, Polo for the Mrs and Aygo for the eldest and finally GTI for me. Opted out of the company car scheme in 1999.
The problem with the LP's (Lease Purchase) is whilst the balloon is fixed, it's just indicative, it isn't guaranteed meaning there's no 'hand back' or Trade-In option at the end of the agreement, you have to pay balloon payment regardless if you keep the car or not. If the car is worth less than the balloon, you have to find the difference.
In the current financial economy of uncertainty it would take a brave man to take a balloon payment out which isn't a guaranteed value.
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It’s all about the size of the balloon - been purchasing cars this way for 20 years without an issue an meant I could put a big deposit down on the GTI.
If the car has strong known residuals and you never go near the maximum allowable balloon, risk is negligible.
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The problem with the LP's (Lease Purchase) is whilst the balloon is fixed, it's just indicative, it isn't guaranteed meaning there's no 'hand back' or Trade-In option at the end of the agreement, you have to pay balloon payment regardless if you keep the car or not. If the car is worth less than the balloon, you have to find the difference.
In the current financial economy of uncertainty it would take a brave man to take a balloon payment out which isn't a guaranteed value.
The only thing you are losing here is some kind of mega crash protection, because nobody in recent years makes money on PCP GFV, its always a loss (especially when you factor in the interest rates). The only upside is in the event of a major economic downturn the GFV is the GFV and you might end up winning after VWFS pay 8 grand for a vehicle now worth 6.
Subtle shifts you'll not benefit from at all.
However with LP, its no different to cash purchase.... its a 30k car, you pay 30k (plus some interest). After 3 years you finish paying and its all yours - depreciation and all.
TBH there is no one winning formula in car finance. It depends on the deals on offer at that moment and your ongoing available cash to cover it. Some people get very lucky and get an good deal, most get a average deal and the finance companies are very happy with that.
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Makes interesting reading seeing different opinions. I'm going to consider opting out of company car when mine is due to change next year but to be fair, the Golf isn't too bad. Around £200 a month (on basic but bonus does affect this) for a car that I just have to put fuel in for private miles.
Will be doing some maths though over the next year to work out the best way to go in 2020. Do really fancy a 2nd hand RS3 next.....
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I opted out of the car scheme at work 20 years ago because the choice was crap - Vauxhall Vectra L, choice of colour or hatch / boot.
TBH - I’m really not sure how tax efficient a comycar is these days?
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I opted out of the car scheme at work 20 years ago because the choice was crap - Vauxhall Vectra L, choice of colour or hatch / boot.TBH - I’m really not sure how tax efficient a comycar is these days?
I bailed out in 2017 after several decades of company cars.
It did used to be an actual benefit, now its just a tax drag and you are better off taking the cash and DIY.
The only possible way you stand to gain anything from a company car is if you go with a milk float. Probably that is advantageous.
Assuming of course that your company car is just a perk for you to use to visit the supermarket once a week.... because a milk float is f*** all use if you are actually a mobile worker and its a tool for your job.
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There was a thread on here a few weeks saying about how expensive PCP is compared to a cheap bank loan. Might be worth crunching the numbers and looking at drivethedeal.com to get an idea how much you could buy the car outright for and have no worries about mileage or ballon payments!
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There was a thread on here a few weeks saying about how expensive PCP is compared to a cheap bank loan. Might be worth crunching the numbers and looking at drivethedeal.com to get an idea how much you could buy the car outright for and have no worries about mileage or ballon payments!
Its swings and roundabouts though...
Borrow £35k at 2% from the bank, you are repaying the entire £35k monthly - much higher monthlies.
Borrow £35k at 3.6% on a PCP from VWFS, you are repaying the loan the capital on £35k minus the GFV.
The only way the bank loan makes any sense is if you can extend the term to longer than 4 years and have an option to repay early (ie you want to change your car) without paying the interest that would have been paid over the full term of the loan.
With the bank loan sure you aren't being hit directly with a mileage charge, but you are effectively because the depreciation (due to mileage) is yours when you come to sell the vehicle. A vehicle with 90k miles on it after 3 years is still worth less than one with 60k...
PCP works for most people because the numbers are all predictable. What you have on the paperwork is the worst case scenario.
If you go for a "cheaper" way, you are taking all of that risk yourself. For most people they are happy to have a controllable budget and derisked.
There's no such thing as a free lunch...
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The way I'm looking at it is my company are paying for the golf gti and the insurance, the PCP deals I've been quoted come in bang on my allowance take home inc insurance. The extra £150/£200 a month I will be saving in tax I will keep in a separate account to maintain it and help with the final balloon payment if I decide to go that way. I've looked on auto trader at 4 year old gold GTI's with over 70k miles on to be safe and they are advertised for £14/£15k so the £10.7k final payment seems conservative.
I'm going in with the attitude that I won't be saving money every month but I can drive a car I actually want and after 4 years I will have something to show for it.
I've got a test drive booked for this afternoon in a gti performance dsg so I'm looking forward to that! First time!
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Borrow £35k at 3.6% on a PCP from VWFS, you are repaying the loan the capital on £35k minus the GFV.
There's no such thing as a free lunch...
Unfortunately that’s incorrect, on a PCP product you pay interest on the entire amount borrowed which includes the GFV, the GFV figure is just deferred however the interest is not...
As you say there’s no such thing as a free lunch, or in the case an interest free loan from VWFS..
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Borrow £35k at 3.6% on a PCP from VWFS, you are repaying the loan the capital on £35k minus the GFV.
There's no such thing as a free lunch...
Unfortunately that’s incorrect, on a PCP product you pay interest on the entire amount borrowed which includes the GFV, the GFV figure is just deferred however the interest is not...
As you say there’s no such thing as a free lunch, or in the case an interest free loan from VWFS..
Yes, you pay interest on the full capital, but not capital repayments...
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Borrow £35k at 3.6% on a PCP from VWFS, you are repaying the loan the capital on £35k minus the GFV.
There's no such thing as a free lunch...
Unfortunately that’s incorrect, on a PCP product you pay interest on the entire amount borrowed which includes the GFV, the GFV figure is just deferred however the interest is not...
As you say there’s no such thing as a free lunch, or in the case an interest free loan from VWFS..
Yes, you pay interest on the full capital, but not capital repayments...
You’ll pay interest and capital reducing payments on the total amount borrowed minus the GFV and any end of contract fees, and interest only payments on the GFV without a reduction in capital of that amount.
To someone unfamiliar with how PCP ‘really’ works your original post could be a little confusing as some may assume the GFV is, for want of a better term, ‘out’ of the agreement and therefore free from any accrued interest..
Edit to add: I’ve found that sadly it’s becoming an increasingly common misconception that GFV can be almost be treated with a head in the sand type of attitude, surely can’t be long before PCP in general gets some kind of regulation before it becomes the next PPi scandal..? :huh:
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Borrow £35k at 3.6% on a PCP from VWFS, you are repaying the loan the capital on £35k minus the GFV.
There's no such thing as a free lunch...
Unfortunately that’s incorrect, on a PCP product you pay interest on the entire amount borrowed which includes the GFV, the GFV figure is just deferred however the interest is not...
As you say there’s no such thing as a free lunch, or in the case an interest free loan from VWFS..
Yes, you pay interest on the full capital, but not capital repayments...
You’ll pay interest and capital reducing payments on the total amount borrowed minus the GFV and any end of contract fees, and interest only payments on the GFV without a reduction in capital of that amount.
To someone unfamiliar with how PCP ‘really’ works your original post could be a little confusing as some may assume the GFV is free from any accrued interest..
The 'balloon' on a PCP has interest charged at the actual true effective rate of interest (APR) for the duration of the term.
The 'balance' of a PCP (your monthlies) has interest charged at a 'flat rate' for the duration of the term.
This is how a PCP has an interest rebate if you settle early. You don't get interest rebates on HP or LP.
PCP's used to be a poor product because the APR's were so high, which is why I used to fund my purchases using LP agreements (as discussed earlier in this thread), but over the past 8/9 years PCP APR has tumbled and GFV (or as they are called now the "Optional Final Payment") have reduced making them a viable product for those who don't want risk.
On a £30k car there is no advantage to using a LP over a PCP. If you want a low balloon a garage can adjust the balloon down accordingly.
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On a £30k car there is no advantage to using a LP over a PCP. If you want a low balloon a garage can adjust the balloon down accordingly.
I’m not convinced it’s a clear cut as that?
Not every £30k car will be bought new, used PCP APR rates are still shockingly high in the most part! LP brings no mileage restrictions and the ability to mod the car if wanted and any reduction in the GFV will surely push up monthlies which defeats the appeal of a PCP to most people?
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On a £30k car there is no advantage to using a LP over a PCP. If you want a low balloon a garage can adjust the balloon down accordingly.
I’m not convinced it’s a clear cut as that?
Not every £30k car will be bought new, used PCP APR rates are still shockingly high in the most part! LP brings no mileage restrictions and the ability to mod the car if wanted and any reduction in the GFV will surely push up monthlies which defeats the appeal of a PCP to most people?
Indeed, the TCO over 4 years has been cheaper for me on two occasions now to take a PCP on a new, more expensive car than a 1-2 year old “cheaper” car. I think by and large, most people don’t understand how the different finances options work, or the concept of interest, GFV, TCO etc - but nor is it as clear cut as PPI mis-selling. Closest to that is the GAP, tyre and alloy insurance, LifeShine etc that very often is factored in to any first quote at the dealers.
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On a £30k car there is no advantage to using a LP over a PCP. If you want a low balloon a garage can adjust the balloon down accordingly.
I’m not convinced it’s a clear cut as that?
Not every £30k car will be bought new, used PCP APR rates are still shockingly high in the most part! LP brings no mileage restrictions and the ability to mod the car if wanted and any reduction in the GFV will surely push up monthlies which defeats the appeal of a PCP to most people?
Indeed, the TCO over 4 years has been cheaper for me on two occasions now to take a PCP on a new, more expensive car than a 1-2 year old “cheaper” car. I think by and large, most people don’t understand how the different finances options work, or the concept of interest, GFV, TCO etc - but nor is it as clear cut as PPI mis-selling. Closest to that is the GAP, tyre and alloy insurance, LifeShine etc that very often is factored in to any first quote at the dealers.
Exactly, pcp lends itself to pushing people into that ‘new’ car purchase cycle due to the incentives offered over going used.
Where I have a problem with it is the poor selling techniques used, upping GFV to meet someone’s monthly budget by lowering mileage pa to an unrealistic level for the consumer and then burying their head in the sand re the mileage/GFV at term end, bundling in extras as you mention like GAP/lifeshine which themselves incur yet more interest charges.
And perhaps the most irresponsible practise, re churning negative equity from the last pcp into the new one, all in pursuit of hitting the magic monthlies and getting a signature on the order form...
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this is interesting and a good explanation, I think!
https://www.whatcar.com/advice/buying/pcp-or-hp-which-car-finance-option-makes-most-sense/n1163
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On a £30k car there is no advantage to using a LP over a PCP. If you want a low balloon a garage can adjust the balloon down accordingly.
I’m not convinced it’s a clear cut as that?
Not every £30k car will be bought new, used PCP APR rates are still shockingly high in the most part! LP brings no mileage restrictions and the ability to mod the car if wanted and any reduction in the GFV will surely push up monthlies which defeats the appeal of a PCP to most people?
Indeed, the TCO over 4 years has been cheaper for me on two occasions now to take a PCP on a new, more expensive car than a 1-2 year old “cheaper” car. I think by and large, most people don’t understand how the different finances options work, or the concept of interest, GFV, TCO etc - but nor is it as clear cut as PPI mis-selling. Closest to that is the GAP, tyre and alloy insurance, LifeShine etc that very often is factored in to any first quote at the dealers.
Exactly, pcp lends itself to pushing people into that ‘new’ car purchase cycle due to the incentives offered over going used.
Where I have a problem with it is the poor selling techniques used, upping GFV to meet someone’s monthly budget by lowering mileage pa to an unrealistic level for the consumer and then burying their head in the sand re the mileage/GFV at term end, bundling in extras as you mention like GAP/lifeshine which themselves incur yet more interest charges.
And perhaps the most irresponsible practise, re churning negative equity from the last pcp into the new one, all in pursuit of hitting the magic monthlies and getting a signature on the order form...
If you are buying a product like for like, then there is no difference between LP and PCP. The only difference is the risk attributed to a LP agreement.
There's no milage restrictions on a PCP as you can pay overage ppm.
Whatever product you choose, whether it be LP, HP or PCP, you are simply in the main financing depreciation. My view is you choose the best product that matches the depreciation rate, to avoid as much negative equity as possible.
Unless buying from a dealer, gone are the days of expensive PCP rates for used cars. "Flex PCP" from Lloyds or Halifax (underwritten by Black Horse finance) can be had for 3-4%, it's why dealer finance has had to come down.
As said, an LP agreement at 3.5% has no advantage over a PCP at 3.5%.
One thing I will agree on is that I think the whole industry has to go under some regulation and investigation for miss-selling. The "what is your monthly budget" questions is the most abused & misleading question ever in car finance, yet it is trotted out by car salesman every single day of the year.
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Apologies I mistook LP for Loan purchase (or cash) rather than I assume Lease purchase? :embarrassed:
Hence why I’m still inclined to think that if purchasing a £30k car then a cash or loan purchase does offer some advantages over purchasing said car via PCP, namely the mileage restrictions in the form of penalty payments or increased monthlies and the ability to carry out modifications to the car if you wish..
PCP isn’t inherently a bad product nor is debt a bad thing, after all society fundamentally relies on it to go about its daily business whether you’re the lender or borrower, where the problem lies and where I think the first pop of the bubble bursting will be heard is the poor selling practises used.
Signing up unemployed people, unrealistic low mileage deals to meet monthly budgets and actually talking about and encouraging voluntary termination at point of sale along with re churning negative equity really shouldn’t be happening..
The drive to meet monthly budgets and get signatures on forms will come as a shock when Tom dick and even harry realise they can’t afford a like for like A-class/1 series next time round!
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this is interesting and a good explanation, I think!
https://www.whatcar.com/advice/buying/pcp-or-hp-which-car-finance-option-makes-most-sense/n1163
Hmmm their page on leasing has a bit of a curly comment:
"Choose leasing if:
You don't want to be exposed to the cost of the cars depreciation"
well you are exposed, of course you are! The lease payments are based on you paying the depreciation (over a set time and set mileage) plus effectively a finance charge (they are lending you a 30k vehicle, someone is stumping up the 30k) and a profit....
Of course, that is all hidden in the payments, no break down, but its there....
You can't escape that.