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.
