can someone explain PCP and GFV etc to me please ....

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RJW_1989
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can someone explain PCP and GFV etc to me please ....

Post by RJW_1989 » Tue Sep 18, 2018 12:10 pm

basically , i thought i had a half decent understanding of how this works but im a bit confused , i got a 140 when the deals were around about 15%,discount , usually i would put at least a 10% deposit into a pcp deal i struggle to stomach putting anymore in really because usually you wont see that money again at the end of your deal.

however with the discounts been so large on the 140 at the time i figured i could get a way with a smaller deposit and keep myself as far away from negative equity as possible , i got a settlement the other day and im nearly 5 grand upside down after 18 months on 3.9% with a £500 deposit , this doesnt make any odds to me at the moment as im not trying to get rid but surely the discounts that were been given should mean your closer to been even?

or am i missing something ha?

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Re: can someone explain PCP and GFV etc to me please ....

Post by marco_polo » Tue Sep 18, 2018 12:16 pm

On a normal 4 year PCP deal, you're usually in debt up to approx month 38 (assuming normal 22% discounts and a small deposit).

The more optional extras you add (Auto Box, Pro Nav, metallic paint, etc), the worse it will be. Nothing depreciates like an options list.
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Re: can someone explain PCP and GFV etc to me please ....

Post by Kerr » Tue Sep 18, 2018 12:23 pm

Sadly the seconhand values take into account the massive discounts on offer. There isn't any way of avoiding negative equity without covering the depreciation.

People are getting 25% off a M140i and second-hand values reflect that.

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Re: can someone explain PCP and GFV etc to me please ....

Post by OneTwenty » Tue Sep 18, 2018 12:55 pm

You will always be hit by depreciation when buying a new car, even with the big discounts. PCP can make it look better than it is but in reality everybody loses when buying a new car.

Mine is just two years old this month and I probably owe about £26k on it. It's still worth less than that I imagine.
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Re: can someone explain PCP and GFV etc to me please ....

Post by stevesurrey » Tue Sep 18, 2018 2:07 pm

Assuming the GFV is roughly what the car is worth at the end of the PCP term then arent all your payments (deposit + monthlies) just really paying the depreciation and interest on the finance ?
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Re: can someone explain PCP and GFV etc to me please ....

Post by RJW_1989 » Tue Sep 18, 2018 2:18 pm

cheer everyone , theres all kinds of things that iv learnt from this experience tbh and it would take ages for me to write it all haha, but i just couldnt understand how a car could be given nearly a quarter of its value off and still be in neg 18 months down the line its a bit witchcrafty to me so i wont worry too much about it.

interestingly i have a mate that works in sales at audi and they have a total differnet way of selling there cars in terms of discount .... i.e you dont really get any! and the APR is a lot higher he said that BMW are notorious for setting GFV unreasonably high and as a result very few people end up with equity in a bmw as they are never worth what the GFV is at the end , seems to ring true as the audis do seem to hold value so would have much more of a chance of having something to work with when you come to the end of your agreement , as i say though there are people far more qualified in this kind of thing than me i tend to just make sure i can afford the monthlies ha

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Re: can someone explain PCP and GFV etc to me please ....

Post by Thrash » Tue Sep 18, 2018 2:36 pm

RJW_1989 wrote:
Tue Sep 18, 2018 2:18 pm
i just couldnt understand how a car could be given nearly a quarter of its value off and still be in neg 18 months down the line its a bit witchcrafty to me so i wont worry too much about it.
You're getting nearly a quarter off it's list price though, not it's value.
It's interesting that the current deals on new cars are significantly more expensive than what they were, that might help second hand prices though. The other issue is the amount of optional extras that add nothing to the GFV, I personally think BMW are a bit tight with their base spec which means most people add on a few options which add very little value to the car - add on metallic paint and electric memory seats and thats £1k you'll never see again.
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Re: can someone explain PCP and GFV etc to me please ....

Post by Kerr » Tue Sep 18, 2018 2:40 pm

stevesurrey wrote:
Tue Sep 18, 2018 2:07 pm
Assuming the GFV is roughly what the car is worth at the end of the PCP term then arent all your payments (deposit + monthlies) just really paying the depreciation and interest on the finance ?
Pretty much. You're paying interest on the entire loan amount and not minus the balloon payment.

There is too many Mlites on PCP deals now and the chances of getting anything out at the end now is getting less and less.

The GFMV was set too high on the Shadow Editions making it even less likely they'll get anything towards their next car.

The finance company is going to get landed with lots of cars going back.

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Re: can someone explain PCP and GFV etc to me please ....

Post by martin10chk » Tue Sep 18, 2018 2:45 pm

Kerr wrote:
Tue Sep 18, 2018 2:40 pm
stevesurrey wrote:
Tue Sep 18, 2018 2:07 pm
Assuming the GFV is roughly what the car is worth at the end of the PCP term then arent all your payments (deposit + monthlies) just really paying the depreciation and interest on the finance ?
Pretty much. You're paying interest on the entire loan amount and not minus the balloon payment.

There is too many Mlites on PCP deals now and the chances of getting anything out at the end now is getting less and less.

The GFMV was set too high on the Shadow Editions making it even less likely they'll get anything towards their next car.

The finance company is going to get landed with lots of cars going back.
Exactly that. I think of PCP as just a lease with an option to purchase at the end. So a pure lease is priced to cover the cost of finance (interest) and the depreciation. If the purchase price is made attractive, then you just pay a premium over the lease cost during the payment plan.

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Re: can someone explain PCP and GFV etc to me please ....

Post by RJW_1989 » Tue Sep 18, 2018 3:27 pm

Thrash wrote:
Tue Sep 18, 2018 2:36 pm
RJW_1989 wrote:
Tue Sep 18, 2018 2:18 pm
i just couldnt understand how a car could be given nearly a quarter of its value off and still be in neg 18 months down the line its a bit witchcrafty to me so i wont worry too much about it.
You're getting nearly a quarter off it's list price though, not it's value.
It's interesting that the current deals on new cars are significantly more expensive than what they were, that might help second hand prices though. The other issue is the amount of optional extras that add nothing to the GFV, I personally think BMW are a bit tight with their base spec which means most people add on a few options which add very little value to the car - add on metallic paint and electric memory seats and thats £1k you'll never see again.
i think i think of things too black and white to be honest but surely its list price and its value should be the same thing , otherwise doesnt it just mean that BMW are over pricing the car? for example why are they asking 34k for a car thats value is really 28k ?
it just makes me think that the whole car market is such a catalyst for people to land themselves in financial difficulty with things like this going on .... everybody will have been shown the little pcp diagram by a car salesman at some point where they show you how you break even after 4 years etc but its all based on a finger in the air job as too how much the car will be worth at the end .... which nobody really knows do they , alot of people will be going back to BMW after 3 years expecting to be owed a few grand only to find out they owe £500-£600 before they even break even... just seems a bit of a false economy to me

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Re: can someone explain PCP and GFV etc to me please ....

Post by marco_polo » Tue Sep 18, 2018 3:47 pm

RJW_1989 wrote:
Tue Sep 18, 2018 3:27 pm
i think i think of things too black and white to be honest but surely its list price and its value should be the same thing , otherwise doesnt it just mean that BMW are over pricing the car? for example why are they asking 34k for a car thats value is really 28k ?
All things are worth whatever someone is willing to pay for them. Some mugs don't negotiate on price at all, and think £34k is a fair price. Other people are happy with a measly 15% discount. Others demand the full 23%, or whatever.
RJW_1989 wrote:
Tue Sep 18, 2018 3:27 pm
based on a finger in the air job as too how much the car will be worth at the end .... which nobody really knows do they
BMW guarantee a minimum value at the end, it's called the Guaranteed Future Value. No guesswork or fingers in waved in any direction needed to know your worst case scenario at the end.


If you renege on the 4 year contract you signed for on a rapidly depreciating asset, you can't honestly expect to be in anything other than a massive debt after 18 months?!

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Re: can someone explain PCP and GFV etc to me please ....

Post by stevesurrey » Tue Sep 18, 2018 4:02 pm

RJW_1989 wrote:
Tue Sep 18, 2018 3:27 pm
alot of people will be going back to BMW after 3 years expecting to be owed a few grand only to find out they owe £500-£600 before they even break even... just seems a bit of a false economy to me
Surely if the car is in negative equity because its market value is less than the GFV you just hand the car back and walk away owing nothing. The finance company have to suck that loss up.
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Re: can someone explain PCP and GFV etc to me please ....

Post by marco_polo » Tue Sep 18, 2018 4:06 pm

stevesurrey wrote:
Tue Sep 18, 2018 4:02 pm
Surely if the car is in negative equity because its market value is less than the GFV you just hand the car back and walk away owing nothing. The finance company have to suck that loss up.
Correct. GFV is the GFV at full term, finance companies problem.

If you try to hand it back early, that's a different matter entirely of course.
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Re: can someone explain PCP and GFV etc to me please ....

Post by OneTwenty » Tue Sep 18, 2018 4:10 pm

GFV is usually pretty spot on, they have maths geniuses (genii??) that work out how much cars will be worth. My GFV is £15,500 and I imagine that is roughly what it will be worth after the 4 years are up.
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Re: can someone explain PCP and GFV etc to me please ....

Post by barneym140i » Tue Sep 18, 2018 4:14 pm

am I reading that graph correct, a 24k market value car worth 8k in 3 years? is that correct?

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