“Total payable” will always be a function of the interest rate, and rates are higher now than they have been in recent years. You always have been at their mercy WRT fees for damage however usually you can get more than the GFV selling yourself so most people skip that part.

Generally speaking PCP contacts are taken out by those who care only about the lowest possible monthly payment and they’re big moneymakers for the car companies.

 

Pre retirement, I was involved in “lease returns” ( same thing if you are handing back a PCP) for 30 years
We are currently in a phase where many funders are staring at “taking a bath” if you return the vehicle.
So they are trying to mitigate their position by enforcing the contracts to the letter

The real difference with PCP product, from the funder’s point of view, is that when the used values are buoyant…..no one returns the car, so they cannot “make Hay” so to speak

I am not sympathising with them ( I think PCP is an insidious product, especially when sold with big deposits), just maybe explaining their harsh stance at this time

 

Used to be that you’d expect a few grand or equity in your PCP which would fund the downpayment on an new PCP (rinse and repeat). But like you say plenty of GFVs quoted 3-years ago have turned out to be optimistic…

 

I don't think there are unrealistic or unreasonable expectations on the condition of a vehicle at the end of a lease return as most of the lease companies use the BVRLA industry fair wear and tear standard. If your vehicle meets those well publicised standards then there is nothing to worry about. If it doesn't then it is the same as p/x ing a car which has not been looked after - it will be worth less.

Far from seeing a greater expectation on the condition of a vehicle, I have been anecdotally reading about cars that have damage that never get picked up on or is ignored (much to the relief of the returnee).

I just think that people who lease a car need to treat it with the same respect that they would treat their own property. Mind you, seeing the condition of some newer cars on the road this is perhaps not a good idea!

All my own opinions of course and it will be good to read if people are seeing a greater emphasis on condition of vehicle at the end of the lease.

 

Exactly this - treat someone's property with respect while it's in your care. If you have a propensity to grind wheels against kerbs, keep the original wheels in the shed and put some sacrificial ones on for the duration. If you get dent or a scuff on the car, get it sorted out. I buy my cars outright and if they got damaged, I'd get them fixed.

The fact that many BEVs are worth less than GFVs is a reflection of residuals being far worse than anticipated, not something that generally happens with ICE cars. There's a very cool market reception to used BEVs generally right now, there's not a lot of interest in 2 or 3 year old BEVs unless they are priced as a bargain. That 5-10% "equity" expectation at end of PCP just doesn't seem to be there for BEVs right now.

 

There are industry rules to follow for condition of the car at the end of a PCP if you are simply handing back with no equity hook for your next one, and they don't expect a pristine car after 3 years, they allow for fair wear and tear. Those allowances are pretty generous (you are allowed at least 1 <50mm long scratch and small dint per panel.

If you can't take reasonable care of a PCP car in your care then maybe buy an old banger and not care about it's condition?

PCP is usually the most expensive way to get into a new car vs buying outright or leasing, especially now, with high interest rates.

 

I checked the valuation of my E-Niro recently and it's a couple of grand more than the balloon payment. The thing is do I change it or just keep it. At the moment my sensible head says just keep it.

 

We bought our Niro on PCP as the rate was low (less than what savings are making), and fully intend to make the balloon payment in September 2025.
I somehow doubt it will be worth £21k minus excess mileage charge. In this situation, is it possible to negotiate. For example, if it was worth £15k, it would be better for me to hand it back and buy another SH, and they loose £6k. But I might be prepared to pay them say £18k to keep it, knowing it's been looked after etc. That saves me £3k and reduces their haircut too.

 

We bought our Niro on PCP as the rate was low (less than what savings are making), and fully intend to make the balloon payment in September 2025.















I somehow doubt it will be worth £21k minus excess mileage charge. In this situation, is it possible to negotiate. For example, if it was worth £15k, it would be better for me to hand it back and buy another SH, and they loose £6k. But I might be prepared to pay them say £18k to keep it, knowing it's been looked after etc. That saves me £3k and reduces their haircut too.

I honestly don't know anyone that's ever been in that situation where the car is worth substantially less than PCP, to simply hand back.

I do know a few people who've tried to buy their lease car at the end of the lease, but haven't because the lease company have asked for upper end retail money for it, so it was collected and went to BCA auction instead.

 

PCP and Lease are 2 different products

Lease, you are borrowing /hiring the vehicle and are not buying the title. There are tax advantages for some ( companies for example) and technically under HMRC law, you should not be able to be granted the title(buy) the vehicle directly from the hirer, particularly if you have enjoyed those tax breaks

You start the agreement with the implication that you are not going to to end up with title


PCP, you are buying the vehicle and eventually it’s title, albeit structured with differing GFVs and . The finance company, just underwrite the GFV, sometimes with the manufacturers help, or indeed they are the manufacturers finance company

You start the agreement with the implication that you are going to end up with title

To comment on @robert79 question, it absolutely would be more sensible for all parties to sit round at PCP-end and get pro-active
But that is so tricky in this arse-covering world
Remember it would become Andy-in-disposals ”fault” that [finance company] has lost £3k, not Brian-in-residuals( if he is still there) “fault”.

What you need is Colin-in-sensible-decisions…………………but he’s on leave today

 

I think when this PCP contract ends I’ll be handing the vehicle back for the first time.

My Polestar 2 is currently valued at £25k. The GFV for when the contract ends in March 2026 is £28.5k.

I think Polestar Finance (Volvo Finance run by Santander Consumer Finance) are going to have a large number of people returning their cars and just walking away, as I know a few people in the same position as me.

 

I think when this PCP contract ends I’ll be handing the vehicle back for the first time.



My Polestar 2 is currently valued at £25k. The GFV for when the contract ends in March 2026 is £28.5k.



I think Polestar Finance (Volvo Finance run by Santander Consumer Finance) are going to have a large number of people returning their cars and just walking away, as I know a few people in the same position as me.

It's a lose lose situation. The Finance company loses and they make sure they don't take another bath by setting the GFV much lower for future buys and the monthlies rocket. The general public already think BEVs cost too much. What will they think when the cars cost an additional £200+ per month?

 

You may see PCP restructured/re-invented after this “bath”, not sure how with lots using it
Real shock is, as eluded to by @Monkeyhanger , you send it back….and find that the same model now costs double per month

 

Are there really that many cars coming to the end of a PCP where the market value is less than the final value payment?

The market values would have to take a massive hit. I know we are going through strange times but I can’t see it.
You see some quote their cars value compared to the final value PCP payment but they do not take into account that they have excess mileage etc. Also - how do you accurately assess your cars market value? Have a look on auto trader and try to buy your year/make/model/mileage car for less than your balloon payment - In most cases, I would be very surprised if you could.

Finance companies cover themselves even during difficult markets - they prefer for the customer to have ‘equity’ in the car at the end of the PCP, as this generates follow-on business, which they and the dealership love.
This buffer is also built in to the calculation and even during difficult times when residuals are hit hard, this final value seldom exceeds the car’s market value.

Hate it as I do, the PCP was a master stroke for the retail car market and most people who regularly want a new car will choose this route. They are just interested in how much a Month it costs and never really dig into the actual cost of ownership - or in fact actually understand how a PCP works and how interest is applied.

Most people who don’t purchase their car at the end of a PCP, do so not because the final value is more than the car is worth, but because they can’t afford to pay the balloon payment, and just want another monthly payment deal.

 

Are there really that many cars coming to the end of a PCP where the market value is less than the final value payment?



The market values would have to take a massive hit. I know we are going through strange times but I can’t see it.



You see some quote their cars value compared to the final value PCP payment but they do not take into account that they have excess mileage etc. Also - how do you accurately assess your cars market value? Have a look on auto trader and try to buy your year/make/model/mileage car for less than your balloon payment - In most cases, I would be very surprised if you could.



Finance companies cover themselves even during difficult markets - they prefer for the customer to have ‘equity’ in the car at the end of the PCP, as this generates follow-on business, which they and the dealership love.



This buffer is also built in to the calculation and even during difficult times when residuals are hit hard, this final value seldom exceeds the car’s market value.



Hate it as I do, the PCP was a master stroke for the retail car market and most people who regularly want a new car will choose this route. They are just interested in how much a Month it costs and never really dig into the actual cost of ownership - or in fact actually understand how a PCP works and how interest is applied.



Most people who don’t purchase their car at the end of a PCP, do so not because the final value is more than the car is worth, but because they can’t afford to pay the balloon payment, and just want another monthly payment deal.

Not many cars as a whole worth less than the GFV after 3 years on a 3 year PCP term, but those that are will be BEVs, considering how much used BEVs in general are worth. The used market for BEVs is not buoyant. When we sold one of our Borns to get the S3, back in April 23, none of our local VAG dealers were interested in taking on a used BEV unless in a p/x. The dealership in London that we bought the Born from wasn't interested either, most car groups had a blanket ban on buying BEVs for used stock. Not a lot has changed in the last 8 months.

People here with PCPs know what the GFV is on their contract. They can also find out what someone would give them in a sale right now, via the likes of Cazoo and Motorway, which is considerably more than the local main dealers for your marque will usually give in p/x (I was offered £27k against the S3 for my Born, I sold it for £31200 to a car buying group in Peterborough, which is about what Motorway said it was worth.

If 2 year old cars have a market value less than their 3 year GFV, I can't see that being turned around in a year.

The main reason people PCP is that they want a new car every 3 years and/or can't/won't buy it outright. PCPs have worked well with 14 years of rock bottom interest rates, but now we're around a 5% base rate and the finance companies expect 10% APR as a result, the interest element of the monthlies is huge. People aren't prepared to be paying £6-800pm for a very ordinary car.

 

Yes, there was always going to be payback for the early days - I sold a 2 Year old EV to Cazoo for more than I paid for it new. It was never going to last.
Anyone who is looking at a new EV should consider looking at the 2 to 3 year old used market - there’s some good deals.
It’s interesting that some might look at what trade buyers like cazoo might buy their car for compared to the PCP balloon payment. I look at what will be needed to buy a comparable car - not the trade selling value. After all, this is what you will need to do if you want to continue motoring - or start again with higher monthly payments and find a deposit to start again.

 

Yes, there was always going to be payback for the early days - I sold a 2 Year old EV to Cazoo for more than I paid for it new. It was never going to last.

Anyone who is looking at a new EV should consider looking at the 2 to 3 year old used market - there’s some good deals.

It’s interesting that some might look at what trade buyers like cazoo might buy their car for compared to the PCP balloon payment. I look at what will be needed to buy a comparable car - not the trade selling value. After all, this is what you will need to do if you want to continue motoring - or start again with higher monthly payments and find a deposit to start again.

I did the same. We bought 2 ID3s new in 2021 (Life for £27.4k, Family for £28.2k, ran them a year) sold them for £34.2k (Life) and £38.2k (Family) to buy our 2 Borns for £38k each. Sold one for £31.2k to buy the S3 a year later. Man Maths says I was paid £3k to run 2 BEVs over 2 years and the other Born only really cost us £28k.

Right now though, the used BEV market is rock bottom. Everyone who wanted a new BEV with their own money as an early adopters got one. If I were in the market for a BEV in a private sale right now, you'd be nuts to buy it new (current e-Corse type deals excepted).

 

In November 2022 we needed to transport growing grandchildren more frequently. Our 2020 Zoe ZE50 was no longer big enough. The 4 year PCP ran till July 2024 with a GFV of approx £14k. Outstanding balance was approx. £17k.

We Buy Any Car offered £18k. We order a Kia Niro 4 EV. At that time delivery delays were approx. 6 months. By February 2023 WBAC value of the Zoe had crashed to approximately £7k leaving a significant shortfall. We cancelled the Niro order and waited to July 2023 when we had paid sufficient to Voluntarily Terminate the contract.

The Zoe was assessed for damage. A kerbed alloy was expected. A scratch where the rear seatbelt got caught in the door shut wasn’t. A couple of other scatches weren’t charged. I was happy with the assessment and damage sum requested (about £300).

The Zoe was worth half its GFV with still a year to go. No way was it going to rise in value that much. The huge drop in value almost overnight took us by surprise.

We were looking at new cars on either lease or PCP. Lease monthly payments were significantly cheaper than PCP so that looked like the most attractive way forward.

We tested an ID4 which was too expensive on PCP. A nearly new one was affordable though on PCP. That car sold before we could finalise the deal. We were then offered the sales managers ID5. 8 months old with 5.5k miles and £2k”s worth of options (heat pump, granny charger and most expensive colour paint) for a discount of £16k on the new price. PCP monthlies were affordable so we went for it. Very pleased as it provides the space and equipment we wanted.

In summary

• damage charged was fair and haggle free
• values crashed dramatically in late 2022/ early 2023
• leasing was cheaper than PCP by £200+ per month
• a nearly new EV was (relatively) great value compared to the same model new (lease or especially compared to PCP).

Different models will have different outcomes but in principle I would definitely recommend looking at nearly-new vehicles. There are some potential bargains (relatively speaking) to be had.

 

In November 2022 we needed to transport growing grandchildren more frequently. Our 2020 Zoe ZE50 was no longer big enough. The 4 year PCP ran till July 2024 with a GFV of approx £14k. Outstanding balance was approx. £17k.







We Buy Any Car offered £18k. We order a Kia Niro 4 EV. At that time delivery delays were approx. 6 months. By February 2023 WBAC value of the Zoe had crashed to approximately £7k leaving a significant shortfall. We cancelled the Niro order and waited to July 2023 when we had paid sufficient to Voluntarily Terminate the contract.







The Zoe was assessed for damage. A kerbed alloy was expected. A scratch where the rear seatbelt got caught in the door shut wasn’t. A couple of other scatches weren’t charged. I was happy with the assessment and damage sum requested (about £300).







The Zoe was worth half its GFV with still a year to go. No way was it going to rise in value that much. The huge drop in value almost overnight took us by surprise.







We were looking at new cars on either lease or PCP. Lease monthly payments were significantly cheaper than PCP so that looked like the most attractive way forward.







We tested an ID4 which was too expensive on PCP. A nearly new one was affordable though on PCP. That car sold before we could finalise the deal. We were then offered the sales managers ID5. 8 months old with 5.5k miles and £2k”s worth of options (heat pump, granny charger and most expensive colour paint) for a discount of £16k on the new price. PCP monthlies were affordable so we went for it. Very pleased as it provides the space and equipment we wanted.







In summary



damage charged was fair and haggle free

values crashed dramatically in late 2022/ early 2023

leasing was cheaper than PCP by £200+ per month

a nearly new EV was (relatively) great value compared to the same model new (lease or especially compared to PCP).





Different models will have different outcomes but in principle I would definitely recommend looking at nearly-new vehicles. There are some potential bargains (relatively speaking) to be had.

It seems that BEV residuals in general are following the large German motor trend. No-one buys a brand new big German motor with their own money, buy the likes of an Audi A6 or BMW 5 series at 10-12 months old for about 60% RRP. The only used car I've bought in the last 20 years was a 2019 Audi A4 Avant, after I convinced myself that I needed a tank when we got a Labrador. It was a "£43k" car that I paid £25k for at 10 months old.

No.one buys one new at or near RRP, seems the same is now true of BEVs, so the company cars with big fleet discounts take the initial hit.

There can be a sting in the tail though. The dealerships generally charge a good 5% extra in APR for a nearly new car vs a new one. When they happens, a lot of those savings on sticker price can be swallowed up by additional interest.

Will this see used prices of BEVs stagnate further? If you're used to buying new and drive a BEV, instead of changing at 3 years old, will you now keep that brand new car from 2022 for 5 years, then buy your next one at 2 years old and sell at 5 years, because the 2 year old ones are too cheap to ignore? I can see that happening with our 1 remaining Born if it's worth less than £24k at 3 years old (highly likely, have not checked what its worth now).

 

And now the public can't buy at BCA auction the car is always sold onto a dealer with high overheads due to cars needing storing on sale sites until they sell.

The higher prices they charge

But there is no reason to drive a new car other then status symbol.

I can think of quite a few reasons:-



1. Knowing the car hasn't been thrashed/abused before you had it.

2. Knowing everything is covered by at least a 3 year warranty should something go wrong.

3. Having the latest safety equipment on board (you can keep your lane assist though!).

4. No faffing around with MOTs for 3 years.

5. If you're PCPing, often a nearly new car comes with a big APR% that (again, often) cancels out most/all of the capital savings - if a new car costs less per month than the 1 year old one, who wouldn't choose new?

6. Knowing that you shouldn't need to worry about new tyres and brake pads/discs/shoes, shocks.

 

That a reason to buy a 3 year old rather then 5 year old, and the last time I did the calculations the cost pcm if kept until about 15 year old was practically same for a 3 year old then a 5 year old.

 

Some people talk about handing the car back at the end of the PCP and ‘walk away’. But most never really ‘walk away’ - they need to get another car, so they have to do something.
In times when there is no ‘equity’ at the end of the PCP, then the potential deposit on a follow on deal is diminished. However, they still have to stay somewhere within the system to get their next car. This shifting of choice is what affects the market - e.g. follow on PCP, buy at end of PCP, move to leasing, drop down to cheap used etc etc.

It‘s the cost to buy the same car that should be looked at when deciding if to keep at PCP end (amongst other things of course), not the trade offer/price (e.g. Cazoo). You are in the position where you need a car - so a buyer not a seller.

Entering into another PCP, or getting another new car is vastly more expensive than buying the car at the end of the PCP - it’s just that it’s usually spread over time and financed to make it more manageable to most people.

If PCP interest rates are reasonable and there is a dealer or manufacturer ’concession’ it can make sense not to use your own cash if you have it, and keep it invested. Remember almost any new car will take a big hit in value - especially in the first 2 Years, so buying a new car is never going to be sensible financially (recent crazy markets excepted).

You never lose a penny on any car purchase until you sell though.

 

Am I right in thinking that with a BYD Dolphin and their current PCP offer with 0.5% APR over 4 years you’d not be able voluntarily terminate early as you’re still not quite half way through paying the capital at the four year term.

 

You can pay any loan off early without penalty. That is guaranteed by law.

 

See their other post on other thread ( cheap deals thread)
It say to me they don’t actually want a 4 year deal
What they actually want is a 2 year deal….but at a 4 year deal price

Dont we all 👍

 

As someone mentioned on another page, it always worth putting a cash purchase of a new car into any comparison of options, but remembering that things like dealer pre-registered discounts aren't available for leasing etc i.e. cash should not be the price of a factory order, but what is available from the dealers. In the case we were discussing, the OP pointed out that my 19.6% discount on our car with 10 miles on the clock was only available because it was a 'used' car on the forecourt - such vehicles aren't offered with financing like leases. When they bought their equivalent their price was the RRP minus a £2K 'contribution' and at 0% interest which worked out at least £4K more over their lease period than my cash purchase. Of course, this only works as an option if you have access to cheap money, such as an offset mortgage or just cash in the bank so I'm not saying it works for everyone by any means, but is still worth taking a look at.

The sales person will usually use the undiscounted, factory-order price as a comparison for a cash purchase vs financing. But if you walked in and only ever asked about cash purchases they'd be quick enough to find you a 'special deal' somehow, if they could. And it's that you should use as the comparator.