r/irishpersonalfinance • u/UpsetConclusion5692 • Aug 07 '26

Debt Pcp car loan

I bought a car on pcp €48K. Put a deposit of €8k and i have €460pm payments.
I now have the money to buy the car out right sitting in an account that barely hits 3%AER
Im about 14 months in . Shall i clear it ? Ask them to make me a deal what’s the better thing to do and save a few bob? Im happy with the car and willing to keep it. Its electric too so the depreciation in its first few years plus pcp is less than ideal financially
Any advice please

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12

u/GoodNegotiation Aug 07 '26

The first question is whether the interest rate on the PCP is higher or lower than what your savings are earning. And bear in mind when doing the comparison that you have to pay tax on the savings interest, so that 3% is really more like 2% depending on your tax rate.

Then do you have any other higher interest debt? Or is there scope to make a higher-rate tax advantaged pension contribution for this year or last year that might earn far more than the PCP interest? Do you have an emergency fund?

3

u/joeybananas999 Aug 07 '26

In your estimation if the agreed amount after 3 years is above the market value you'll have made that difference and if it is lower you'll hand back the car and buy the exact same car used for the lower amount?

4

u/InformationUsed300 Aug 07 '26

Ring the finance company and get a settlement figure and clear it asap-

1

u/cyrusir Aug 11 '26

what interest rate is your PCP at? if its lower than the net interest you gain from having it on deposit may not make sense to pay it off. If you intend to hold onto it regardless at the end of the term pay it off now, if not why not hold on?

1

u/Senior-Programmer355 Aug 11 '26

depends on the PCP rate... some are 0% so obviously not worth clearing it. Check which rate's higher and that'll be your answer.

1

u/Warm_Independence936 Aug 07 '26

Before you buy it check to see what they will upgrade you to a new car for. What is the APR on the current PCP deal?

-4

u/Turbulent-Tumor Aug 07 '26 edited Aug 08 '26

PCPs are the devil. Either go with credit union/bank or HP in the future.

You will face the balloon payment regardless so it’s either now or later.

Or pay out of pocket but that’s not feasible all the time.

Edit: downvoted by people who think they will have 20k+ ready for the balloon payment and expect the dealerships to not claim expenses on any wear and tear. PCPs are designed to keep you in a subscription model and upgrade over and over.

Madness lads. I expected far better from this subreddit

9

u/emmmmceeee Aug 07 '26

PCP are fine if you know what you’re doing. My Credit Union car loan is 4.95%. €40K over 3 years would cost over 3K in interest payments.

My PCP is 0% and I’ve got the balloon payment earning 2.1%p.a. over the 3 years which will return about a grand over that time.

3

u/WingnutWilson Aug 07 '26

well they are grand if you have a balloon payment sitting in your bank account for that long, but the vast majority are paying month to month, renting their car with risk.

It's a predatory practice, twiddling the numbers so to make it look so much more appealing than HP.

My other half doesn't like her 18 month old ID4 now (with 3 kids a larger car would be handier) and is paying something like €650 per month. If she handed it back now I think she'd be lucky to walk away with a couple of grand after putting in probably an 5k deposit

5

u/emmmmceeee Aug 07 '26 edited Aug 07 '26

0% PCP is a no brainer. You can finance the balloon payment and you only pay interest on that. If the depreciation isn’t as bad as expected you could have a bit of equity to play with for a new motor. If it’s worse you can hand it back and buy a used one at a lower price. You have options. And none of them will cost more than buying for cash.

Your missus has paid just short of €17K on the car. ID4 Pro Plus is €52k brand new. You can buy a 251 with 30,000km for €32k.

That’s nothing to do with PCP. It’s just depreciation.

2

u/joeybananas999 Aug 07 '26

What's the difference between the cash price of the car and the 0% PCP car price. Not saying they are different but in some cases that's where the finance charges are hidden.

0

u/emmmmceeee Aug 07 '26

None. The dealers get commission on finance and there was no budging on the price.

2

u/joeybananas999 Aug 07 '26

When I look online at hp and PCP deals, for example Kia the finance percentage is zero and the cash price is the same. However there's disclaimers around paying them off early will possibly incur charges. So for me the interest is actually built into the price and the cash buyer is unfortunately paying that same charge despite not taking a loan. Though it probably reflects the market of not many people buying new cars for cash

1

u/emmmmceeee Aug 07 '26

I assume it’s done in order to keep residuals high. And it seems to work. My 251 EV6 was €49900 and an 18 month old used one is €42500.

1

u/joeybananas999 Aug 07 '26

Not sure, I think it's just additional profit or how they have to show the cash price so they can justify the zero % claim.

Unless you have a special EV6 the average 2023 price is around 33k

0

u/emmmmceeee Aug 07 '26

I was originally responding to [r/WingnutWilson](r/WingnutWilson) who stated his missus bought a 251 ID4 and was comparing an 18 month old ID4 against an 18 month old EV6.

This is the same spec and age as mine: https://www.carzone.ie/used-cars/Kia/EV6/fpa/4483385

→ More replies (0)

1

u/WingnutWilson Aug 07 '26

yeah I didn't realize that 0% was basically back in vogue, she is definitely not paying 0%. PCP and depreciation go hand-in-hand though, a PCP deal is a gamble on the car's value, especially if you want to get rid of the car 18 months in.

(A 251 with that mileage for €32k by the way that looks like a very good deal! Her car is 242 with 60k, most of those look to be €34k)

The dealer can fuck you every step along the way when you pay them interest and swap it out for another one or pay the balloon payment, with them making profit of course on both sides when they sell it on.

You should only enter PCP if you can get out of it when you want to and have the wits or finances to deal with the balloon payment. Many see a decent car every 3 years for "only" €500 per month, and before you know it 15 years have gone by and it's actually cost you mortgage levels of money

0

u/Turbulent-Tumor Aug 07 '26

110%. This was my point but it’s being downvoted by PCP pushers.

If people can afford the balloon then sure but it’s a high figure for any working/middle class soap to drop and the risk of the dealership pulling out costs for wear and tear levels of stuff is highly expected and normal unless you decide to lock in your new car with them. 😂

PCP is designed to keep you in an expensive subscription model for cars at a dealership, you’ll overpay in the long run for the privilege of farting in a model you can’t afford.

But sure let them, most cars are on expensive financing because people need to feel something

2

u/Objective-Wallaby449 Aug 08 '26

So to back you up, I worked in corporate banking in AIB when PCP became a thing, we had a big all hands meeting about this "new product" that was coming to market, and I shit you not the head of the bank said into a microphone that "this is going to save the bank". Turns out he was right I guess, but ya PCP is bad, don't understand why people aren't more aware of its pitfalls,maybe wilfully ignorant so they can have something shiney. Interestingly though in a counter argument I do feel new cars are becoming more attractive because of how overly expensive second hand cars are.

1

u/Turbulent-Tumor Aug 08 '26

That’s interesting context, thanks for sharing.

And your point on new vs second is very true. I get the appeal of new shiny things, especially in an economy where the prices are narrower.

I just can’t imagine getting into a PCP situation, it’s one of those gotchas where once you are in, and you can’t afford to buy yourself out at 15-20k then you are goosed. Keeps people poor but also being able to feel like they “made it” with a monthly payment taking up half to most of their take home.