Great point and well made.
Although if I was being pedantic (and you know I will be...
), the dealer deposit is relatively easy to secure even as a cash buyer, so the difference is about £1400 when you account for that. But £400 does little to change your overall point
I mean £1400 is no small amount, but for the convenience of paying a smaller monthly fee, I can see the attraction.
But its not just the economic argument I am making against PCP vs other types of loans, its the risk of being in negative equity and having to pay money to get out the deal should your situation change.
Lets assume you take either of the deals above, and after 18months the worst happens and you face redundancy.
Lets assume the cars trade in value is worth the GFV on the Audi Calculator after 18m/20k miles @ £25,800.
The settlement for the PCP loan after 18months would be £31,400. This leaves you a shortfall, or negative equity, of £5,600 to cover and settle the finance in full.
The settlement for the personal loan after 18months would be £23,800. This leaves you with £2k positive equity. You are able to clear the debt and have £2k back in your account.
Any finance against a heavily depreciating asset carries risk, since there is a danger the asset value falls faster than the debt you owe on it (i.e. the asset for which the best is borrowed against is worth less than the debt owed). As you can see, the PCP has far greater risk due to the structure of the loan and the proportion of capital and interest paid per month.
They are fantastic while everything is going great....but life has a habit of throwing a spanner in the works. Best laid plans of mice and men and all that...