Audi S4 Avant PCP Deal - opinions

[Alexander Thomson]

Exactly right, just as the good doctor (Eskimo) says, the more cash you part with on day 0, the less interest you pay. Any more increases in cost for you (e.g. options, service plans, rrp increases, tax increases, etc) are all liable to interest. I think audi call it something like 'total amount payable' or something like that, it's a scary number but highlights how much interest actually gets charged on a pcp deal.

On the equity front, it is an absolute gamble and not to be taken lightly. Trade in prices also have a mysterious habit of varying wildly depending on how much you're paying for the new car...would love, just for one day, to get behind the scenes at a dealership to see how the books work...

 

[EddieRS3]

Mmmm you don't 'own' anything until the full balance is settled but fair play.
Pros/cons!

Not exactly mate.

You don't own the car, and technically, can't modify it. The terms of the contract are that it is kept under warranty, and modifications will void this warranty. By doing so, you are in breach of this contract agreement.

If something goes wrong due to a modification, not only are you liable for footing the bill due to the warranty being void, but also either paying the full balance or fixing it, returning it to stock and handing it back.

Bang on about selling/trading it in whenever you like, and not being tied so strictly to mileage limits. Of course going over the mileage limit will result in lower trade in.

Actually - you own the car exactly if you had purchased it via hire purchase. It's identical to when your mortgage a property.

You own the house. You don't tell your finance applications etc that the house belongs to Santander, or Lloyds, or Barclays etc. You own the house, and the bank has a financial interest in it.

Exact same with the car, you own the car, your name is on the V5, you are free to do what you want with the car. The finance company has an interest in the car. If you hand back the car after the term and you've resprayed it, changed the exhaust and wheels, slapped a bigger turbo on it then all that will happen is your GFV will be lowered to suit. Simple.

If you don't hand the car back and you choose to sell, then it makes no difference literally at all.

If something goes wrong after you've modified the car and the warranty is void, then sobeit. Your obligation is to pay the finance only. The only time you need to keep the car in standard condition, maintained with a vat registered garage, and stay under the mileage limit is if you want to exercise your right to "handing it back" after the full term. By doing this, you get your guaranteed future value. If you modify in any way, or change the parameters above, then Audi have all the ammo they need to lower that GFV.

In short, you own the car but the finance company has an interest. Simple.

 

[DrEskimo]

Actually - you own the car exactly if you had purchased it via hire purchase. It's identical to when your mortgage a property.

You own the house. You don't tell your finance applications etc that the house belongs to Santander, or Lloyds, or Barclays etc. You own the house, and the bank has a financial interest in it.

Exact same with the car, you own the car, your name is on the V5, you are free to do what you want with the car. The finance company has an interest in the car. If you hand back the car after the term and you've resprayed it, changed the exhaust and wheels, slapped a bigger turbo on it then all that will happen is your GFV will be lowered to suit. Simple.

If you don't hand the car back and you choose to sell, then it makes no difference literally at all.

If something goes wrong after you've modified the car and the warranty is void, then sobeit. Your obligation is to pay the finance only. The only time you need to keep the car in standard condition, maintained with a vat registered garage, and stay under the mileage limit is if you want to exercise your right to "handing it back" after the full term. By doing this, you get your guaranteed future value. If you modify in any way, or change the parameters above, then Audi have all the ammo they need to lower that GFV.

In short, you own the car but the finance company has an interest. Simple.

You don't own the car. V5 is not proof of ownership. Says this clearly on the finance agreement and on the front of the V5...

I'm not saying you can't mod it, or that extreme cases like the finance company demanding money back is common, but it can and does happen:

http://www.seatcupra.net/forums/showpost.php?p=2133732&postcount=50

By all means, do what you want, but don't state black is white, when it very clearly states that you don't own the car until you make the final payment.

 

[Alexander Thomson]

The ownership bit is one I'm not sure about either - agree that v5c doesn't equal ownership but as you have the right to sell it, does that not mean you own it? You definitely can't sell a leased car but you can sell a pcp'd car, so would have thought this does mean you own it?

 

[Alexander Thomson]

Scratch that, just read that the finance company owns the car until you pay the optional final payment.

 

[cuke2u]

Like paying more of a deposit reduces the interest. Interest on a PCP is calculated on the total cost of the vehicle, not less deposit and is also calculated before you purchase. I.E. not worked out on a monthly basis on the amount remaining. If that was the case, like a credit card, the monthly payments would reduce..

 

[cuke2u]

Have a read of Alexanders excellent post #29.

You don't pay interest on the deposit you put down do you...!

The amount you borrow to finance the car is RRP - discount - deposit. So if you increase either the discount of the deposit, you are financing a smaller amount, therefore paying less interest.

We are still talking a PCP aren't we? Because the interest is worked out on the total cost of the car, not the cost of the car less the deposit.However you can spread the initial lump sum over the term of the contract, without paying anymore interest. Thus, on a PCP you are incorrect, it doesn't matter how much much deposit you pay because the interest isn't reduced if you pay a higher deposit.
This is not the same as buying on credit or HP, where you can borrow less by placing a large deposit. That is the worse thing to do with a PCP.

 

[cuke2u]

This is what 'What Car' state "
With a PCP, interest is charged on the whole sum
To be clear, you pay interest on the total price of the car, not just the amount of money you’re borrowing."

 

[Alexander Thomson]

We are still talking a PCP aren't we? Because the interest is worked out on the total cost of the car, not the cost of the car less the deposit.However you can spread the initial lump sum over the term of the contract, without paying anymore interest. Thus, on a PCP you are incorrect, it doesn't matter how much much deposit you pay because the interest isn't reduced if you pay a higher deposit..

Sorry @cuke2u, this is incorrect. I'm afraid it's the exact opposite of what you just said, the interest is calculated on what you walk out of the showroom with, which is essentially the list price of the car minus any deposits. If what you are saying is correct, then Audi would be also charging interest on their own deposit contribution, essentially charging themselves interest.

Forgetting the figures part of it, it's entirely unethical to charge interest on money that is not borrowed. Comparing to a mortgage, you only pay interest on what you borrow from the bank to pay for the house, which is always cost of the house, minus your deposit.

Also, for PCP deals, if you settle early, the settlement figure for the finance is re-calculated on a rolling basis because it is illegal in the UK to charge interest for products/services that weren't received. E.g. say you are 2 years into a 3 year PCP deal and you want to settle your finance, paying £300 p/m (of which a portion is interest, let's say £50 for easy figures), you don't actually owe £3,600 back if you want to settle, you owe £3,000.

 

[Alexander Thomson]

To What Car's point, they're emphasising that it's not only what you're borrowing that get's charged interest, it's the list price and the guaranteed value. A common mis-conception of PCP is that you don't pay interest on the final payment\GFV as you hand it back, but you do. The reason why you pay interest on the GFV is that you have the option to take the car at the end if you stump up the final payment, of which you've already paid interest on, so it's an easy transaction. If interest wasn't charged at point of sale for the GFV part, you'd be essentially getting half the car interest free.

Coming back to the previous post, easy way to think about is to consider what you're walking out of the showroom with - that is what you pay interest on. Anything more/less would be either unethical financing or a good result for the buyer!

 

[DrEskimo]

We are still talking a PCP aren't we? Because the interest is worked out on the total cost of the car, not the cost of the car less the deposit.However you can spread the initial lump sum over the term of the contract, without paying anymore interest. Thus, on a PCP you are incorrect, it doesn't matter how much much deposit you pay because the interest isn't reduced if you pay a higher deposit.
This is not the same as buying on credit or HP, where you can borrow less by placing a large deposit. That is the worse thing to do with a PCP.

What Alex says...

I think you've confused 'paying interest on the full amount borrowed' with 'paying interest on the full cost of the car'. You only pay interest on what you borrow, which is the cost of the car minus any deposit (better described as upfront payment).

Basically people sometime don't think they are paying interest on the GFV, but you are.

 

[DrEskimo]

This is what 'What Car' state "
With a PCP, interest is charged on the whole sum
To be clear, you pay interest on the total price of the car, not just the amount of money you’re borrowing."

Here's a working example using a PCP calculator, one with £1000 deposit and one with £5000 deposit.

As you can see, the amount borrowed is less on the £5000 deposit example.

The total cost at £1000 deposit is £12,266.2, whereas the total cost at £5000 deposit is £11,885.72. You save yourself £380.48 over the 36months in interest by putting down £4000 more upfront.

Hope that clears it up for you buddy

 

[cuke2u]

I have tried all the finance calculators going, including Audi's own on their website, and found the calculations widely optimistic and inaccurate to any offer the dealerships have made. Even the head salesperson stated to me you would be wrong to put in a high equity because you do not get it back.
That particular pcp calculator I found to be amongst the worst for thinking you'll get the payments cheaper..
If the way interest calculations have changed on a pcp, and I don't know, then please tell me when this happened. When I purchased my A3 in 2013 I was actually quite shocked to see the interest being calculated on the total amount of £27,000. The article from What Car I took the quote from was dated the 2nd May 2017...

 

[Alexander Thomson]

I have tried all the finance calculators going, including Audi's own on their website, and found the calculations widely optimistic and inaccurate to any offer the dealerships have made. Even the head salesperson stated to me you would be wrong to put in a high equity because you do not get it back.
That particular pcp calculator I found to be amongst the worst for thinking you'll get the payments cheaper..
If the way interest calculations have changed on a pcp, and I don't know, then please tell me when this happened. When I purchased my A3 in 2013 I was actually quite shocked to see the interest being calculated on the total amount of £27,000. The article from What Car I took the quote from was dated the 2nd May 2017...

Who's interests is the dealer serving by telling you that? His own of course, as you'll be paying more interest into his pocket.

There is no getting around what you will pay in base terms - the price of the car you've specced minus the guaranteed value. After that, it's up to you how much you put down on deposit or pay monthly, but the more you deposit, the less interest you pay. Either way, you're paying back a sum of money to arrive at the GFV after X months payments.

Say the car costs £10k, you agree that it's worth £4k after 3 years, so you owe £6k over 3 years. You could:

- put no deposit down and pay £2k + interest * 3 years.

- put £3k deposit in and pay £1k + interest * 3 years

- put £6k deposit in and pay £0 + interest * 3 years

As you put more deposit in, your interest goes down. Whichever way you pay it, you arrive at £4K after 3 years, at which point you've paid X interest. The only variable is the X.

There is no mention of equity anywhere in a car sale - this would be misselling if there is. Equity is the difference between what you owe and what the car is worth; you always know what you owe, you don't always know what the car is worth due to market forces.

A salesperson discouraging you to pay less deposit is like a credit card company telling you to only pay off the minimum payment every month, even if you can afford to settle the balance. As you reduce your debt, you reduce your interest liability. This has always been the principal for credit.

Can totally understand how this is a confusing product to understand; I'm fortunate enough to work in financial services where I've got a cohort who are up to thrashing these things out over a couple of pints! I'll see if I can get some examples from the Audi finance calculator to put up with screenshots.

 

[Alexander Thomson]

lol just realised that this does not constitute financial advice in any way before I get busted by the FCA...

 

[scotty76]

http://www.parkers.co.uk/car-finance/advice/2015/pcp-and-insurance/

 

[scotty76]

, but it can and does happen:

http://www.seatcupra.net/forums/showpost.php?p=2133732&postcount=50

Remember reading that thread on SCN.

 

[DrEskimo]

Who's interests is the dealer serving by telling you that? His own of course, as you'll be paying more interest into his pocket.

There is no getting around what you will pay in base terms - the price of the car you've specced minus the guaranteed value. After that, it's up to you how much you put down on deposit or pay monthly, but the more you deposit, the less interest you pay. Either way, you're paying back a sum of money to arrive at the GFV after X months payments.

Say the car costs £10k, you agree that it's worth £4k after 3 years, so you owe £6k over 3 years. You could:

- put no deposit down and pay £2k + interest * 3 years.

- put £3k deposit in and pay £1k + interest * 3 years

- put £6k deposit in and pay £0 + interest * 3 years

As you put more deposit in, your interest goes down. Whichever way you pay it, you arrive at £4K after 3 years, at which point you've paid X interest. The only variable is the X.

There is no mention of equity anywhere in a car sale - this would be misselling if there is. Equity is the difference between what you owe and what the car is worth; you always know what you owe, you don't always know what the car is worth due to market forces.

A salesperson discouraging you to pay less deposit is like a credit card company telling you to only pay off the minimum payment every month, even if you can afford to settle the balance. As you reduce your debt, you reduce your interest liability. This has always been the principal for credit.

Can totally understand how this is a confusing product to understand; I'm fortunate enough to work in financial services where I've got a cohort who are up to thrashing these things out over a couple of pints! I'll see if I can get some examples from the Audi finance calculator to put up with screenshots.

That's what I was going to do, but it will tell you exactly the same information as the PCP calculator I've posted...!

It's a bit mental to suggest the car finance makes you pay interest on your own money mate....I say that with all the respect in the world...but take a minute to think about it...!

 

[Alexander Thomson]

That's what I was going to do, but it will tell you exactly the same information as the PCP calculator I've posted...!

It's a bit mental to suggest the car finance makes you pay interest on your own money mate....I say that with all the respect in the world...but take a minute to think about it...!

I'm with you chief, just wondered if an actual S4 example from Audi might be a bit more contextual for @cuke2u

 

[DrEskimo]

I'm with you chief, just wondered if an actual S4 example from Audi might be a bit more contextual for @cuke2u

Absolutely, crack on buddy!

 

[SINGHY]

Doesn't it say something when there's so much confusion/misunderstanding over how PCPs work, and the fact that the dealers are so keen to sell you a car on a PCP deal over good old fashioned buy it outright. It sounds a bit like all those complex derivative scams that led to the financial crisis a few years ago, when Warren Buffet (who knows a thing or two about making money and protecting it) said if it can't be understood then stay well clear.

 

[DrEskimo]

Doesn't it say something when there's so much confusion/misunderstanding over how PCPs work, and the fact that the dealers are so keen to sell you a car on a PCP deal over good old fashioned buy it outright. It sounds a bit like all those complex derivative scams that led to the financial crisis a few years ago, when Warren Buffet (who knows a thing or two about making money and protecting it) said if it can't be understood then stay well clear.

You're not alone....

https://www.theguardian.com/money/2...s-driving-us-towards-the-next-financial-crash

 

[Alexander Thomson]

Doesn't it say something when there's so much confusion/misunderstanding over how PCPs work, and the fact that the dealers are so keen to sell you a car on a PCP deal over good old fashioned buy it outright. It sounds a bit like all those complex derivative scams that led to the financial crisis a few years ago, when Warren Buffet (who knows a thing or two about making money and protecting it) said if it can't be understood then stay well clear.

^^^ this this this - I genuinely find it easier to understand investment banking products than it is consumer finance products. Only a matter of time before we have a sub-prime 2nd hand car market. Whilst ever dealers are offering £££ off new cars if you buy on finance, why would you go used? Especially as market moves towards electric too.

Friend of mine has setup a fund that is shorting the car finance companies, predicting it will fall. It's performing well.

 

[Muzzito]

Hi there.

New member here.

Looking to purchase a new Audi A4 and have learned a lot from this current thread. I feel like I have a good understanding of how the pcp deals work thanks to the previous advice given but was wondering if I got a loan cheaper than the 3.9% that Audi offer to pay off the finance, would I be paying off the difference to the final payment or would paying off the finance mean that I would have to pay off the loan plus the final payment cost? Hope this makes sense!

 

[CornishB9]

Top tip - buy an ex-demo with 3-4000 miles at 6-8 months old (save £12 000), finance at 3.3% from a personal loan, yeah you don't get the exact spec but...

 

[Muzzito]

Top tip - buy an ex-demo with 3-4000 miles at 6-8 months old (save £12 000), finance at 3.3% from a personal loan, yeah you don't get the exact spec but...

But would you get the Audi finance contribution? Ultimately comes down to what I can afford monthly. That's why pcp looks like the option for me. I wouldn't be able to take a loan out on the whole cost of car. Happy to look at any option that works out well monthly but wasn't sure you could do a pcp deal on a nearly new?

 

[Kestrel]

I think these days you can do a PCP on most cars...new and used.

 

[Muzzito]

I think these days you can do a PCP on most cars...new and used.

Thanks Kestrel. I didn't realise that.

Can anyone help with my original question?

Hi there.

New member here.

Looking to purchase a new Audi A4 and have learned a lot from this current thread. I feel like I have a good understanding of how the pcp deals work thanks to the previous advice given but was wondering if I got a loan cheaper than the 3.9% that Audi offer to pay off the finance, would I be paying off the difference to the final payment or would paying off the finance mean that I would have to pay off the loan plus the final payment cost? Hope this makes sense!

 

[Kestrel]

Thanks Kestrel. I didn't realise that.

Can anyone help with my original question?

If you mean take out a loan to cover the deposit and the monthly payments...leaving just the GFV to pay at the end of the period (be that 12, 24 or 36 months), well I'm not sure that would be acceptable to the finance company.

 

[Muzzito]

If you mean take out a loan to cover the deposit and the monthly payments...leaving just the GFV to pay at the end of the period (be that 12, 24 or 36 months), well I'm not sure that would be acceptable to the finance company.

Ok thanks.

 

[Splodgeit]

Hi there,

Audi code A32WM7CF

uk.audi.com/A32WM7CF

10k miles per year

The best quote I can get is £5000 down and £494PCM for a 48month deal.

Does this sound like a good deal?

Thanks for opinions.

I'm no expert but for reference i decided to go for a 2 year lease deal just last month on a new S4 Avant over 15,000 miles per year with Metallic Paint,Light\Vision Pack and Privacy Glass.

Cost £554 pcm \ Deposit ( Upfront payment around £1500). (3 + 24).

Almost went for a PCP deal at 3 years with £0 deposit which came in at £595 but in the end i wanted the shorter term.

I was told for every £1000 deposit is around £25pcm saving.

Hope that helps.

 

[Muzzito]

I'm no expert but for reference i decided to go for a 2 year lease deal just last month on a new S4 Avant over 15,000 miles per year with Metallic Paint,Light\Vision Pack and Privacy Glass.



Cost £554 pcm \ Deposit ( Upfront payment around £1500). (3 + 24).

Almost went for a PCP deal at 3 years with £0 deposit which came in at £595 but in the end i wanted the shorter term.

I was told for every £1000 deposit is around £25pcm saving.

Hope that helps.

Ye thanks for sharing your deal. Interesting roughly how much you can save per £1000 deposit.

 

[richardshoes]

I ordered the S4 last week from Edinburgh Audi - £5k down £494pcm

Audi config = A6E4kTHR