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      01-06-2017, 01:34 PM   #1
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Lump sum into a pcp?? Yes or no.

Evening all

I am currently 8 months into a 36 month pcp on my 340i.

I put in 5k at the start, and have just under 17k balloon.

Undecided as to what to do at the end. I now have an additional 5k which won't achieve much in the way of interest in savings a/c. Better to put it into pcp?? (Which is with bmw finance at 5.9%)

Has anyone done similar, assume it either shortens the term or lowers the monthlies? And what if the car isn't worth the balloon at the end and hence I walk away? In that scenario id have been better off doing something else with it I presume?

I'm new to the pcp scheme and probably should know the answers but thought I'd just ask you knowledgeable lot on here 👍

Thanks all

Garry
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      01-06-2017, 02:06 PM   #2
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i never put anything into PCPs because more often than not i either VT it or hand it back, or swap for another car. Ive yet to run a full term on 1.

Any money you put into them is a waste Unless you really plan to keep it.

i buy them with 500 down and negotiate my monthly to suit, advantages of putting more in as deposit is monthly's come down, however if you VT it or hand it back you've lost it all...in essence you could put the lump in savings and save for that final balloon payment, but ask youself do you plan to keep the car for xxx years or swap for a new 1 if so Save the cash and just pay the monthly
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      01-06-2017, 02:15 PM   #3
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      01-06-2017, 02:31 PM   #4
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Quote:
Originally Posted by Tobamory View Post

Any money you put into them is a waste Unless you really plan to keep it.
Here we go again.
PCP = deposit + monthlies + final payment.

Final payment is always a constant and deposit + monthlies equal the balance. A high deposit means low monthlies and low deposit means high monthlies.

If you decide to VT, a high deposit means you can do this earlier.

Money is not lost anywhere.

Now please pass the popcorn.
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      01-06-2017, 02:36 PM   #5
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I would put the 5k in an account and transfer say 150 a month into the account where your payments come from. That way you still earn interest albeit crap and you can use it for something else if needs be.
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      01-06-2017, 03:33 PM   #6
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Quote:
Originally Posted by Nobby Clark View Post
Here we go again.
PCP = deposit + monthlies + final payment.

Final payment is always a constant and deposit + monthlies equal the balance. A high deposit means low monthlies and low deposit means high monthlies.

If you decide to VT, a high deposit means you can do this earlier.

Money is not lost anywhere.

Now please pass the popcorn.
but lower deposit also means higher overall cost (more interest) up to FP point ?
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      01-06-2017, 04:02 PM   #7
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The less you pay as a deposit the more that's borrowed so the more interest you pay..... Simple

The higher the APR the more money you waste in interest payments
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      01-06-2017, 04:08 PM   #8
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no

why put capital in something that depreciates, I'd leave it in the bank/isa.
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      01-06-2017, 04:10 PM   #9
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Quote:
Originally Posted by AndyEssex330d View Post

why put capital in something that depreciates.
err, so you pay less interest perhaps?
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      01-06-2017, 04:12 PM   #10
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Quote:
Originally Posted by 73henny View Post
err, so you pay less interest perhaps?
Pay less interest and less per month.

It's all an individual balancing act.
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      01-06-2017, 04:13 PM   #11
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Quote:
Originally Posted by AndyEssex330d View Post
no

why put capital in something that depreciates, I'd leave it in the bank/isa.
I am afraid you are wrong

It's irrelevant if the item goes up or down in price the issue is you are throwing money away if you are paying interest which is lost money

The only way around this is if the APR on the car is lower than the interest from the investment you decide to put the money into instead of the car

The issue is always the money you are losing in interest
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      01-06-2017, 04:13 PM   #12
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Cheers guys keep the comments coming is good to get some advice and suggestions. Liking the idea of drip feeding the 5k in from another account at the moment, hadn't thought of that one 👍
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      01-06-2017, 04:20 PM   #13
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Quote:
Originally Posted by JLR1969 View Post
I am afraid you are wrong

It's irrelevant if the item goes up or down in price the issue is you are throwing money away if you are paying interest which is lost money

The only way around this is if the APR on the car is lower than the interest from the investment you decide to put the money into instead of the car

The issue is always the money you are losing in interest
Agree with what you say RE interest, and 5.9 is steep these days, however to pay a lump sum to save on interest, to only lose it in the value of the car? - depends if OP is paying the car off or planning to PX some way through the agreement etc etc
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      01-06-2017, 04:25 PM   #14
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Yep trouble is I don't know what I will do, love the car so may pay the Bubble in which case the 5k could go towards it.. Guess it depends on a number of factors (availability of cheap personal loans in 2yr time, Value of the car at that point - if it's got any equity (doubtful?) etc etc.
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      01-06-2017, 04:27 PM   #15
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Quote:
Originally Posted by JLR1969 View Post
I am afraid you are wrong

It's irrelevant if the item goes up or down in price the issue is you are throwing money away if you are paying interest which is lost money

The only way around this is if the APR on the car is lower than the interest from the investment you decide to put the money into instead of the car

The issue is always the money you are losing in interest
I always work on the principle of using any spare capital to pay off debt that has the highest interest rate. So depending on type of debt that would be (probably in order); payday loans/loansharks, credit cards, other loans, car loans, then mortgage. Of course, if you can invest in something to make more than the interest you are paying on any of the above, that's better too.
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      01-06-2017, 04:28 PM   #16
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Quote:
Originally Posted by AndyEssex330d View Post
Agree with what you say RE interest, and 5.9 is steep these days, however to pay a lump sum to save on interest, to only lose it in the value of the car? - depends if OP is paying the car off or planning to PX some way through the agreement etc etc
I still don't agree mate

No matter what he does the amount of equity in the car will be dependent on how much has been paid on the loan, the car will be worth the same no matter what.

Therefore when it's sold the balance will be higher or lower depending on the contributions

A PCP is simply a fancy name for a 'loan' with the added feature that you can sell the car back during the term.

In reality you can do the same thing if you buy the car for cash except you have to sell it privately

When I looked at a 4 year PCP at 5.9% on 32k the interest was 4500, this is lost money

What matters is the cost for the finance

Last edited by JLR1969; 01-06-2017 at 04:34 PM..
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      01-06-2017, 04:32 PM   #17
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Quote:
Originally Posted by Herr Dreier View Post
I always work on the principle of using any spare capital to pay off debt that has the highest interest rate. So depending on type of debt that would be (probably in order); payday loans/loansharks, credit cards, other loans, car loans, then mortgage. Of course, if you can invest in something to make more than the interest you are paying on any of the above, that's better too.
Spot on mate

You pay off the highest interest rate first.

Interest is simply throwing money away but allows people who don't have 40k etc lump sums to buy cars

Some people prefer to have cash in the bank for security

It's whatever works
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      01-06-2017, 04:37 PM   #18
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Quote:
Originally Posted by AndyEssex330d View Post
Agree with what you say RE interest, and 5.9 is steep these days, however to pay a lump sum to save on interest, to only lose it in the value of the car? - depends if OP is paying the car off or planning to PX some way through the agreement etc etc
I don't follow how paying up front, or monthly, makes any difference to what you lose in the car's lease period. Variations in interest for taking a loan vs. using savings is the only measure that changes the equation. Whether it costs more or less for the term, if we self finance some of it or not.

We all finance depreciation, one way or another.

I've not got a diploma in man maths, so can't make it work any other way.
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      01-06-2017, 04:53 PM   #19
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If you've got it and you've got no other more expensive debt, and you're happy with your level of easy access emergency funds, and nothing else you could invest it in that you think might return more than 5.9% per annum, then the answer is yes it would be a good and sensible thing to do.
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      01-07-2017, 02:03 AM   #20
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I've recently done this. I'm now 10 months into my 4 year PCP.

Last month I had a 6.5k windfall and I decided the best use of it would be to pay a bit off the car. My biggest reason for doing it was that if I had put it in a separate savings account, the interest would be 1% as opposed to the 5.9% of my agreement. Also, I'm not sure I'd be able to resist dipping into it for anything else I fancied.

I opted to reduce the payment so I'm now going to be paying about 200 less per month. I think the interest rebate was something like 400 which doesn't sound much but it's 400 less I have to pay over the term and it's probably 350 more than I'd have earned in interest elsewhere. I'm now saving that 200 I've saved into a regular saver at 5% so in 12 months I can pay that off too.

I don't see it as money wasted, I'd have either paid this amount over the term or be in negative equity by this much more if I traded in. I'm even tempted to do the same again this month, I just need to wait for the 28 days after the last lump sum.
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      01-07-2017, 05:09 AM   #21
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Quote:
Originally Posted by rjberry View Post
I've recently done this. I'm now 10 months into my 4 year PCP.

Last month I had a 6.5k windfall and I decided the best use of it would be to pay a bit off the car. My biggest reason for doing it was that if I had put it in a separate savings account, the interest would be 1% as opposed to the 5.9% of my agreement. Also, I'm not sure I'd be able to resist dipping into it for anything else I fancied.

I opted to reduce the payment so I'm now going to be paying about 200 less per month. I think the interest rebate was something like 400 which doesn't sound much but it's 400 less I have to pay over the term and it's probably 350 more than I'd have earned in interest elsewhere. I'm now saving that 200 I've saved into a regular saver at 5% so in 12 months I can pay that off too.

I don't see it as money wasted, I'd have either paid this amount over the term or be in negative equity by this much more if I traded in. I'm even tempted to do the same again this month, I just need to wait for the 28 days after the last lump sum.
I really like the colour of your car, really exclusive

Oh and paying the lump sum was the right thing to do as well
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      01-07-2017, 07:09 AM   #22
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I love how 'never put money into a depreciating asset' has been spun by the man math geniuses out there and adapted to cars. Brilliant!!!!
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