PCP the next toxic debt threat or is it?

[DallasDad]

A lot in the press re the massive amount of money tied up in PCP car plans.
Propped up by presumed high final values which relies heavily on high used car prices

I don't see where the risk or personal debt elephant is to the individuals though
So if it all goes tits up people lose a runabout hardly the same as losing a home

Where is the liability and the true cost burden?
Is it with the manufacturer's, FT said VW have 150 billion tied up on PCP that's quite a bit.

[Jog On]

I'm sure they will find a way of passing any losses on to the customer. Don't have PCP myself so can't check if there are any small print clauses saying the vendor/finance co have the right to renegotiate terms mid contract. It's probably in there somewhere I'd hazard a guess.

Can anyone confirm?

[radish2008]

yeah ~I'd be interested in anyone in the know explaining in detail the pitfalls.

I'd love a new car but am put off as something about it doesn't feel right. Sticking with my gut for the time being.

[The_Equalizer]

A lot in the press re the massive amount of money tied up in PCP car plans.
Propped up by presumed high final values which relies heavily on high used car prices

I don't see where the risk or personal debt elephant is to the individuals though
So if it all goes tits up people lose a runabout hardly the same as losing a home

Where is the liability and the true cost burden?
Is it with the manufacturer's, FT said VW have 150 billion tied up on PCP that's quite a bit.

You can be made bankrupt for debts of £5k so it could threaten the roof over your head.

[AtW]

You can be made bankrupt for debts of £5k so it could threaten the roof over your head.

PCP is more of a systemic risk to the banks - everybody's roof threatened.

[FrontEnder]

You can be made bankrupt for debts of £5k so it could threaten the roof over your head.

PCPs you can return the car at the end of the agreement.

And your rights under the CCA say you can return the car after 50% of the agreement has been paid.

In both cases any damage above wear and tear needs to be paid for, so this is the only way they could claw money back from the customer.

[sasguru]

PCP is one of the pillars of the powerhouse UK economy, you traitor and saboteur.

[radish2008]

PCP is one of the pillars of the powerhouse UK economy, you traitor and saboteur.

Indeed. Along with out 0.000001% growth rate. The highest growth rate in the UK.

[fullyautomatix]

PCP is an American innovation and pretty much everyone over there buy cars via this instrument. What has really changed from the traditional finance is that the upfront deposit and monthly payments are pretty low and the final payment is huge, so huge that its almost impossible to pay that. So punters are told to trade in that car and get a new one and the cycle continues. What this means is that you could be paying for years but have nothing to show for it in terms of assets.

These days you can buy an Audi or Merc on PCP for less than 300 quid which was pretty unheard of, which is reflected on the roads, you see only Audi or Merc these days on the roads. But the final payment on these cars are huge since they depreciate less.

I have heard the doom stories but I am not convinced that its got the same legs as the sub prime crisis that hit us during the housing boom.

[AtW]

These days you can buy an Audi or Merc on PCP for less than 300 quid which was pretty unheard of, which is reflected on the roads, you see only Audi or Merc these days on the roads. But the final payment on these cars are huge since they depreciate less.

No final payment on majority of those (which is why it got so crazy popular) - they rely on secondary market instead, so if the bottom falls off that market then the whole system crashes, with banks on the hook for all this lending.

And who knows whether banks used those "packaged" loans as some kind of security to do leveraged speculations?