Mitchy260

My mate has seen an R32 Golf on a 52 plate at a main dealers for £22500.

This morning he told me he's going to try and get PCP on the car, now a question about this as im not sure whether he has his facts right.

The R32 estimated value in 2 years time with only 6000 miles per year going on it should be around the £16000 mark.

He says because of this he only needs to finance £6500 and hand the car back in 2 yrs time or opt to pay the final fee. (he'd hand it back though)

I asked about a deposit and he said only £100-200

Surely this can't be right can it? An R32 Golf for £6500 for 2 years.

Newbie123

I know of no finance house who would lend on a residual value of that amount c 70% of it's cost. The usual maximums are between 30% and 50% of the cost of the vehicle, so average for this car is around £9000.

I bought a new R32 last year and the maximum residual I was quoted was £9500 on a 3 year deal.

The reason being that at the end of the contract the car should be worth more than the residual value in the contract thus creating a deposit for your next car. No finance company would underwrite a car for that kind of residual value due to the fact you could just hand the car back after 2 years and walk away, and if the market takes a dive and the car is only worth £12000, they've taken a massive hit. So they play it very safe when quoting residuals.

Mitchy260

You mean an R32 Golf would be worth £9500 in 3 years time??

They need to be realistic and that is not realistic.

2 year old R32 Golfs are still worth £18000 which means when you go to hand it back that £18000 is wiped off.

Mitchy260

The R32 is not losing money at all in depreciation terms so when it comes to PCP it is wrong to say it will lose 50% of its value as that is clearly not the case when 2 yr old cars are still fetching 18-19000.

JoeyDeacon

Thats correct, if you sit down and work out the figures it will cost him more than £6500 over 2 years.

Lets assume the Guaranteed Future Value after 2 years (6000 miles per annum) is indeed £16,000 and the purchase price is £22,500. The average mileage for most people is 12,000 per year is your friend sure he will only do 6,000 miles per year otherwise their is additional mileage charges to factor in.

Next although he only has to pay back £6500 and then hand back the car after 2 years he will have to pay interest on the whole £22,500 over those 2 years.

When I bought my Impreza in 2000 I bought it on a PCP (knew no better) and the figures were as follows :

Total Price : £21,309
Deposit : £5000
Guaranteed future value : £9500

This means I was financing £16309 over 3 years and minus the Guaranteed Future Value I "only" had to payback £6809 over those 3 years. I was paying £321 a month which ment I was paying £189 a month clearing the debt and £132 a month in interest! The £6809 I had to pay suddenly becomes £11,556 after the 3 years and then I still have nothing to show for my £16,556 (36 * 321 + £5000 deposit)

2 Years in I wanted out of this deal and had to sell the car to clear the finance. The money I got for the car was still £500 less than was outstanding. I still feel sick when I remember how much that car cost me over the 2 years.

At a rough guess once interest is included I think that car will cost your friend nearer £11,000 over the 2 years once interest is included on the £22,500 original price. That works out at nearly 92 pence per mile for the 12,000 miles he is allowed to do.

The £6500 is just another car dealer jedi mind trick to disguise the actual cost of owning the car.

Newbie123

See my edit for the reason why they give such low residuals.

BTW R32s are not doing very well in the trade, I know of someone trying to sell his (less than a year old) and he is getting offers from dealers around £18k! some aren't even interested.

Mitchy260

What about deposit?? Does it need to be a set % of the car value as he seems to think £100-200

I don't think he knows he has to pay interest on the whole amount, i better go and tell him before he embaresses himself! Cheers!!!

He's in the Army so mileage will be limited to 6000 miles. Only be driven on weekends!

Silver Knight

Glasses guide trade price for a 52 golf is £16,650. Trade value would be nearer 16k.
Nobdy would give a 16k balloon over 2 years

Interest is paid on all the money borrowed including the balloon figure.
Deposit could £0