What's cheaper - PCP or bank loan?
Discussion
Here's a question for all the car finance experts here. Can someone advise which works out cheaper:
Example 1 - £24k car, £8k deposit with balance financed on PCP for 2 years.
Example 2 - £24k car, £8k deposit with balance financed on 4 years and sell at the 2 year point.
Also, how is interest calculated on a PCP?
Thanks in advance.
Example 1 - £24k car, £8k deposit with balance financed on PCP for 2 years.
Example 2 - £24k car, £8k deposit with balance financed on 4 years and sell at the 2 year point.
Also, how is interest calculated on a PCP?
Thanks in advance.
Because you never pay off any of the balloon/MGFV payment over the course of the PCP you are always charged interest on it right up until the end of the agreement. With a conventional loan you're paying off the loan amount plus interest every month.
Because of that usually when it all shakes out at then if they're at the same APR a conventional loan will be cheaper than PCP, although the monthly payments will be lower on the PCP. Problem is you're comparing two very different loan terms which makes a big difference.
Best thing to do is get quotes and then ask the loan provider what the cost would be to settle the loan after 24 months because settlement charges can differ between providers, then you'll have accurate numbers you can compare.
Because of that usually when it all shakes out at then if they're at the same APR a conventional loan will be cheaper than PCP, although the monthly payments will be lower on the PCP. Problem is you're comparing two very different loan terms which makes a big difference.
Best thing to do is get quotes and then ask the loan provider what the cost would be to settle the loan after 24 months because settlement charges can differ between providers, then you'll have accurate numbers you can compare.
john banks said:
PCP can be good value if the price if the deal is sweetened by incentives.
They usually are hence why I prefer to use them. Problem is the car I really want doesn't qualify for a PCP due to age (it's an 09) and I want to know how much more it'll cost me going down the loan route.i.e. I want it but do I want it that much?
Seeker UK said:
They usually are hence why I prefer to use them. Problem is the car I really want doesn't qualify for a PCP due to age (it's an 09) and I want to know how much more it'll cost me going down the loan route.
i.e. I want it but do I want it that much?
Personally i would be running with a straight bank loan on a car of that age. PCP rates will be higher as (a) they generally are on used cars and (b) they are related to the cars age.i.e. I want it but do I want it that much?
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