End Of PCP-how best to keep car?
Discussion
After almost 3 years of fabulous motoring in our Civic Type-R (where did that time go?) the 3 year finance deal (a PCP) is coming to the end.
Long story short, I simply can't find another new car that I'd like as much so I really want to keep it. Being a PH Director of course the best option is to pop the remaining balance (circa £16700) on the debit card and snigger at all those who have to lower themselves to renting a car they can't afford but living somewhat in the real world this has it's drawbacks;
Second child is due this spring so that little savings pot is taken care of and we are looking to expand one business which will necessitate buying more land. In other words I'd like to invoke that other old PH excuse for PCP in keeping the cashflow for something more important than driving a hot hatch.
Currently the monthlies are circa £210 PCM however if we put the car on a new PCP with Honda the monthlies jump up to £270 with a balloon of £8500 or so in four years time. Not exactly fantastic rates I'm sure you'll imagine.
For the avoidance of doubt, extending the manufacturers warranty is a pittance at £360 PA, the car has a 5 year service plan on it and in all honesty, I imagine keeping the car until it is over 5 years old, certainly 5 and a half years or so.
So with the option of throwing in as little capital as possible what are the cheapest options, both monthly and totally? A 3% bank loan and a bit of cash in? Some other form of car finance?
Long story short, I simply can't find another new car that I'd like as much so I really want to keep it. Being a PH Director of course the best option is to pop the remaining balance (circa £16700) on the debit card and snigger at all those who have to lower themselves to renting a car they can't afford but living somewhat in the real world this has it's drawbacks;
Second child is due this spring so that little savings pot is taken care of and we are looking to expand one business which will necessitate buying more land. In other words I'd like to invoke that other old PH excuse for PCP in keeping the cashflow for something more important than driving a hot hatch.
Currently the monthlies are circa £210 PCM however if we put the car on a new PCP with Honda the monthlies jump up to £270 with a balloon of £8500 or so in four years time. Not exactly fantastic rates I'm sure you'll imagine.
For the avoidance of doubt, extending the manufacturers warranty is a pittance at £360 PA, the car has a 5 year service plan on it and in all honesty, I imagine keeping the car until it is over 5 years old, certainly 5 and a half years or so.
So with the option of throwing in as little capital as possible what are the cheapest options, both monthly and totally? A 3% bank loan and a bit of cash in? Some other form of car finance?
Doing another PCP and deferring yet more capital to pay interest on is not the best way.
I would try and find the lowest rate personal loan that you can, put some cash in or extend the time so you can afford it. Then look forward to paying it off and owning it outright...no payments. Always a good feeling even if its only for a year or two until another car takes your fancy.
try www.zopa.com for a loan
I would try and find the lowest rate personal loan that you can, put some cash in or extend the time so you can afford it. Then look forward to paying it off and owning it outright...no payments. Always a good feeling even if its only for a year or two until another car takes your fancy.
try www.zopa.com for a loan
bogie said:
Doing another PCP and deferring yet more capital to pay interest on is not the best way.
This.PCP is often subsidised by an invisible discount on a new car and allows manufacturers to shift tin and then roll the punter into a new car as most don’t save enough for the balloon.
Cheaply bank loan could do it but £15k over 3 years is north of £400 a month - you’d need a 7 year loan to match your current payments, leaving <— you may have accidentally stumbled across the PCP illusion - potentially leaving you with a 9 year hatchback still on finance.
Summary, hand it back and buy a car on HP finance. £200pm = around £8k car over 4 years, probably unwarranteed. Or dive back into the rental world, which is what PCP is for many folks.
2.8% has got to be about the cheapest hasn't it, that's ridiculously low! Are these rates fixed or anything, or if interest rates spiral do they do the same?
I (probably somewhat naively) did wonder if there was an option to PCP that may even lower the monthlies I'm paying now but I expect due to the car's age there are simply no decent deals to be had? I imagine the figures look thus;
Car Honda Civic Type-R GT, FSH 20k miles Retail Value circa £22k
Trade in Value circa £18k (might be being generous there)
Balloon Payment Due May '19 £16700
Let's guess that in two years the trade in value is £14k? If I'm paying off the loan at £270 PCM and chucking a couple of grand at it I'll have paid off some £8k? So if I look to change in 2 and a bit years there'll be a good chance of coming out with more capital value considering the increased monthly payments and extra deposit.
It's all very "crystal ball" isn't it?
I (probably somewhat naively) did wonder if there was an option to PCP that may even lower the monthlies I'm paying now but I expect due to the car's age there are simply no decent deals to be had? I imagine the figures look thus;
Car Honda Civic Type-R GT, FSH 20k miles Retail Value circa £22k
Trade in Value circa £18k (might be being generous there)
Balloon Payment Due May '19 £16700
Let's guess that in two years the trade in value is £14k? If I'm paying off the loan at £270 PCM and chucking a couple of grand at it I'll have paid off some £8k? So if I look to change in 2 and a bit years there'll be a good chance of coming out with more capital value considering the increased monthly payments and extra deposit.
It's all very "crystal ball" isn't it?
Think the Honda rate was somewhere around 7+% APR although the sales man there is a mate, he said I’d be better off finding myself via a personal bank loan which is probing true.
His thinking was used car PCPs are a bit of a mugs game due to the high cost and once it isn’t a new car sale you’re better off looking outside the franchised dealer for a better offer.
His thinking was used car PCPs are a bit of a mugs game due to the high cost and once it isn’t a new car sale you’re better off looking outside the franchised dealer for a better offer.
£16,500 loan from TSB @ 3.49% is running me £300.09 a month over 5 years, obviously no balloon.
That’s considerably cheaper than the PCP option you posted the numbers for.
I didn’t find any difference in rates between my banks on personal loan vs car loan when I used their online quotes.
That’s considerably cheaper than the PCP option you posted the numbers for.
I didn’t find any difference in rates between my banks on personal loan vs car loan when I used their online quotes.
Out of interest, what was the deposit on the original PCP? £210 a month seems pretty low.
Seems to me PCP on new cars is driven more by manufacturers and dealers wanting registrations. They can set the deposit contribution and future value to get to any monthly rate they want. Downside is they may end up with loads of cars after 3 years, which don't sell easily as a newer car is cheaper.
Other option is just to get a new one, assuming the deals are as good as they were 3 years ago.
Seems to me PCP on new cars is driven more by manufacturers and dealers wanting registrations. They can set the deposit contribution and future value to get to any monthly rate they want. Downside is they may end up with loads of cars after 3 years, which don't sell easily as a newer car is cheaper.
Other option is just to get a new one, assuming the deals are as good as they were 3 years ago.
Most cars will last for as long as you look after them and, certainly, a 3-year-old CTR should give many more years of trouble-free motoring. While the extended warranty might be a good call, it'll likely just need oil and consumables for at least another 5 years.
It will probably prove very cost-effective when compared to the overall cost of a new car, depending on how long you keep it.
As you know, the current PCP arrangement has offset ~£16.5k of the capital payment until the end of the term (while charging interest on the whole sum borrowed), thereby giving low monthly payments. If you want to continue low payments, you can achieve this by taking a loan to repay the settlement figure over a period of 5-6 years.
While you'd need to take account of expected maintenance and the possibility of a random bill, you will find the total cost at the end of a long ownership period to be lower than that of owning a new equivalent car in almost any circumstance.
It will probably prove very cost-effective when compared to the overall cost of a new car, depending on how long you keep it.
As you know, the current PCP arrangement has offset ~£16.5k of the capital payment until the end of the term (while charging interest on the whole sum borrowed), thereby giving low monthly payments. If you want to continue low payments, you can achieve this by taking a loan to repay the settlement figure over a period of 5-6 years.
While you'd need to take account of expected maintenance and the possibility of a random bill, you will find the total cost at the end of a long ownership period to be lower than that of owning a new equivalent car in almost any circumstance.
That seems to be the thinking, borrow long on low interest.
For my personal circumstances the extended manufacturers warranty is a no brainer for £360-they even let you pay monthly on 0%. I put the 5 year service plan on the car so in reality I'm probably only looking at consumables for the next two years.
If the loan payments are circa £270 pcm I'd be looking at getting rid of £6.5k plus whatever I throw into the deal-say £2k-ish?
So I'd be looking at owing say £8-9k on a 5 year old Type-R at the end of year 5 and how much will it be worth? More than that I imagine.
All of that is pretty irrelevant however when I know I want to keep the car for at least that two years and enjoy it as I have been-something I've never done before!
Someone asked about the deposit and I think it was around £11k as we part exchanged an MX5 we owned outright.
For my personal circumstances the extended manufacturers warranty is a no brainer for £360-they even let you pay monthly on 0%. I put the 5 year service plan on the car so in reality I'm probably only looking at consumables for the next two years.
If the loan payments are circa £270 pcm I'd be looking at getting rid of £6.5k plus whatever I throw into the deal-say £2k-ish?
So I'd be looking at owing say £8-9k on a 5 year old Type-R at the end of year 5 and how much will it be worth? More than that I imagine.
All of that is pretty irrelevant however when I know I want to keep the car for at least that two years and enjoy it as I have been-something I've never done before!
Someone asked about the deposit and I think it was around £11k as we part exchanged an MX5 we owned outright.
Another good way to mitigate the cost of the deferred interest element on a PCP is to get a credit card advance at 0%, pay the fee for that (say 3%) but make sure it is fora chunky term of say 30 months. Throw it all on the PCP and you will save a fair chunk, whilst only making minimum repayments ovr the term. When the credit card loan reverts to standard interest be prepared for that exit plan though - maybe bounce it on another card
PCPs are so 'cake and eat it' for manufacturers - high interest rates despite loan being secured on the car. They are often funded in house too - their profits on selling cars make them more profits as they loan those profits back to you to buy the b cars. Blinding business model but forgive me for hating it as I sit on my 2.3% Nationwide unsecured loan over 5 rather than a PCP over 3 (with 'good month' overpayments easily done on the phone app)!
PCPs are so 'cake and eat it' for manufacturers - high interest rates despite loan being secured on the car. They are often funded in house too - their profits on selling cars make them more profits as they loan those profits back to you to buy the b cars. Blinding business model but forgive me for hating it as I sit on my 2.3% Nationwide unsecured loan over 5 rather than a PCP over 3 (with 'good month' overpayments easily done on the phone app)!
LaurasOtherHalf said:
Think the Honda rate was somewhere around 7+% APR although the sales man there is a mate, he said I’d be better off finding myself via a personal bank loan which is probing true.
His thinking was used car PCPs are a bit of a mugs game due to the high cost and once it isn’t a new car sale you’re better off looking outside the franchised dealer for a better offer.
It’s a difficult one. In crude terms they are offering you nearly 3 times the market rate for an unsecured loan (around 2.5%) on £17k for the benefit of deferring £8500 of the repayment element. His thinking was used car PCPs are a bit of a mugs game due to the high cost and once it isn’t a new car sale you’re better off looking outside the franchised dealer for a better offer.
It manifestly makes better sense to switch to a bank loan to purchase the car. You obviously are making monthly repayments on the whole £17k but the way to look at that aspect is that with each repayment event you have more equity in the car. It also leaves you 100% free to sell the car at any time should you need to.
In reality paying an extra 4-5% just to delay part of the equity repayment just doesn’t make any sense unless you have absolutely no other option.
You mention that you need to make an investment in order to expand the business. That expansion is obviously intended to deliver higher revenues than the cost of that borrowing so that should enable you to cover the monthly cost of the additional repayment element?
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