Are the wheels about to fall of car finance?

[funkyrobot]

I may need a reliable car over the next few months to do some big mileage customer visits. This will probably mean I need to finance something, purely because I don't want to sink my savings into a car and lose my safety net.

If I do, I'm going to see what sort of bank loan is affordable on a monthly basis, then base my purchase price on that.

I could look at the PCP route to get something more desirable. However, the way a PCP works scares the bejesus out of me.

[Alex_225]

funkyrobot said:

Would you need more money for the next car deposit though?

Certainly the person I was chatting to would either have had to stump up more cash to put into the deal as her £8k initial deposit was only worth £2k by the time the deal ended. Which has resulted in paying the same amount per month for a lesser car.

As I've said before on here, I don't think PCP should be damned entirely but there are some really naff deals out there. People only see the monthly out going and then realise that it's not sustainable as what happens at the end of that deal?

[Sheepshanks]

funkyrobot said:

I could look at the PCP route to get something more desirable. However, the way a PCP works scares the bejesus out of me.

What do you find scary about it?

If you're doing big mileage, though, you need to be aware of the impact of excess mileage charges.

[funkyrobot]

Sheepshanks said:

funkyrobot said:

I could look at the PCP route to get something more desirable. However, the way a PCP works scares the bejesus out of me.

I don't think there's anything scary about it, but if you're doing big mileage then you need to be aware of the impact of excess mileage charges.

Indeed. At least if I go down the loan route, I am not capped on anything.

I need to double check with the new job before I commit though. I've been told I will need to visit clients every now and again. If it's that infrequent, I'll just buy the most reliable cheap shed car I can find.

[funkyrobot]

Sheepshanks said:

What do you find scary about it?

It's 'x' amount a month for a good few years, followed by even more money. I'm not one for any sort of finance apart from the mortgage. I work on the basis that if I lose my job, I should be able to find something quick that will at least cover the mortgage. Having to cover anything on top of that is just extra hassle.

I also think the interest rates on PCP's are quite high. The fact that you still owe a balloon payment at the end puts me off too. If I am going to commit to a loan, I'd like to think that it's paid off at the end of the term.

Also, if I have to take out a car with a bank loan, I can at least sell it if everything goes wrong work wise. With a PCP, you can't do much until you have reached 50%.

Or am I wrong about the above?

[Dave Hedgehog]

berlintaxi said:

Just to add a bit more petrol to the bonfire...

http://www.dailymail.co.uk/money/cars/article-4512...

i love the article next to it saying new car sales are down 20%

ROFL

http://www.dailymail.co.uk/money/cars/article-4472...

[Sheepshanks]

funkyrobot said:

Or am I wrong about the above?

None of it is wrong, if you're not pretty confident of your circumstances then you shouldn't commit.

The only thing I'd say is that the APR can appear higher with a PCP because of the way the GFV stays the same during the whole loan - the amount owing isn't reducing as it would with HP.

[liner33]

funkyrobot said:

It's 'x' amount a month for a good few years, followed by even more money. I'm not one for any sort of finance apart from the mortgage. I work on the basis that if I lose my job, I should be able to find something quick that will at least cover the mortgage. Having to cover anything on top of that is just extra hassle.

I also think the interest rates on PCP's are quite high. The fact that you still owe a balloon payment at the end puts me off too. If I am going to commit to a loan, I'd like to think that it's paid off at the end of the term.

Also, if I have to take out a car with a bank loan, I can at least sell it if everything goes wrong work wise. With a PCP, you can't do much until you have reached 50%.

Or am I wrong about the above?

When I took out my pcp it was 2.9% that was lower than I could get from a bank loan anyhow, I really dont see any difference to a bank loan or pcp really, people get hung up with this balloon payment but you dont need to pay it and you are back in the same situation you were when you started ie no car but no debt . If you do choose to pay it and keep the car you can and you will then be in the same situation as a bank loan ie you have a car but you are also in debt, if you do pay the GFV with a loan you will in fact be paying interest on that amount twice

Some on here seem obsessed by the actual "ownership" thing as thats some kind of benefit, I'm not so sure that is always the case. Having two cars one on pcp and the other not , I look after them both exactly to the same standard

As far as I'm aware you can get out of a pcp anytime you like you hand the car back and pay the corresponding money but it wont be cheap same as if you buy a new car with a bank loan and have to sell it after a year, you wont have enough to settle your debt

[daemon]

funkyrobot said:

Sheepshanks said:

What do you find scary about it?

It's 'x' amount a month for a good few years, followed by even more money. I'm not one for any sort of finance apart from the mortgage. I work on the basis that if I lose my job, I should be able to find something quick that will at least cover the mortgage. Having to cover anything on top of that is just extra hassle.

I also think the interest rates on PCP's are quite high. The fact that you still owe a balloon payment at the end puts me off too. If I am going to commit to a loan, I'd like to think that it's paid off at the end of the term.

Also, if I have to take out a car with a bank loan, I can at least sell it if everything goes wrong work wise. With a PCP, you can't do much until you have reached 50%.

Or am I wrong about the above?

PCPs work best these days on new cars and where there is a manufacturers incentive added. For example, a cash contribution or 0% finance. PCPs on used cars tend to have high APR rates so IMHO rarely stack up as a decent deal

If you take out a PCP, you can sell it at any time - simply have the buyer (whether it be a private buyer or a trade buyer) pay the finance company directly. The advantage of a Consumer Credit Act regulated finance deal such as Hire Purchase or PCP is that after you've paid 50% of the total transaction amount, you can hand the car back with nothing further to pay (subject to documented fair wear and tear). This can be extremely powerful, particularly if there is a drop in the market and the car isnt worth whats owed.

As echoed already, if you have any concerns about a change in your future needs or job stability, then i wouldnt be committing to a fixed term PCP or PCH deal for what might be a large amount of money.

[Sheepshanks]

liner33 said:

..... you are back in the same situation you were when you started ie no car but no debt .

I'd say what throws many people is they p/x their existing car to get into their first PCP, and they think the low monthly payments are marvellous. Then, as you say, at the end of it they hand the car back.

It suddenly dawns on them that they've got nothing - they went into the deal with a car worth a few £K, but that value has gone.

[liner33]

Sheepshanks said:

I'd say what throws many people is they p/x their existing car to get into their first PCP, and they think the low monthly payments are marvellous. Then, as you say, at the end of it they hand the car back.

It suddenly dawns on them that they've got nothing - they went into the deal with a car worth a few £K, but that value has gone.

True but the car they p/x'ed had they kept it would now be 3 or 4 years older and if they didn't want it then why would they want it 3 or 4 years later.

[djc206]

Sheepshanks said:

I'd say what throws many people is they p/x their existing car to get into their first PCP, and they think the low monthly payments are marvellous. Then, as you say, at the end of it they hand the car back.

It suddenly dawns on them that they've got nothing - they went into the deal with a car worth a few £K, but that value has gone.

But generally you don't hand the car back, you P/X it. I've never run a PCP completely to the end but I got £7k out of my RS4 when I sold it 2 months before the end of that agreement. Most companies (Mercedes being the obvious historical exception) set the GFV a little lower than the actual predicted value aiming at giving you enough equity for a deposit on your next car.

[Sa Calobra]

Sheepshanks said:

Yex 450 said:

That and the sheer number of people who believe their "deposit" will roll over into their next PCP arrangement

One of the girls in our office genuinely thought she got it back at the end. Salesmen also lead people to think the car will be worth more than the GFV, so they'll get it back that way.

NOT wanting to tar all main dealer salesmen but my experiences of main dealer sales tactics lead me to feel that this does occur.

[daemon]

Sa Calobra said:

Sheepshanks said:

Yex 450 said:

That and the sheer number of people who believe their "deposit" will roll over into their next PCP arrangement

One of the girls in our office genuinely thought she got it back at the end. Salesmen also lead people to think the car will be worth more than the GFV, so they'll get it back that way.

NOT wanting to tar all main dealer salesmen but my experiences of main dealer sales tactics lead me to feel that this does occur.

I think a lot of people in that boat chose not to listen to what they're being told. I've never had a situation yet where i've taken a PCP deal and it fully explained to me my options at the end of term.

[Milemuncher]

Glad to see the Mail has finally caught up with this outrage. Their article demonstrates clearly that poor people (some of whom may even be immigrants - shock horror!) are now able to get hold of new cars.

It's an absolute scandal.

I despair at the quality of journalism huge numbers of the population subject themselves to - and worse, believe - every day.

[daemon]

Milemuncher said:

Glad to see the Mail has finally caught up with this outrage. Their article demonstrates clearly that poor people (some of whom may even be immigrants - shock horror!) are now able to get hold of new cars.

It's an absolute scandal.

I despair at the quality of journalism huge numbers of the population subject themselves to - and worse, believe - every day.

It does read like that. These poor people simply shouldnt be "allowed" to drive a new car. How very dare they!

"Drivers earning £8,200 a year can buy a brand new £12,500 Ford Fiesta"

Oh the humanity!

Edited by daemon on Wednesday 17th May 21:43

[Justin Case]

It should be obvious to anyone, regardless of their knowledge of finance, that a new BMW will cost more than a new Fiesta, no matter how it is funded. The fact that this doesn't appear to be the case is the worrying aspect, rather than the number of cars financed or the amount of money involved.

[Truckosaurus]

Justin Case said:

... a new BMW will cost more than a new Fiesta, no matter how it is funded.....

Cheapest BMW (3dr 1-series) = £21,420

Most Expensive Fiesta (ST200) = £23,215

(sans options and discounts, of course)

[Justin Case]

Truckosaurus said:

Justin Case said:

... a new BMW will cost more than a new Fiesta, no matter how it is funded.....

Cheapest BMW (3dr 1-series) = £21,420

Most Expensive Fiesta (ST200) = £23,215

(sans options and discounts, of course)

But then of course if I could stretch to £28k I could have a BMW 120d M sport........




or two Fiesta Zetecs

[SpeedBash]

http://www.dailymail.co.uk/money/cars/article-4542...