Purchasing Route for next car, PCP or Loan?
Discussion
Hi guys
I am starting to consider a new car as my circumstances are getting better and the option will soon be available.
I currently have a 2011 corsa i bought new when i was 20, so now im 26 and the car is 6 years old.
Im considering 2 cars specifically at the moment, a fiesta ST for around 17k new on 0% PCP, or a Toyota GT86 2 years old (itll have 3 years warranty left on it) with 10k or less mileage, also for 17k.
Issue is that obviously theres no PCP on the used car so id be looking at loans rather than PCP, benefit is less depreciation hit, disadvantage is that its going to have some level of APR.
I was wondering is there a clear winner in the two i am not seeing? or are both equally as viable as methods? Some background, I am 26 with a 30k job but am moving shortly to a 40k job, going to be renting a flat also soon. I have no debts beyond student loan and no major outgoings besides the usual food, phone, gym etc.
Cheers for any insight into making this decision!
I am starting to consider a new car as my circumstances are getting better and the option will soon be available.
I currently have a 2011 corsa i bought new when i was 20, so now im 26 and the car is 6 years old.
Im considering 2 cars specifically at the moment, a fiesta ST for around 17k new on 0% PCP, or a Toyota GT86 2 years old (itll have 3 years warranty left on it) with 10k or less mileage, also for 17k.
Issue is that obviously theres no PCP on the used car so id be looking at loans rather than PCP, benefit is less depreciation hit, disadvantage is that its going to have some level of APR.
I was wondering is there a clear winner in the two i am not seeing? or are both equally as viable as methods? Some background, I am 26 with a 30k job but am moving shortly to a 40k job, going to be renting a flat also soon. I have no debts beyond student loan and no major outgoings besides the usual food, phone, gym etc.
Cheers for any insight into making this decision!
This will get fun, let me get some popcorn.
I am in a very similar position to you - 25, earn 38k, rent privately, don't have a deposit on a flat, no dependents.
I recently bought a Honda Civic 2014 for 10.6k, on a personal loan at 6.9%. I chose this route as in the long run, it worked out much cheaper than PCPing a newer car, even though the monthly payments are higher. I would however suggest that a personal loan for the GT86 over four years is 354pcm, and I wouldn't really fancy taking a loan for longer than that out for a car. That's quite a big chunk of change on your salary. The PCP will be cheaper monthly, but in all likelihood you'll hand it back at the end so you are in effect leasing (have you considered leasing?).
If you buy on a loan, you have more flexibility. Hate it after three months? Sell, buy something else (can't do that on a PCP). Only you can decide what is more sensible, neither is inherently bad. I would however suggest you perhaps look at cheaper cars - there are plenty of decent sporty motors out there for half the price of the GT86.
I am in a very similar position to you - 25, earn 38k, rent privately, don't have a deposit on a flat, no dependents.
I recently bought a Honda Civic 2014 for 10.6k, on a personal loan at 6.9%. I chose this route as in the long run, it worked out much cheaper than PCPing a newer car, even though the monthly payments are higher. I would however suggest that a personal loan for the GT86 over four years is 354pcm, and I wouldn't really fancy taking a loan for longer than that out for a car. That's quite a big chunk of change on your salary. The PCP will be cheaper monthly, but in all likelihood you'll hand it back at the end so you are in effect leasing (have you considered leasing?).
If you buy on a loan, you have more flexibility. Hate it after three months? Sell, buy something else (can't do that on a PCP). Only you can decide what is more sensible, neither is inherently bad. I would however suggest you perhaps look at cheaper cars - there are plenty of decent sporty motors out there for half the price of the GT86.
So assuming you have £6k cash to put down on the ST, it's worth exactly the ballon at the end, and you'd be borrowing £11k to buy the GT86 over three years at about 10%
ST: £6k down, pay an additional £6084, after three years have nothing
GT86: £6k down, pay an additional £12680, after three years have a 5-yr old GT86
Don't know much about GT86s or what they are worth so I'm guessing not much in it !
With the added restriction that you can't easily get out of the ST deal early if you suddenly need a bigger car or get bored of it, and you'll have to hand it back in good condition/buy it after 36 months (Ford will no doubt offer you an additional PCP as the term progresses, do the same sums based
on total cost to check it all works for you..)
ST: £6k down, pay an additional £6084, after three years have nothing
GT86: £6k down, pay an additional £12680, after three years have a 5-yr old GT86
Don't know much about GT86s or what they are worth so I'm guessing not much in it !
With the added restriction that you can't easily get out of the ST deal early if you suddenly need a bigger car or get bored of it, and you'll have to hand it back in good condition/buy it after 36 months (Ford will no doubt offer you an additional PCP as the term progresses, do the same sums based
on total cost to check it all works for you..)
JordanM200 said:
CivBrum said:
If you buy on a loan, you have more flexibility. Hate it after three months? Sell, buy something else (can't do that on a PCP).
Why? Can get out of PCP whenever you like...JordanM200 said:
Yeah you could just part ex it, if worse come to worse. Even with a bank loan, the car will still be worth less, you will just be paying more for a car you no longer have in that instance.
Yes, of course, and I don't disagree that PCP can be the right option for some people, especially if you are comparing like-to-like (i.e. a 20k car v a 20k car), and you really place value on driving brand new cars. My biggest problem with PCP is that it means that people compare monthlies, rather than cost - oh I can afford 250pcm, so I will PCP a 20k car, rather than bank loan a 10k car. Even though the PCP will cost them much more over the two years in reality.
If going with PCP then see what discounts are available on carwow etc to reduce the risk of negative equity early in the deal.
I have just bought a £39.5K car for £28.8K. After deposit I have essentially financed £24K so would be very confident of clearing the finance if I had to terminate the deal.
One mistake people make is that they think that they will have some equity left at the end of the PCP term which they can use for their next purchase. Dealers are very aware that most buyers are looking at getting monthlies as low as possible and therefore tend to offer quite high Guaranteed Final Values. All that means is that you are unlikely to find that your car is worth more at the end, and there will still be a sizeable sum to pay to keep it. Consequently you are ripe pickings for the "Customer Loyalty Special Offer". This is where the salesman calmly explains that you have no equity in your current vehicle, but as you have been such a good customer they will offer you £xxxx off the new version. As you could probably achieve or beat that price by shopping around anyway it is there to make people think that they haven't just leased a car for three years!
PCP is a really handy scheme if you know what you are going into. No new car purchase ever really makes financial sense so you just have to accept that you are paying for something that you want and make sure you can afford it.
Lastly, READ THE PAPERWORK!
The guy I dealt with at Audi was great until he just pushed an order form under my nose and asked me to sign next to the sentence saying I agree to all T&C. When I asked about the T&C he just told me that they were all standard and no need to worry. I then found them printed in microscopic font size on the reverse side of the form. There was some level of astonishment when I asked for a readable copy. I mentioned that I was happy to take it home, scan it in and read at my leisure and suddenly they were delighted to take me through line by line. Good job I did as a couple of the salesman's claims regarding the flexibility of the arrangement were not documented so I requested an email confirming them.
I have just bought a £39.5K car for £28.8K. After deposit I have essentially financed £24K so would be very confident of clearing the finance if I had to terminate the deal.
One mistake people make is that they think that they will have some equity left at the end of the PCP term which they can use for their next purchase. Dealers are very aware that most buyers are looking at getting monthlies as low as possible and therefore tend to offer quite high Guaranteed Final Values. All that means is that you are unlikely to find that your car is worth more at the end, and there will still be a sizeable sum to pay to keep it. Consequently you are ripe pickings for the "Customer Loyalty Special Offer". This is where the salesman calmly explains that you have no equity in your current vehicle, but as you have been such a good customer they will offer you £xxxx off the new version. As you could probably achieve or beat that price by shopping around anyway it is there to make people think that they haven't just leased a car for three years!
PCP is a really handy scheme if you know what you are going into. No new car purchase ever really makes financial sense so you just have to accept that you are paying for something that you want and make sure you can afford it.
Lastly, READ THE PAPERWORK!
The guy I dealt with at Audi was great until he just pushed an order form under my nose and asked me to sign next to the sentence saying I agree to all T&C. When I asked about the T&C he just told me that they were all standard and no need to worry. I then found them printed in microscopic font size on the reverse side of the form. There was some level of astonishment when I asked for a readable copy. I mentioned that I was happy to take it home, scan it in and read at my leisure and suddenly they were delighted to take me through line by line. Good job I did as a couple of the salesman's claims regarding the flexibility of the arrangement were not documented so I requested an email confirming them.
It really is up to you, only you can make the best decision.
Personally, I'd go for buying a car. My reason for this is that I like to know that once the finance/loan is paid for it's mine, I'm not committed to having to get another new car in 3 years time or whatever, when that extra money instead of a new car would be of more use.
This is mainly as I want to move house and it's likely I'll have to spend £££££ doing it up.
BUT only you know, as you know what your future plans are etc
Personally, I'd go for buying a car. My reason for this is that I like to know that once the finance/loan is paid for it's mine, I'm not committed to having to get another new car in 3 years time or whatever, when that extra money instead of a new car would be of more use.
This is mainly as I want to move house and it's likely I'll have to spend £££££ doing it up.
BUT only you know, as you know what your future plans are etc
OP, what do you intend to do when you have paid off the finance?
If you intend to keep the car, then the PCP is less than ideal because you have to find the final payment which will be a decent chunk of money. Much easier in that case to go with HP or a loan.
If you're more likely to chop it in and get another car at the end of the term, then PCP can make a bit more sense, but it is not usually the cheapest way to finance a car.
If you intend to keep the car, then the PCP is less than ideal because you have to find the final payment which will be a decent chunk of money. Much easier in that case to go with HP or a loan.
If you're more likely to chop it in and get another car at the end of the term, then PCP can make a bit more sense, but it is not usually the cheapest way to finance a car.
essayer said:
So assuming you have £6k cash to put down on the ST, it's worth exactly the ballon at the end, and you'd be borrowing £11k to buy the GT86 over three years at about 10%
ST: £6k down, pay an additional £6084, after three years have nothing
GT86: £6k down, pay an additional £12680, after three years have a 5-yr old GT86
Don't know much about GT86s or what they are worth so I'm guessing not much in it !
With the added restriction that you can't easily get out of the ST deal early if you suddenly need a bigger car or get bored of it, and you'll have to hand it back in good condition/buy it after 36 months (Ford will no doubt offer you an additional PCP as the term progresses, do the same sums based
on total cost to check it all works for you..)
Using this example, the ST on a PCP would suggest a total outlay of around £12k over three years. This three year lease on a ST-3 works out at £7750: https://www.contracthireandleasing.com/independent...ST: £6k down, pay an additional £6084, after three years have nothing
GT86: £6k down, pay an additional £12680, after three years have a 5-yr old GT86
Don't know much about GT86s or what they are worth so I'm guessing not much in it !
With the added restriction that you can't easily get out of the ST deal early if you suddenly need a bigger car or get bored of it, and you'll have to hand it back in good condition/buy it after 36 months (Ford will no doubt offer you an additional PCP as the term progresses, do the same sums based
on total cost to check it all works for you..)
You can get PCP on most used cars certainly a gt86 bought from Toyota as they tried to sell them this way to me. A gt86 for about £13k has fairly cheap monthly payments from memory sub £200 over 3 yrs, with about £3k down. I went loan as plan to keep car and didn't want balloon but would be a good option if wanting a PCP alot cheaper than buying new monthly payment as depreciation is slower once 3yrs old.
mikey P 500 said:
You can get PCP on most used cars certainly a gt86 bought from Toyota as they tried to sell them this way to me. A gt86 for about £13k has fairly cheap monthly payments from memory sub £200 over 3 yrs, with about £3k down. I went loan as plan to keep car and didn't want balloon but would be a good option if wanting a PCP alot cheaper than buying new monthly payment as depreciation is slower once 3yrs old.
The trouble with PCP on used cars is that the interest rates are usually pretty high. This makes a very expensive way to finance the car. They are less expensive on new cars because the manufacturers tend to subsidise the deal by offering deposit contributions and lower interest rates.Gassing Station | Car Buying | Top of Page | What's New | My Stuff