Is PCP on a used car a bad idea

[Ukadvice]

Evening everyone.


I have been browsing this forum for a while but just signed up and started posting yesterday, great set up and I am looking forward at getting involved.

My question this time is in regards to PCP, I have read a few threads but nothing relevant to me at the moment.

Basically I am looking to free up some cash for a project, I have a car worth about £27,000 at the moment with approx £14k left on a loan, just a personal loan and not car finance. I am thinking of selling the car and then paying off the loan leaving me with approx 13k once sold.

My plan was then to put about £2000 - £3000 down on a used PCP car, something relatively desirable like an M50 X5 (approx 30k) and spreading the cost over 24-30 months. I only do about 9000 miles per annum but I would intentionally put the mileage a bit higher at about 14k per year so the balloon payment is lower at the end and 'hopefully' the balloon payment will be reasonable and I could either buy or sell at the end of the term and keep some of the initial deposit.

Has anyone on here done this or is PCP on a used car typically money down the drain and the same as lease where you hand it back 99% of the time?

Thinking with my head I should really just get something for about £5000 and keep repaying my loan to maximise cash for my project but coming from a string of good cars jumping in to something old and cheap would bug the life out of me!

Any advice appreciated!

[Welshbeef]

It totally depends on the APR - it could be a magically good deal or like dog poo stuck to your new shoes

[Chris Type R]

When we looked at it, it was definitely better to PCP new. New, we got a manufacturer's rebate (£500) and 0% (and 10% off RRP). The used APR was pretty high - maybe 5% (can't quite remember). With new we had a longer warranty as well.

[stevemcs]

So potentially you will free up 11k, but continue to make monthly payments. However if you can continue to pay your monthly payments in a few years time you will have an 18k car, if you PCP you will effectively own nothing and may have negative equity.

Personally I would be looking at borrowing more on your existing loan or move it to another lender and increase the term/borrow more.

[Ukadvice]

Thanks guys.

I had a quick word with some brokers and they are around 5% APR.

I was hoping by buying something desirable such as an X5 M50, RR Sport Dyanmic, Cayenne or similar that there will be demand for it at the end so I could possibly sell for a reasonable price or purchase my self.

The M50 X5 seem to hold their value well with older models (2012ish) still going for over 20k.

New could be an option but I presume with new its typically a case of handing it back after X years where as with used I might be able to make it work in my favour?

[syl]

PCP is fine on any car, but APR is key. You can get a decent APR on most new cars, but it's harder on a used car - though it's not impossible. I wouldn't touch anything over 6.9% and I would prefer significantly less. It may be cheaper to just do it the old fashioned way and get an unsecured bank loan - it's easy to find rates around 3.0% APR for loans up to £25,000. You can always borrow over 5-8 years to have a similar effect to a PCP - pay less per month and then settle the loan at 2-3 years.

Buying a more expensive car is not usually the right way to go about freeing up cash. Why not just get a new bank loan to pay for your current one, plus the extra capital you require?

The other issue with a used car is that you have to hand back (or trade in / buy) a working car at the end. New cars are covered by an all-inclusive warranty for three years. You'll have to budget for repairs or pay for a warranty yourself with something used.

Edited by syl on Monday 29th April 19:35

[Bob-2146]

PCP on any car is usually best avoided but at least look at the total cost over the period rather than monthly payments alone. Bank loans almost always work out much cheaper.