Finance - Most Flexible Option?

[paddyhasneeds]

I'm considering changing cars. No idea what for just yet but let's assume my car is worth around £17k and I'd be looking to change for something around £30-33k.

My current car is owned, and the money is there to simply "pay the difference", however I'm wondering if that's the smartest thing to do?

I've found I change cars when I'm bored or just want a change rather than due to having to make a decision on paying a balloon or anything finance related.

Have to admit I've not looked too much into PCP and contract hire but I assume they tie you to the marque and make it quite difficult to "flit" between marques?

[mattviatura]

PCP and Contract Hire don't tie you into a marque but are far from ideal if you want to come out of an agreement early. The vast majority of "lease" deals are of three years duration, it is possible to terminate early but there is always a penalty.

[paddyhasneeds]

Yes I always assumed there was no way you'd walk away from it "ahead" vs. simply buying and p/x'ing and taking the "cash" hit on depreciation.

[OnTheOverrun]

If you have the cash to add to your £17k car value to buy a £35k car, you need to ask yourself the following question - can I use that money to earn more than the interest on finance costs me? If you can, do it and finance. If you can't, pay cash.

[cheadle hulme]

I had a big chunk of cash after I sold my last car to go towards the new car. I decided to get a loan with a fixed rate for the full (ish) amount instead and the keep the cash for a bit of flexibility.

The way I see it, inflation will be rising strongly soon and stay high for the 3 yrs of the loan. This means I'm paying very little in real terms for the interest.

Leases are priced on the full term, so if you wish to end early, they'll sting you for the money they may end up losing.

[mattviatura]

There used to be a pretty good loophole for getting out of contract hire agreements with drastically reduced penalties.

[Willy Nilly]

When I bought my car in 02, I didn't quite have enough to pay cash for the whole £6500. I went to my bank, the one with the black hoss and told them that I didn't have quite enough money, but wanted it paid of ASAP and didn't want any early payment penalties. After explaining the load, probably 50 times before I fully understood, I took out a 5 year loan for the full sum, paid £5k off there and then, set up a DD for what ever it worked out at over 5 years and had the rest paid off inside of 4 months.

The loan cost £125.

I'm only getting 2.5% on my cash ISA and would only loose the interest in the sum withdrawn if I needed to use it. I don't know what the APR on a car type loan would be, but it would be more than 2.5%.

Those lease deals are OK if you are self employed and can use the cost to put against tax. I can run my car much cheaper than I can lease one, what with it finishing depreciating a year or too ago