PCP vs HP vs Bank Loan.

[Mercenary Keyboard Warrior]

When advertising finance APR % they need to offer that to more than half the people. If your not in their target demographic however you may get offered silly rates.
I have 3.1% with ZOPA, was the lowest they gave at the time, when I was thinking about another car change when I asked for some extra, 8.9%. I've got a suspicion they don't like too much unsecured lending.

You can take on PCP and a bank loan (or certainly a ZOPA loan) without apparently having two loans, until its past relevant.

"order" new car. PCP will check in order to allow finance, this will however only flag a search.
A few days before you get the car you apply for a ZOPA loan, this will be approved in theory but dont draw down.
Collect car after signing PCP deal.
Drawdown finance from ZOPA
Call PCP company, ask to withdraw from the finance agreement, they will send details of what to pay, use loan to pay off.

I have noticed recently though a lot of manufacturers are starting to allow the discount as a cash discount or a PCP discount, so I suspect the widening knowledge of the above means they will just try to compete on price and stop messing about only offering a contribution if you take their PCP.
They would prefer to sell you the car outright, its your risk then if something hammers the resale value (such as dieselgate), if its on PCP they maintain the risk since if its hammered in resale value you will just hand it back.

If your 95% certain you want the car for the PCP period (pretty much anything is negotiable) only its not a bad way of doing it, there is unlikely to be much cost difference if you bargain well on the APR, and its not got a super strong residual (you pay interest on the outstanding balance, so if its got a strong residual you are paying on that final balloon for the whole period).
If you far less certain you will keep the car for roughly that period, and may swap it in well before, or if its a real keeper for you, then traditional finance is likely to be better.

 

[psd99]

When advertising finance APR % they need to offer that to more than half the people. If your not in their target demographic however you may get offered silly rates.
I have 3.1% with ZOPA, was the lowest they gave at the time, when I was thinking about another car change when I asked for some extra, 8.9%. I've got a suspicion they don't like too much unsecured lending.

You can take on PCP and a bank loan (or certainly a ZOPA loan) without apparently having two loans, until its past relevant.

"order" new car. PCP will check in order to allow finance, this will however only flag a search.
A few days before you get the car you apply for a ZOPA loan, this will be approved in theory but dont draw down.
Collect car after signing PCP deal.
Drawdown finance from ZOPA
Call PCP company, ask to withdraw from the finance agreement, they will send details of what to pay, use loan to pay off.

I have noticed recently though a lot of manufacturers are starting to allow the discount as a cash discount or a PCP discount, so I suspect the widening knowledge of the above means they will just try to compete on price and stop messing about only offering a contribution if you take their PCP.
They would prefer to sell you the car outright, its your risk then if something hammers the resale value (such as dieselgate), if its on PCP they maintain the risk since if its hammered in resale value you will just hand it back.

If your 95% certain you want the car for the PCP period (pretty much anything is negotiable) only its not a bad way of doing it, there is unlikely to be much cost difference if you bargain well on the APR, and its not got a super strong residual (you pay interest on the outstanding balance, so if its got a strong residual you are paying on that final balloon for the whole period).
If you far less certain you will keep the car for roughly that period, and may swap it in well before, or if its a real keeper for you, then traditional finance is likely to be

A comment should be like a mini skirt
Short enough to cover the subject but long enough to keep your attention

What is your point here?

 

[psd99]

When advertising finance APR % they need to offer that to more than half the people. If your not in their target demographic however you may get offered silly rates.
I have 3.1% with ZOPA, was the lowest they gave at the time, when I was thinking about another car change when I asked for some extra, 8.9%. I've got a suspicion they don't like too much unsecured lending.

You can take on PCP and a bank loan (or certainly a ZOPA loan) without apparently having two loans, until its past relevant.

"order" new car. PCP will check in order to allow finance, this will however only flag a search.
A few days before you get the car you apply for a ZOPA loan, this will be approved in theory but dont draw down.
Collect car after signing PCP deal.
Drawdown finance from ZOPA
Call PCP company, ask to withdraw from the finance agreement, they will send details of what to pay, use loan to pay off.

I have noticed recently though a lot of manufacturers are starting to allow the discount as a cash discount or a PCP discount, so I suspect the widening knowledge of the above means they will just try to compete on price and stop messing about only offering a contribution if you take their PCP.
They would prefer to sell you the car outright, its your risk then if something hammers the resale value (such as dieselgate), if its on PCP they maintain the risk since if its hammered in resale value you will just hand it back.

If your 95% certain you want the car for the PCP period (pretty much anything is negotiable) only its not a bad way of doing it, there is unlikely to be much cost difference if you bargain well on the APR, and its not got a super strong residual (you pay interest on the outstanding balance, so if its got a strong residual you are paying on that final balloon for the whole period).
If you far less certain you will keep the car for roughly that period, and may swap it in well before, or if its a real keeper for you, then traditional finance is likely to be better.

Extra coment
Not required

 

[Luckystrike123]

With a bank loan it's worthwhile fiddling with the amount loaned and the term length. I forget the specifics but for my wife's bank loan it was nominally more expensive to borrow £000's more than we needed due to the decrease in APR, the result being we got a nicer car for essentially the same money.

 

[glenimp617]

PCP can work out cheaper, but you need to fully understand the methods. Best time of year to buy, manufacturers/dealer incentives, low rate APR, GFV....

Stick it all in an excel sheet next to buying the car with a loan. Everything being equal, and so long as you can negotiate, PCP should save you a few thousand over buying. It all comes down to if you want to trade the bought car in like you would have to a PCP......of course, at the end of the PCP you have the option to buy but let's not add extra complexities in.

for most people, a supermarket loan is best but 49% won't get the best rates (regardless of how much you earn to current debt ratio)

Curve ball, negotiate a fantastic deal on PCP, then switch to a low rate supermarket loan. Might be worth adding that into the excel sheet too.

Half a day calling dealers, working out sums and negotiating tactics pays off!

 

[NooBish AbbZ]

I took out a loan when i bought the 340i.

Car was £33k, I had £8k saved so was taking 25k loan. The loan was offered (before i got to BMW) at 3% from Zopa Loans, so £453 a month over 5 years.

With BMW they offered me about 7% APR i think, but over 4 years. I said no, armed with my calculations, they offered me 5%, and then 4%. At 4% i'd have been paying £430 a month, for 4 years, but then to own the car (my eventual plan at the time) at the 4 year point I'd still have had to pay a further £7k or so.

Hence, i took the bank loan in the end; it also meant that when I came to sell the car a few months ago, the loan wasn't at all attached to the car so a private sale was less complicated than it would have been with finance attached.

 

[glenimp617]

I took out a loan when i bought the 340i.

Car was £33k, I had £8k saved so was taking 25k loan. The loan was offered (before i got to BMW) at 3% from Zopa Loans, so £453 a month over 5 years.

With BMW they offered me about 7% APR i think, but over 4 years. I said no, armed with my calculations, they offered me 5%, and then 4%. At 4% i'd have been paying £430 a month, for 4 years, but then to own the car (my eventual plan at the time) at the 4 year point I'd still have had to pay a further £7k or so.

Hence, i took the bank loan in the end; it also meant that when I came to sell the car a few months ago, the loan wasn't at all attached to the car so a private sale was less complicated than it would have been with finance attached.

Prime example of a dealer going from 7% to 4%. The deals aren't in the cars anymore (although VIP events and end of March/Sept targets are gold for discounts) but the finance packages.

 

[DarkHorizon472]

You just need to calculate the total cost of each option remembering used cars depreciate less in value, shop around for loans to get the best value, you can negotiate the price of a used car down and a used car gives you an asset value at the end of the loan. For me a low mileage three year old car offers better value as it has roughly halved in price but is in pretty much as new condition. My last car came with a three year warranty for an extra £250.

 

[MichaelAwkward]

I found when buying ours brand new that the dealers were able to give a sizeable discount (we got 25% off list price in the end) when we just offered to pay cash via a bank loan (which did come at a higher rate than advertised but we plan to settle early anyway), where as with their 0% PCP offer they had very little room to discount beyond what the offer was already and it needed a hefty deposit up front.

 

[HangTime]

^This is quite unusual as normally the opposite would be true, with PCP having bigger discounts due to kickbacks from the financial services arm of the dealer. I can only assume it is because it was on a 0% offer. This will sound a bit counter-intuitive but arguably it is better if a franchise DOESN'T have a 0% finance offering, because then you can get discounts off list price for taking out finance and just payback/withdraw from the finance really early to avoid most of the interest.
(obviously this assumes you have access to the capital required).

 

[SS-89]

I found when buying ours brand new that the dealers were able to give a sizeable discount (we got 25% off list price in the end) when we just offered to pay cash via a bank loan (which did come at a higher rate than advertised but we plan to settle early anyway), where as with their 0% PCP offer they had very little room to discount beyond what the offer was already and it needed a hefty deposit up front.

What manufacturer? That is counter to any brand new car I've bought (Merc/BMW and Volvo) and I would say is very unusual.

 

[McPhee]

Let's assume I'm looking to buy a car that's worth around £15,000

What I'm confused about is which finance route to take....

Getting a loan from the bank appears to be the cheapest option. I can get £12k (3k of my own money to make 15k) for £215 a month for 5 years and I own the car outright straight away. Overall I'm playing an extra approximately £900 on top of that over 5 years (total cost of the loan = £12,900.

Yet with PCP over a period of two/three years I'm paying just a bit more per month but at the end of the term the car doesn't belong to me and I have to pay said amount to own it. Which looks like it will cost me much more than £900 when compared to the bank loan.

HP tends to be very expensive compared to PCP, so what I'm asking here is which is the most financially economical option and why do people not often get a loan from a bank to buy a car?

It just looks cheaper overall in my findings.

Let me know what I'm missing here....

Is the comparison equitable?

With a £3k deposit, how does a 36 month deposit (plus a bank loan to cover the GMFV over 24 months) compare?

 

[weathmatth]

I'm currently thinking about getting a bank/personal loan to pay of my HP finance on my car. APR on the finance is 5.5% (4 years left) where as looks like i can get 2.9% elsewhere. The savings aren't massive but every little helps as they say.

 

[MichaelAwkward]

What manufacturer? That is counter to any brand new car I've bought (Merc/BMW and Volvo) and I would say is very unusual.

It was only with their 0% offer that they wouldn't budge. Their regular 7.9% APR (or something like that) finance was offered with a sizeable discount off list price, but still not as much as we got in the end using a bank loan.

It was a main Citroen dealer.

 

[Ryan-3]

Finally, you have the right to whats called voluntary termination. This says that after half of the repayments are made you can hand the car back - regardless of its market value (obviously subject to condition and mileage). This isn't much use for PCP as it means the total amount including the balloon, so 50% is near the end of the agreement anyway, but for an HP it means you can walk away after half the period.

Sorry for the necro, but I searched for VT and your post came up.

I'm currently looking into doing this for my HP agreement. Would I be right in thinking the figure for half the total amount payable includes all monthly payments and my deposit?

 

[Mercenary Keyboard Warrior]

Sorry for the necro, but I searched for VT and your post came up.

I'm currently looking into doing this for my HP agreement. Would I be right in thinking the figure for half the total amount payable includes all monthly payments and my deposit?

Its half the contracted payments, deposit is outside that iirc.
With PCP it includes the balloon, with HP it should just be the monthlies and possibly the end fees if they are part of the contract (eg collection)