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Car Finance / Purchasing Help

Nitefly

Nitefly

Nitefly

Man of Honour
Joined
24 Sep 2005
Posts
38,018
Hi there,

My wife and I are looking to buy a car and we've found one we like (a pretty looking specced out Audi Q3 - I only mention for depreciation reasons). The new list price is just over £50k, so let's just call it £50k. We don't have £50k lying around, but a finance purchase of sorts would be affordable.

The thing is, I'm not sure what is actually a decent way of doing it. From what I gather, standard Hire Purchase (which is all I was familiar with) has effectively been replaced by Personal Contract Purchase (i.e. you return the car if you opt not to make the agreed 'balloon payment' at the end). So far so good.

Other than ensuring that the monthly payments are affordable, is there anything else that really needs to be taken into consideration when agreeing a PCP? For example, is it better to agree a higher or lower balloon payment, when factoring a car of this value? I say this as I'm not really familiar with how cars depreciate, other than the most generic googling which suggests that cars will lose about 60% of value in 5 years.

Taking that into account, I would assume that the value of a £50k new car in 5 years would be 60% less i.e. £20k after a £30k depreciation. In which case, would it make sense to agree, for example, that a 5 year PCP of the £50k car would have a final balloon payment of £20k?

Also, if agreeing a PCP, would it make sense to agree a manufactures warranty for that period? That would make it stress fee, I think.

Thanks in advance for any advice; I appreciate that I may have made a load of completely incorrect assumptions about how these things work but I'm willing to learn :)

Ta.
 
Work out what the total cost of ownership is over the period you intend to have it and pick the lowest. It's pretty much that simple.

The problem here is that whichever way you pick, it's going to be very expensive. The Audi Q3 is not a £50,000 car. It's an Audi A3 hatchback on stilts, which is fine, but this is not a £50k car. Infact to even get it to £50k you need to buy basically the top engine model and then add a load of options and you rarely get anything like the cost of the options back. On the market when you've finished, it's simply a 3-4 year old Q3 regardless of what you initially paid. So, there is no getting away from the fact a £50k one is going to shed value fast and there is only one person who will ultimately pay for this depreciation - that's you.

And if we leave the money to the side for one moment, it's not going to feel like a £50k+ car either. It's going to feel like a £30k because this is effectively what it is new - the range starts at £33k and better nav, nicer seats and a bit more power from basically the same range of 4 cylinder engines won't feel like it was worth an extra £20k.

I'd probably be looking at a perhaps marginally less well specified Q5 over a Q3 of any spec.

Audi extended warranty costs - especially on a Q3 - are really very reasonable so this isn't something I'd be worried about. It'll qualify for the cheap service and warranty package they now offer.
 
PCP is pretty simple. Don't worry yourself too much about the final payment. It is always conservative as the idea is they blow your socks off with a part-ex value that gives you a deposit for your next PCP, and so, the cycle continues. Hardly anyone WBAC's/sells privately (as you'd need the cash to clear the finance if you were a really risk averse buyer).

Just get your monthlies as low as possible whilst not kidding yourself on mileage. Interest rates are low but you are paying interest on the full amount.

And finally, check out a bank loan on a pre-owned Q3 before you get on the PCP train. It is quite a drug and insanely profitable for car dealers.
 
[TW]Fox said:
Work out what the total cost of ownership is over the period you intend to have it and pick the lowest. It's pretty much that simple.

The problem here is that whichever way you pick, it's going to be very expensive. The Audi Q3 is not a £50,000 car. It's an Audi A3 hatchback on stilts, which is fine, but this is not a £50k car. Infact to even get it to £50k you need to buy basically the top engine model and then add a load of options and you rarely get anything like the cost of the options back. On the market when you've finished, it's simply a 3-4 year old Q3 regardless of what you initially paid. So, there is no getting away from the fact a £50k one is going to shed value fast and there is only one person who will ultimately pay for this depreciation - that's you.

And if we leave the money to the side for one moment, it's not going to feel like a £50k+ car either. It's going to feel like a £30k because this is effectively what it is new - the range starts at £33k and better nav, nicer seats and a bit more power from basically the same range of 4 cylinder engines won't feel like it was worth an extra £20k.

I'd probably be looking at a perhaps marginally less well specified Q5 over a Q3 of any spec.

Audi extended warranty costs - especially on a Q3 - are really very reasonable so this isn't something I'd be worried about. It'll qualify for the cheap service and warranty package they now offer.
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Thanks for the detailed and considered response. You are right that it's really not so different than any house mortgage - go with the lowest option.

Yes, I'm aware that it's not the most 'economic' starting point which I why I deliberately dropped the model in the post, knowing that there are certainly more economic choices, depreciation-wise. We were also particularly keen at getting a hybrid and are also the annoying non-car-people types to get overly excited by a silly fancy trim. So in that sense, it is a frolic and we are probably OK with that, as being absolutely cost-effective isn't the priority (and really, I'm looking to be cost effective with my frolic). But I take your point!

Our current and only ride is an A1. Coming from that, the Q5 seemed like a behemoth!! We spent some time looking at them today. Meanwhile, the Q8 was comically big. What an absolute tank!

The best thing to do would be to do some test rides of both he Q3 and the Q5, I think.

Thanks again.
 
dLockers said:
PCP is pretty simple. Don't worry yourself too much about the final payment. It is always conservative as the idea is they blow your socks off with a part-ex value that gives you a deposit for your next PCP, and so, the cycle continues. Hardly anyone WBAC's/sells privately (as you'd need the cash to clear the finance if you were a really risk averse buyer).

Just get your monthlies as low as possible whilst not kidding yourself on mileage. Interest rates are low but you are paying interest on the full amount.

And finally, check out a bank loan on a pre-owned Q3 before you get on the PCP train. It is quite a drug and insanely profitable for car dealers.
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Thanks mate, appreciate the response.
 
Also the boot on the Q3 stinks for anything decent sized.

Check out VW Tiguan's too.
 
Take a look at brokers such as Drive the Deal. You may be able to get a significant saving and still use PCP though you need to sell or WBAC your trade in.
They were emailing with some higher spec Q3 and Q5 models at @15% off recently.

Agree with above, £50k is a lot of option on a Q3, Drive the Deal had the SQ5 at £50k in July.

You can negotiate on the list price, though a bit of a sellers market right now give chip shortages.

Also consider GAP Insurance. If it's stolen / written off you're on the hook for the gap between finance and what the insurance will pay out as the 'market value'.
Not expensive, just don't buy it from the dealer as they charge you near double.
 
decto said:
Take a look at brokers such as Drive the Deal. You may be able to get a significant saving and still use PCP though you need to sell or WBAC your trade in.
They were emailing with some higher spec Q3 and Q5 models at @15% off recently.

Agree with above, £50k is a lot of option on a Q3, Drive the Deal had the SQ5 at £50k in July.

You can negotiate on the list price, though a bit of a sellers market right now give chip shortages.

Also consider GAP Insurance. If it's stolen / written off you're on the hook for the gap between finance and what the insurance will pay out as the 'market value'.
Not expensive, just don't buy it from the dealer as they charge you near double.
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Great shout, especially on GAP. Don't take the dealer GAP. It is a bit like rental car 'extra insurance'.

Check out carwow too. Don't get too wedded to your current sales man/current car.
 
Thanks for the ongoing advice.

The Q5 does seem to be a safer bet from a depreciation perspective. Is there any way of getting a decent idea of depreciation, from websites or otherwise? Or is it all just pure speculation? themoneycalculator.com suggests some depreciation rates but not being a car person I have no idea how reliable a website like this actually is.

Thanks (for putting up with my silly questions!).

Edit: will check out GAP :)
 
Nitefly said:
Thanks for the ongoing advice.

The Q5 does seem to be a safer bet from a depreciation perspective. Is there any way of getting a decent idea of depreciation, from websites or otherwise? Or is it all just pure speculation? themoneycalculator.com suggests some depreciation rates but not being a car person I have no idea how reliable a website like this actually is.

Thanks.
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To calculate the final payment? You need to use the finance calculator on the Audi website. As Fox mentioned, 'options' don't really do anything to the final value and is generally 'dead money' unless selling privately.

https://www.audi.co.uk/uk/web/en/fi...calculator/Audi Q3/Q3 Sportback TFSI e/S line

The Audi one seems quite good to use actually. Looks like basic S Line is 19.5k after 4 years, Black is 20.4k, and Vorsprung is 22.3k. So the 9k premium for the Vorsprung is only "worth" ~2.8k at the end of the 4 years.
 
dLockers said:
To calculate the final payment? You need to use the finance calculator on the Audi website. As Fox mentioned, 'options' don't really do anything to the final value and is generally 'dead money' unless selling privately.

https://www.audi.co.uk/uk/web/en/find-and-buy/finance-and-offers/finance-calculator.html#/calculator/Audi Q3/Q3 Sportback TFSI e/S line

The Audi one seems quite good to use actually. Looks like basic S Line is 19.5k after 4 years, Black is 20.4k, and Vorsprung is 22.3k. So the 9k premium for the Vorsprung is only "worth" ~2.8k at the end of the 4 years.
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That is very helpful indeed, thanks. I don't know how I didn't find that calculator :o :p

That's the right model save that we preferred the non-sportback version. Just felt a bit roomier looking around the cabin.

According to that link, after 4 years:
  • The top of the range Vorsprung (£50,350 list) ends up at an estimated £20,788.40 (depreciation of around 59%).
  • The basic Teknick (£38,910 list) ends up at an estimated £16,391.80 (depreciation of around 58%).
Meanwhile, looking at the Q5:
  • The top of the range Competition Vorsprung (£73,205.00 list) ends up at an estimated £29,343.15 (depreciation of around 60%).
  • The basic Sport (£52,405 list) ends up at an estimated £21,804.90 (depreciation of around 58%).
I suppose you could put all of the depreciation against the trims / top of the line models, in which case it looks like a heavy loss, but based on that it does seem to be a fairly uniform estimated depreciation.

I suppose the savings come in when selling privately, assuming you buy the whole car at the end of it.

Edit: hmm I don't think I can really rely on this. It's the actual second hand prices that are probably relevant.
 
Not to be 'that guy' and suggest completely irrelevant cars but what's your home situation regarding getting an EV wall charger fitted?

If so, have you had a look at the Skoda Enyaq EV? I only ask as you mention wanting the hybrid Q3 and are looking at a 50k SUV crossover from VAG.

It's similar sized and a similar ride height to the Q3 and a top spec model can be had for around £45k. It has pretty much the same kit and a good level of build quality.
 
[TW]Fox said:
Yup - look at how much a second hand one costs!

Plenty of 3-4 year old Q3 and Q5 around on the market to compare.
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This would be normally the case, but do you think run of the mill (ie not rare sports cars etc) petrol/diesel cars are going to suddenly take a big hit at some point in the future with the move over to electric? That moment may be a far way off yet I guess, but I get the feeling that normal ice engined cars are not going to very sought after in the nearish future.
 
I don't think it's possible to guess. I'd agree if the reason for the switch is being driven purely by the fact EV was superior and consumer choice was simply for the better product but that isn't the case.

Imagine a post 2030 environment where you can't buy a new ICE car anymore but for whatever reason it still suits your needs better than an EV. What can you buy?
 
decto said:
Also consider GAP Insurance. If it's stolen / written off you're on the hook for the gap between finance and what the insurance will pay out as the 'market value'.
Not expensive, just don't buy it from the dealer as they charge you near double.
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personally - not yet understood trade-off of 1+23 vs 9+23 pcp options, say, on GAP cost, and total cost of ownership (if you have the cash to do the 9)

Journey said:
They only settle the balance due on the lease, so if you pay a bigger upfront payment then you lose that, hence the need for GAP to cover the difference. If you do a 1+23 vs a 9+23, you lose the 8 difference.
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How long do you plan to keep the car for? A PCP will give you the lowest monthly repayments, but as Fox has suggested it's important to look at the total cost of ownership. If you are going to keep the car after the end of the term then how are you going to pay for the balloon payment? It may make more sense to simply hire purchase/bank loan it for a longer period if payments are affordable. Remember, with a PCP you are paying interest on the total amount - not the bit minus the balloon payment.

However, manufacturers like PCPs so the best deal may involve a PCP. You can always settle these, but probably more hassle than it's worth.

Finally, you don't negotiate on the GRV (balloon payment). That'll be predetermined by Audi (or, rather, Audi finance), if you are buying a new Audi.

Probably worth mentioning that stock is very short on the ground (though I do know the Q3e & Q5e is relatively easy to get hold of) and therefore factory lead times will be long (I'd expect 6 month plus) and some options may not be available. My new car, ordered in March, has a latest delivery date of December but this has been pushed back numerous times already and I don't expect to see it this year.
 
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