Car financing question

Soldato
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Hi all, looking to buy a new to 2 year year old car (make/model yet to be decided). We have £10k to put down as a deposit.

Now, as I understand it, if we take a car on PCP we pay a deposit, then X monthly payments. At the end of the term you either hand the car back, or use the equity in the car as a deposit for the next. Is this correct?

If we were to go down the HP route, you pay a larger deposit, then pay of the balance over X months. At the end, the car is yours. Correct?

I'm swinging towards HP, as I'm old fashioned and like to own my car. With HP you do, with PCP you never own your car. Am I right, or am I reading this wrong? Amy advice appreciated.
 
Soldato
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PCP at the end there is usually an optional payment to own the car at the end if you do not decide to hand it back for another. Its designed mainly for people who never want to own the car & just jump into another PCP.

HP payments are higher because it bakes that final cost into the loan so by the end the car has no outstanding finance but I think % APR is also way higher. I would always go PCP purely because monthly's are much lower then ensure you put by the final payment over the lifetime of the loan.

If you compare % APR & how much the finance cost over the lifetime of the loan you will see HP costs way more :eek:
 
Soldato
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PCP also permits you to own the car by paying the balloon payment at the end of the agreement.

Because of the balloon arrangement though, it also opened up options for dealerships to encourage you into future agreements by ensuring you have some equity in the car at that point and making it seem advantageous to get a new car rather than close out your current agreement.

Deposit sizes can be sized as you wish, HP doesn't necessarily need a larger deposit (but if you don't, the payments are larger as there is no end of arrangement balloon like a PCP to bring the monthlies down).
 
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Depending on the price of car, put your 10k on top of a 15k bank loan (good rates to be had at that value) and it should all work out cheaper.

Unhelpful if you're after something more expensive, however.
 
Soldato
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Depending on the price of car, put your 10k on top of a 15k bank loan (good rates to be had at that value) and it should all work out cheaper.

Unhelpful if you're after something more expensive, however.

£25k is the price point we're looking at actually, so that is another (obvious in hindsight) option.

Thank you all
 
Soldato
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£25k is the price point we're looking at actually, so that is another (obvious in hindsight) option.

Thank you all
It's likely to be especially favourable if you're looking at nearly new rather than new, as used car finance tends to have garbage interest rates when compared to new car purchases.
 
Soldato
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It's likely to be especially favourable if you're looking at nearly new rather than new, as used car finance tends to have garbage interest rates when compared to new car purchases.

I saw that Peugeot were offering a highly competitive 11 odd percent :p
 

mjt

mjt

Soldato
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Bank loan will likely be the best option, if possible.
 
Man of Honour
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If you can afford the monthly payments, then HP is almost always cheaper than PCP, especially given your deposit size.

A bank loan is likely the cheapest option if the car isn't brand new.
 
Man of Honour
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I'm swinging towards HP, as I'm old fashioned and like to own my car. With HP you do, with PCP you never own your car. Am I right, or am I reading this wrong? Amy advice appreciated.
With HP you don't own the car either until the final payment is made. If owning the car is a priority for you then a secured finance agreement is the wrong choice.
 
Soldato
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I always go the personal loan route, usually Zopa or similar. Seems the most logical way of you plan to keep the car, I usually keep mine a good 10 years.
 
Associate
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Why new car ?

There are plenty of decent second hand cars that can be had for 10k.

why not save yourself the loan and go down that route?
 
Man of Honour
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It’s an expensive way to own a car with little to no benefit to owning it at the end. Be less old fashioned would be my advice.
 
Associate
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In the new car arena, some dealers are offering 0% deals, so could be something to look out for.
 
Soldato
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I think that PCP is only really a good idea on new cars as they tend to offer incentive discounts and a lower apr, the apr on second had cars is normally pretty appalling.

In your shoes I would favour a personal loan with the deposit to give a budget to go looking.
 
Soldato
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Owning the car outright, either straight away or after X months, is important to us. We keep our main car for 10 years on average.

Bank loan is definitely the way forward for us, ses the logical choice (in our situation).
 
Man of Honour
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The benefit is you own a car that belongs to you and no longer has any monthly payments to a finance company :confused:
Well yes but most will sell the car well before it’s paid for, the industry metrics confirm this. So many want to own but never seem to own it because it’s gone before the final payment for something nicer. So it’s ambition v reality again. Our OP might be spesh like you and keep his car….FOR EVA of course and if so bank loan over HP or PCP or stick it on the house mortgage and overpay to clear quickly.
 
Man of Honour
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Owning the car outright, either straight away or after X months, is important to us. We keep our main car for 10 years on average.

Bank loan is definitely the way forward for us, ses the logical choice (in our situation).
Fair enough.:)
 
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