Soldato
Our base rate with the manufacturer has gone upto 5.75 but we still get VB on that.
base rate with BH is VERY low this month!
Oh and everyone's asking 0.25 uplift for all 60 mth loans.
Downfalls of PCP
- Thread starter ste_bla
- Start date
Our base rate with the manufacturer has gone upto 5.75 but we still get VB on that.
base rate with BH is VERY low this month!
Oh and everyone's asking 0.25 uplift for all 60 mth loans.
Soldato
Just my 2p in terms of finance, I got offered 2-3% flat rate when I was looking into buying a 2nd hand MINI 
Although I was going to be paying it off over a year so was going to be a great deal! However, I've still not bought another car yet 
I'd look around, play other dealers off each other to get finance deals down. Also perhaps look at alternative vehicles and see if any have any deals on?
I know that Vauxhall keep doing 0% APR deals over 4 years with a 30% deposit.
BeatMaster
Although I was going to be paying it off over a year so was going to be a great deal! However, I've still not bought another car yet I'd look around, play other dealers off each other to get finance deals down. Also perhaps look at alternative vehicles and see if any have any deals on?
I know that Vauxhall keep doing 0% APR deals over 4 years with a 30% deposit.
BeatMaster
Soldato
Just my 2p in terms of finance, I got offered 2-3% flat rate when I was looking into buying a 2nd hand MINI
I'd look around, play other dealers off each other to get finance deals down. Also perhaps look at alternative vehicles and see if any have any deals on?
I know that Vauxhall keep doing 0% APR deals over 4 years with a 30% deposit.
BeatMaster
I think everyone can offers BHs rate of 2.95% end this month though, and is on Personal Loan terms.
0% is a totally different kettle of fish, as it's subsidised by the manufacturer on brand new cars.
In short you'd in most cases be better off taking the huge discount available and using low rate finance.
How deeply can you think?
Finance does benefit both consumer and the dealer but obviously the dealer gets more. Eg you pay 150/month, 150 in 2 years time will be worth more than 150 that is paid now, in effect you are paying a few thousand extra because money earnt later on is worth more.
On top of that if you crash the car and don't have gap insurance afaik you lose out, eg value is 15k in 1 year and you paid 20k and the amount left to pay is 13k you only have 2k left over. Assuming you paid a deposit you've pretty much been roasted.
Of course I am just showing you the down side as you asked.
Finance does benefit both consumer and the dealer but obviously the dealer gets more. Eg you pay 150/month, 150 in 2 years time will be worth more than 150 that is paid now, in effect you are paying a few thousand extra because money earnt later on is worth more.
On top of that if you crash the car and don't have gap insurance afaik you lose out, eg value is 15k in 1 year and you paid 20k and the amount left to pay is 13k you only have 2k left over. Assuming you paid a deposit you've pretty much been roasted.
Of course I am just showing you the down side as you asked.
I can't really answer that fully as it very much depends on your circumstances, but buying a car on a lease (a PCP is simply a flavour of lease) is likely to cost you more than buying the car via a loan. There is usually slightly more risk on the dealers with a lease, so they tend to mitigate their risk a little by charging you more. As I have said before I am not a financial expert, so please take anything I say as simply my experience, and not an experience that would be always applicable to you.
I would suggest the cheapest way for you to buy a car, assuming you do not have the cash of course, would be via a bank loan. Now, I made some assumptions that may or may not be correct about your circumstances. I assumed you lived with your parents, were employed full time, and had no CCJ's. On this basis, and assuming you are not a credit risk, have not overloaded yourself with credit cards or loans, do not sit with a huge overdraft and have never been bankrupt, you should be able to secure a loan for £11K at around 6.5% interest rate or maybe even a little lower.
So, over 5 years, based on £11K with no loan insurance, which you could be forced to take, you should be able to get money at around £215 per month from a major bank. The total interest on that would be about £1800, so you can already see why the numbers you outlined at the top of this thread are not very good. A loan would have some advantages over a lease in that you will have no final payment, you will not have a mileage restriction and you will own the car at the end of the period. Most bank loans will also not penalise you more than 1 months interest if you choose to finish it early. My advice would also be, if you can afford to, reduce the loan length as much as you can. I would never take a car out over greater than 3 years myself, and 5 years is too long if you ask me. If you can afford more per month then reduce the length of the loan by as much as possible. It will cost you less in the long run, even if it will cost you more per month.
The reasons most people take a PCP or lease is because they want to reduce their monthly payments, but to do this the loan is not fully repaid, hence the final or 'bubble' payment at the end of the period. To arrive at this final payment, a number of assumptions have to be made, based on mileage, likely value of the car etc, and these are sometimes guesstimates. What a PCP offers is a Guaranteed Future Value (GFV) but to do this it has to hedge its bets somewhat, and therefore is often more expensive than other lease options. I have never taken out a PCP on mine or my wife's cars, though I have funded them via finance in some instances, using the balanced payments or personal lease avenues, and they have been much cheaper as you are taking some of the risk back. It can still be built to look like a PCP, but with better rates. The manufacturers finance rates are 95% of the time NOT the best you will get, though a dealer will virtually always start with these. If they are getting nowhere, they will then go to the market and at this point you should start to get some better deals.
When a dealer works out your GFV they are usually conservative. They would rather you pay more than you probably need to (not a huge amount more though), so when you get to the end of the term you have a little more left in the pot than you thought, which then makes a nice deposit for your next purchase! So as an example if they say you car is likely to be worth £2000 at the end of a period it is more than likely to be close to £2500 or more if sold private, though again this is not always the case!
So to answer your question, based on what you have told me, and based on the fact that you don't have the cash and plan to keep the car I would suggest.
1) Loan
2) Personal Lease or other finance arrangement
3) PCP
Now there are of course some other curved balls. The dealer may have a promotion, such as Audi had on the A6 sometime back where they are offering very attractive PCP's (on the surface) because they are knocking 10% off the list price of the car and a special rate of interest. The fact is you could still go into the dealers and get 10% off a new one (and more) and then buy it via a loan, and it would still be cheaper more than likely, but on the surface, when you look at the monthly payments it looked good value.
If you want to reduce payments then some form of personal lease, contract hire or finance package should be able to be built that makes the monthly payments less than a bank loan, but then you will still end up paying more as you will have a bubble at the end, and if you don't stick it into a PCP that bubble will not be guaranteed of course, not that this should be a huge issue.
So some food for thought but I emphasise again that there might be special offers or circumstances that make all the above false, but in general terms what I have outlined above should be fair and applicable to you.